When a Builder's Insolvency Ends in Liquidation: What Changes for Bengaluru Homebuyers

For homebuyers caught in a builder's insolvency, the outcome most would hope for is a resolution plan: a new developer, a revised timeline, keys eventually. Liquidation is the outcome to worry about, because it means the company's assets are sold and the proceeds distributed rather than the project being completed. If it comes to that, the rules that shaped a buyer's voice during the resolution process change in ways that are easy to miss.

This guide uses the Insolvency and Bankruptcy Board of India's published answers to explain what changes for homebuyers when a corporate insolvency moves into liquidation: who represents them, how decisions are made, and how proceeds are distributed. It is written for Bengaluru buyers, but the framework is national.

The short answer. The IBBI FAQ on CIRP and liquidation says the provision to appoint an authorised representative for real estate allottees, as provided in the corporate insolvency resolution process, does not extend to the liquidation process. In liquidation, homebuyers, like other creditors, may appoint a representative for the stakeholders' consultation committee under the liquidation regulations, and the representative's fees are borne by them. The committee advises the liquidator by a vote of not less than sixty-six per cent of the votes cast, and distribution of proceeds against claims is as per Section 53 of the Code. The trade-off: liquidation keeps homebuyers in the room, but with a representative they must organise and pay for, in a process aimed at selling assets rather than finishing homes.

How is liquidation different from the resolution process?

The goal changes. During the corporate insolvency resolution process, creditors consider resolution plans, and homebuyers can be represented as a class by an authorised representative. The IBBI FAQ says that under amended regulation 16A(2) of the CIRP Regulations, once the application to appoint such a representative is filed and pending, the selected insolvency professional acts as interim representative for the homebuyer class, attending committee of creditors meetings, collecting instructions from homebuyers and casting votes for the class.

In liquidation, the company's assets are realised and the proceeds distributed. The FAQ's answers on liquidation speak of e-auctions, the stakeholders' consultation committee advising the liquidator, and distribution under Section 53. For a homebuyer, this is a different kind of process from one that ends with a new developer completing the project. Our earlier report on homebuyers as creditors in a builder insolvency covers the resolution stage.

Who represents homebuyers in liquidation?

Whoever they appoint and pay for. The IBBI FAQ, answering who should pay the fee of an authorised representative of homebuyers under liquidation, says the provision to appoint an authorised representative for real estate allottees, as provided in the CIRP, does not extend to the liquidation process. It adds that in liquidation, homebuyers, like other creditors, may appoint a representative for representation in the stakeholders' consultation committee, as per the liquidation process regulations, and that the representative's fees are to be borne by them.

For homebuyers, this has two practical consequences. First, the representation that existed during the resolution process does not simply carry over. Second, organising a representative is now the buyers' job, including agreeing on who it will be and how the cost will be shared. An association of allottees, if one exists, is an obvious place to coordinate that.

How does the stakeholders' consultation committee decide?

By a two-thirds share of the votes actually cast. The FAQ cites regulation 31A(9) of the liquidation regulations and says the stakeholders' consultation committee shall advise the liquidator by a vote of not less than sixty-six per cent of the votes cast, so only stakeholders who vote are counted. In a separate answer it repeats that the committee shall advise the liquidator by a vote of not less than sixty-six per cent of the representatives of the consultation committee, of the votes cast.

That rule rewards participation. A group of creditors that does not vote is not counted, so homebuyers who want their view reflected need their representative to attend and vote. The FAQ also says the liquidator must conduct committee meetings on a regular basis as per regulation 31A, even after the first meeting, which gives representatives a recurring chance to raise issues.

The committee has another power worth knowing. The FAQ says that, after recording reasons, the stakeholders' consultation committee may by a majority vote of not less than sixty-six per cent propose to replace the liquidator, and shall file an application before the Adjudicating Authority after obtaining the written consent of the proposed liquidator.

What happens to the property and the money?

Assets are sold and proceeds distributed under the Code's order. The FAQ, answering whether liabilities such as unpaid wages and taxes can be attached to property sold on an as is where is basis, says no, and that distribution of proceeds against claims is as per Section 53. It also says that if an asset is not sold after several e-auctions, the liquidator must consult the stakeholders' consultation committee and act in line with the applicable legal framework, and that unsold assets can be distributed to a stakeholder under regulation 38 of the liquidation regulations.

For a homebuyer, the important point is that a liquidation does not follow the agreement for sale. The money that reaches each creditor depends on where its claim sits in the order Section 53 sets and on what the assets realise. This guide does not set out that order. A buyer facing liquidation should ask the liquidator or their representative how homebuyer claims are being classified and treated.

What records should a homebuyer keep?

Everything that proves the claim, for as long as the process runs. In the resolution process, regulation 12(1) of the CIRP Regulations, quoted in the FAQ, requires a creditor to submit a claim with proof, and allows late claims within limits. Our report on what happens if a homebuyer did not file a claim explains those limits and IBBI's February 2026 disclosure change.

The FAQ also records how long the liquidator must keep the company's records: a minimum of eight years from the date of the order of dissolution, the closure of the liquidation process or the conclusion of any related proceeding before the Board, the Adjudicating Authority, the Appellate Authority or any court, whichever is later, under regulation 45A. Homebuyers should keep their own documents at least as carefully. If a builder you have booked with in Bengaluru enters insolvency, use this checklist.

1. File your claim with proof during the resolution process, or as soon as you learn of it, using the agreement for sale, allotment letter and payment receipts.
2. Keep copies of every claim form, acknowledgement and communication from the resolution professional or liquidator.
3. If the process moves to liquidation, ask the liquidator how the stakeholders' consultation committee is constituted and how homebuyers are represented.
4. Coordinate with other buyers, through an association if one exists, to appoint a representative for the committee.
5. Agree in advance how the representative's fees will be shared, since the FAQ says homebuyers bear them.
6. Make sure your representative attends and votes, because only votes cast count towards the sixty-six per cent threshold.
7. Ask in writing how homebuyer claims are classified for distribution under Section 53.

Is there anything a buyer can do to avoid liquidation?

A buyer cannot control the outcome, but participation earlier matters. During the resolution process, homebuyers vote through their class representative on resolution plans. The IBBI FAQ describes the interim representative stepping in as soon as the appointment application is pending, collecting instructions and voting for the class. Buyers who give instructions and stay informed during that stage are better placed to support a viable plan.

Staying informed also helps if the process does move into liquidation. A buyer who already knows the other allottees, and has kept a complete set of documents, can help organise a representative for the stakeholders' consultation committee quickly rather than starting from scratch.

This guide does not discuss any particular builder or project. It sets out what IBBI's published answers say so that a buyer can recognise the stage a process is at and what each stage asks of them.

Frequently asked questions

Do homebuyers get an authorised representative in liquidation?

Not automatically. IBBI's FAQ says the provision to appoint an authorised representative for real estate allottees, as provided in the resolution process, does not extend to liquidation. Homebuyers, like other creditors, may appoint a representative for the stakeholders' consultation committee under the liquidation regulations, with the fees borne by them.

How does the stakeholders' consultation committee take decisions?

IBBI's FAQ, citing regulation 31A(9) of the liquidation regulations, says the committee shall advise the liquidator by a vote of not less than sixty-six per cent of the votes cast, so only stakeholders who vote are counted. The liquidator must also hold committee meetings on a regular basis under regulation 31A.

Can homebuyers seek a change of liquidator?

The stakeholders' consultation committee can. IBBI's FAQ says that after recording reasons, the committee may by a majority vote of not less than sixty-six per cent propose to replace the liquidator, and shall file an application before the Adjudicating Authority after obtaining the written consent of the proposed liquidator.

How are sale proceeds shared in a builder's liquidation?

IBBI's FAQ says distribution of proceeds against claims is as per Section 53 of the Insolvency and Bankruptcy Code. It also says that if assets remain unsold after several e-auctions, the liquidator must consult the stakeholders' consultation committee, and unsold assets can be distributed to a stakeholder under regulation 38.

Last updated 2026-10-26. PropNewz Team.