PROTECTING HOMEBUYERS IN CORPORATE INSOLVENCY PROCEEDINGS: A COMPARATIVE STUDY OF RECENT IBC PROVISIONS WITH INTERNATIONAL BEST PRACTICES

ABSTRACTThe protection of homebuyers in corporate insolvency proceedings has become a subject of intense academicand policy debate, particularly in emerging markets like India where real estate forms a dominant avenue ofhousehold investment. Historically, insolvency law privileged banks and financial institutions as primarycreditors, leaving individual homebuyers, despite their significant financial contributions, in a precariousposition during the collapse of real estate developers. The Insolvency and Bankruptcy Code, 2016 (IBC), at itsinception, did not accord homebuyers the legal recognition of creditors. This gap, exposed by high-profileinsolvency cases in the real estate sector, resulted in prolonged consumer distress and highlighted systemicdeficiencies in balancing insolvency efficiency with consumer protection. Subsequent reforms, most notably the2018 amendment legislating homebuyers as financial creditors under Section 5(8)(f), alongside significantjudicial pronouncements, have redefined the contours of their protection by granting a seat in the Committee ofCreditors (CoC) and participatory rights in resolution proceedings. This transformation represents afundamental reorientation of India’s insolvency jurisprudence, merging consumer protection principles withcorporate restructuring objectives.The study adopts a comparative legal framework to evaluate the evolution and effectiveness of India’s approachin light of global best practices. Drawing from the United States’ Chapter 11 paradigm, the United Kingdom’screditor-driven model, and recent European Union restructuring directives, this paper situates India’s legalinnovations within a broader transnational discourse on insolvency and consumer rights. While somejurisdictions embed homebuyer protections through robust consumer law mechanisms outside of insolvencycodes, others integrate explicit participatory and distributive safeguards within insolvency procedures. Byanalyzing these models, the paper interrogates whether India’s recognition of homebuyers as financialcreditors provides long-term structural balance or generates new challenges, such as dilution of creditorconsensus, fragmentation of voting blocs, and risks to timely resolution processes.Beyond doctrinal comparison, the paper engages with larger normative and policy debates. It explores whetherthe elevation of homebuyers aligns with foundational insolvency objectives of maximizing asset value andensuring equitable distribution, or whether it reflects an exceptionalist consumer-driven response to a highprofile sectoral crisis. It also investigates the implications for financial creditors like banks, whose recoveryprospects may be altered by expanding creditor classes, and examines how courts mediate conflicts betweeninstitutional and individual stakeholders. Through this lens, the Indian model is tested against principles ofprocedural fairness, distributive justice, and systemic insolvency efficiency.The findings suggest that while India has made significant strides in embedding homebuyer protections, itsframework remains transitional, requiring further refinement to reconcile consumer rights with the exigenciesof insolvency resolution. The paper argues for a calibrated approach: one that preserves the collective natureof insolvency, establishes clear procedural mechanisms for large and dispersed creditor classes likehomebuyers, and aligns consumer-centric reforms with international best practices. Ultimately, the studycontributes to the evolving discourse on strengthening insolvency systems to promote both market stability andconsumer welfare, positioning the Indian experience as a critical case study in comparative insolvency law.Keywords: Insolvency and Bankruptcy Code (IBC), corporate insolvency, homebuyers’ rights, financialcreditors, Committee of Creditors, comparative insolvency law, real estate insolvency, creditor hierarchy,consumer protection, Chapter 11, EU restructuring framework.