Authors - Shikha Ginodia, Equity Partner (Disputes, Restructuring & Insolvency) and Shalini Singh, Principal Associate

Distressed real estate is increasingly finding its way to buyers through the insolvency route — a resolution plan approved by the Committee of Creditors (CoC), a going-concern sale in liquidation, or a direct purchase from a corporate debtor still under the Corporate Insolvency Resolution Process (CIRP). The pricing is often attractive precisely because the process looks complicated. But the complication is exactly where the risk and the lawyer's value sits. A property acquired without understanding where it sits in the insolvency timeline can leave a buyer with a title that unwinds the moment an appellate forum intervenes, or with liabilities the buyer never bargained for.

This piece sets out the legal framework under the Insolvency and Bankruptcy Code, 2016 (“IBC”) that governs such transactions, and the due diligence checklist that follows from it read alongside the latest judicial trend on moratorium, Section 32A protection, and the interface with RERA and other statutes.

The Legal Framework: Where the Property Sits Matters

1. The Moratorium under Section 14

The moment CIRP is admitted against a corporate debtor, Section 14 of the IBC imposes a moratorium that, among other things, prohibits the transfer, encumbrance, or disposal of the corporate debtor's assets except with the Resolution Professional's (RP) sanction under the CoC's oversight. Practically, this means:

1. A corporate debtor cannot unilaterally sell its property during CIRP. Any sale must be routed through the RP and typically needs CoC approval if it is not in the ordinary course of business.

2. The moratorium continues until the Adjudicating Authority (NCLT) either approves a resolution plan under Section 31(1) or passes a liquidation order under Section 33 — whichever happens first from which date it automatically ceases.

A recurring buyer misconception is that the moratorium freezes 

A recurring buyer misconception is that the moratorium freezes everything connected to the company, including third parties. The Supreme Court has now closed that door decisively. In Tejas J. Shah & Amisha T. Shah v. Mantri Technology Constellations (P) Ltd. (2026 INSC 746, decided 27 July 2026), the Court held that Section 14 protection is confined strictly to the corporate debtor that it does not extend to promoters, directors, landowners, or other associated persons unless the statute expressly says so. For a buyer, this cuts both ways: it means the corporate debtor's insolvency does not automatically immunise its promoters from separate proceedings, but it also confirms that only the corporate debtor's own assets are frozen and not every property a promoter or group entity might hold.

Equally important for property specifically: the moratorium does not revive rights that had already lapsed before CIRP began. In A.A. Estates (P) Ltd. v. Kher Nagar Sukhsadan CHS Ltd.(2025 INSC 1366), the Supreme Court held that Section 14 cannot be used to resurrect a development agreement or contractual right that had already ceased to exist prior to the insolvency commencement date. This matters directly for redevelopment-linked property purchases, if the underlying development rights had lapsed before CIRP, the moratorium will not breathe life back into them, and a buyer relying on those rights buys nothing.

2. Sale During CIRP vs. Sale During Liquidation

The due diligence posture changes depending on which stage the transaction is happening at:

3. During CIRP, a sale of a specific asset (rather than the company as a going concern) is unusual and requires the RP to justify it as necessary and CoC-sanctioned; more commonly, the property changes hands as part of an approved resolution plan under Section 31, with the successful resolution applicant taking over the company (and its assets) as a going concern.

4. During liquidation, the Liquidator can sell assets — including as a standalone asset sale or as a going-concern sale of the business — under the IBBI (Liquidation Process) Regulations, subject to the Stakeholders' Consultation Committee's oversight and NCLT's confirmation where required.

The Supreme Court in Sincere Securities Pvt. Ltd. v. Chandrakant Khemka (2025 SCC OnLine SC 1608 / 2025 INSC 931, decided 5 August 2025) reinforced that the CoC's commercial wisdom on what to do with an asset in that case, surrendering leased premises is not blocked by Section 14(1)(d) once the CoC and RP have determined that retaining the asset is not commercially viable. The broader principle for due diligence: CoC/Liquidator approval is not a formality to skim past, it is the operative sanction that makes the transaction valid, and its absence, or a defect in how it was obtained, is a real title risk.

3. Section 32A: The “Clean Slate” and Its Limits

Section 32A is the provision that makes post-resolution or post-liquidation-sale property attractive: once a resolution plan is approved and results in a change of management, the corporate debtor's assets are protected from prosecution or attachment for offences committed before the CIRP began (subject to the incoming management not having abetted the offence). This extends to protection from attachment proceedings under laws like the Prevention of Money Laundering Act, 2002 (PMLA).

Two recent developments sharpen this for buyers:

The NCLAT (Delhi Bench), in Amitkumar Rishi Kumar Bhabhda & Ors. v. Amit Chandrashekhar Poddar & Ors. (Company Appeal (AT) (Insolvency) 221/2026, decided September 2026), held that Section 32A's clean-slate protection is not a discretionary concessionand it extends as a matter of law to a buyer who purchases the corporate debtor as a going concern during liquidation, not only to buyers under an approved resolution plan during CIRP. This is significant for anyone buying real estate assets bundled into a going-concern liquidation sale.

Courts have also confirmed (REEDLAW 2025 SC 10581 and related NCLAT rulings) that Section 32A can override a prior PMLA attachment once the plan is approved and management changes but the protection is conditional on the statutory tests being met, and attachments made after CIRP admission but before plan approval may still require a specific release order.

The practical point: Section 32A protection is not automatic or unconditional. A buyer's counsel must verify that the change-of-management and non-abetment conditions are actually satisfied and should not assume the "clean slate" applies simply because a resolution plan exists.

4. The RERA and Homebuyer Overlay

Where the property is a real estate project with existing allottees, the interplay with the Real Estate (Regulation and Development) Act, 2016 adds another layer. The NCLAT, in Vandana Garg (RP) v. Mysore Petro Chemicals (Company Appeal (AT) (Ins) No. 361 of 2024, decided 27 May 2026), clarified that while any RERA authority order passed during the moratorium is void for want of jurisdiction, the underlying claim of the allottee survives and must be dealt with through the CIRP claims process. A buyer acquiring a part-constructed project must therefore diligence the full universe of allottee claims filed with the RP and not just assume that RERA silence during the moratorium period means the claims have lapsed.

Separately, following Tejas Shah v. Mantri Technology (above), homebuyers can pursue promoters and directors in consumer fora even while the company itself is under CIRP, a signal that the corporate debtor's insolvency does not clean the slate for individuals, and that project-level reputational and litigation risk can survive a change in corporate ownership.

The Due Diligence Checklist

Bringing the law together, a due diligence exercise for property connected to a CIRP or liquidation should, at minimum, cover:

1. Confirm the exact procedural stage — CIRP (pre- or post-resolution plan approval), or liquidation (asset sale vs. going-concern sale) — since the governing provisions and required sanctions differ materially.

2. Obtain and verify the RP's or Liquidator's authority and confirm CoC or Stakeholders' Consultation Committee approval for the specific transaction, not just a general approval of the resolution plan.

3. Obtain the NCLT order approving the resolution plan (Section 31) or the liquidation/sale process, and check whether it has attained finality — specifically, whether any appeal is pending before the NCLAT or Supreme Court that could result in the order being set aside.

4. Run a fresh Encumbrance Certificate and CERSAI search to confirm the charge status and obtain lender No-Objection Certificates where secured creditors have not been fully satisfied out of the resolution plan proceeds.

5. Check for ED/PMLA attachments and, where any exist, confirm whether Section 32A conditions (change of management, no abetment by incoming management) are actually met before relying on the "clean slate."

6. Where the asset is a real estate project with allottees, obtain the full claims register from the RP/Liquidator and confirm how allottee claims have been treated in the resolution plan or liquidation waterfall.

7. Check for connected personal guarantor insolvency proceedings under Part III of the IBC where promoters or guarantors have pledged the same or related property — a Section 14 moratorium on the company does not extend to a guarantor's personal assets, but a parallel personal insolvency process might.

8. Confirm there is no pre-CIRP lapse of underlying rights (such as development or redevelopment rights) that the moratorium cannot revive, per the A.A. Estates principle.

9. Build in conditions precedent in the transaction documents — full lender NOCs, RP/Liquidator confirmation, appeal-status confirmation, and a fresh title search closer to closing — rather than relying on diligence done at an earlier stage of the process.

The Takeaway

Buying property out of an insolvency process is not inherently riskier than any other real estate transaction but it is diligence of a different character. The questions are less about the seller's chain of title in the conventional sense, and more about whether the insolvency process itself has been correctly followed: the right sanction, at the right stage, free of pending challenge, with the right statutory protections actually engaged rather than merely assumed. Getting that sequence wrong is what turns an attractively priced acquisition into years of litigation.

For buyers, financial institutions, and resolution applicants navigating this space, engaging counsel early before a term sheet is signed, not after is what converts a discounted asset into a secure one.