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Buying your own house is a big dream of every person. But, many times the news of builder's bankruptcy turns this dream into fear. A big question always remained that if a project of a real estate company goes into insolvency process, will all the other safe projects of that company also get caught in this legal trouble? The National Company Law Appellate Tribunal (NCLAT) has made its position absolutely clear on this important question. The Tribunal has clarified in one of its recent decisions that the insolvency proceedings will be limited only to that particular project in which the builder has defaulted.

Action will be taken only on defaulted projects

The Appellate Tribunal has adopted a very practical approach and said that irregularities in one project cannot be punished by the entire real estate company and the buyers of its other projects. If financial creditors or home buyers in any one housing society have initiated insolvency proceedings against the builder, then this 'Corporate Insolvency Resolution Process' (CIRP) will be limited to that project only. A two-member bench of NCLAT, comprising Chairperson Justice Ashok Bhushan and Member (Technical) Barun Mitra, made it clear that unnecessarily jeopardizing unrelated projects is not beneficial to the stakeholders from any perspective.

Example set by Raheja Developers case

This important decision has come while hearing an appeal of Naveen M. Raheja. If we go into the details of the matter, on August 21, 2025, the New Delhi Bench of the National Company Law Tribunal (NCLT) had accepted the petition of several flat buyers of 'Raheja Krishna Housing Scheme'. An appeal was made against this in NCLAT. The Appellate Tribunal has now given the final order that the ongoing bankruptcy process against Raheja Developers will not be applicable to the entire group but will be limited only to 'Krishna Housing Scheme'. Let us tell you that last month itself the Tribunal had given a similar decision regarding another project of Raheja Group 'Raheja Shilas' and the same decision has been made the basis in this case also.

What was the builder's argument?

Krishna Housing Scheme is mainly an affordable housing project, which has got benefits under 'Pradhan Mantri Awas Yojana' and 'Loan Scheme'. The entire project consists of 11 1 and 2 BHK towers, which include 1,644 residential units as well as commercial space. During the hearing, the builder argued that the construction work was badly affected due to the Covid-19 pandemic. Due to this, the cost of the project increased from Rs 183.36 crore to Rs 204 crore, which became a major reason for not being able to give possession on time.

What do home buyers have to do now?

NCLAT has given clear instructions to the Resolution Professional to issue a corrigendum to its old advertisement issued in 'Form-A'. Under this, the affected stakeholders of Krishna Housing Scheme will be asked to submit their claims within 14 days as per CIRP Regulation 2016. The tribunal has clearly stated in its 30-page order that when the insolvency proceedings are being conducted for a single project, the liability claims should also be limited to that project only.