Top News

Buying one's own home is a cherished dream for every individual. However, news of a builder going bankrupt often turns this dream into a nightmare. A major question has long persisted: if a specific project undertaken by a real estate company enters insolvency proceedings, will all of that company's other, financially sound projects also get entangled in this legal quagmire? The National Company Law Appellate Tribunal (NCLAT) has now provided absolute clarity on this crucial issue. In a recent ruling, the Tribunal clarified that insolvency proceedings will remain strictly confined to the specific project in which the builder has committed a default.

**Action to be Taken Only Against the Defaulting Project**
Adopting a highly pragmatic stance, the Appellate Tribunal asserted that the entire real estate company—and, by extension, the buyers involved in its other projects—cannot be penalized for irregularities occurring in a single project. If financial creditors or homebuyers within a specific housing society initiate insolvency proceedings against a builder, this 'Corporate Insolvency Resolution Process' (CIRP) shall remain strictly limited to the scope of that particular project. The two-member bench of the NCLAT—comprising Chairperson Justice Ashok Bhushan and Member (Technical) Barun Mitra—made it clear that unnecessarily jeopardizing unrelated projects serves no beneficial purpose for stakeholders from any perspective.

**Precedent Set by the Raheja Developers Case**
This landmark verdict was delivered while the Tribunal was hearing an appeal filed by Navin M. Raheja. Delving into the specifics of the case, on August 21, 2025, the New Delhi Bench of the National Company Law Tribunal (NCLT) had admitted a petition filed by several flat buyers of the 'Raheja Krishna Housing Scheme.' An appeal challenging this decision was subsequently filed before the NCLAT. The Appellate Tribunal has now issued a final order stating that the ongoing insolvency proceedings against Raheja Developers shall not apply to the entire group, but will instead be strictly limited to the ‘Krishna Housing Scheme’ project. It is worth noting that just last month, the Tribunal had delivered an identical verdict regarding another Raheja Group project, ‘Raheja Shilas,’ and that very ruling has served as the precedent for the current case.

**What was the Builder's Argument?**
The Krishna Housing Scheme is primarily an affordable housing project that has availed of benefits under the ‘Pradhan Mantri Awas Yojana’ (Prime Minister's Housing Scheme) and associated credit-linked subsidy schemes. The entire project comprises 11 towers featuring 1 BHK and 2 BHK units, encompassing a total of 1,644 residential units alongside commercial spaces. During the hearings, the builder argued that construction work was severely disrupted due to the COVID-19 pandemic. Consequently, the project's cost escalated from ₹183.36 crore to ₹204 crore—a significant factor contributing to the inability to hand over possession on time.

**What Must Homebuyers Do Now?**
The NCLAT has issued clear directives to the Resolution Professional to publish a corrigendum (amendment) to the original public announcement issued in ‘Form-A.’ Pursuant to this, affected stakeholders of the Krishna Housing Scheme will be required to submit their claims within 14 days, in accordance with the CIRP Regulations, 2016. In its 30-page order, the Tribunal explicitly stated that when insolvency proceedings are initiated specifically for a single project, the claims regarding liabilities must also remain confined solely to that particular project.

Disclaimer: This content has been sourced and edited from TV9. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.