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The National Company Law Appellate Tribunal has ruled that insolvency proceedings initiated by homebuyers against real estate developers must be restricted to the specific project where default has occurred, and cannot be extended to other projects of the company. The ruling came while adjudicating an appeal related to Raheja Developers, where the tribunal confined the CIRP to the Krishna Housing Scheme. The decision emphasises protection of stakeholders in unrelated projects and clarifies that creditor claims must also remain project-specific. The case pertains to delays in an affordable housing project comprising 1,644 units, where construction timelines were impacted and costs escalated.
The National Company Law Appellate Tribunal has reaffirmed that insolvency proceedings initiated by homebuyers against real estate developers must be restricted to the specific project in default, ruling that such actions cannot extend to other unrelated projects of the same corporate entity. Advertisement
The appellate tribunal delivered the ruling while deciding an appeal filed by Navin M Raheja, concerning insolvency proceedings against Raheja Developers Ltd. The bench clarified that when homebuyers, acting as financial creditors, file an application under Section 7 of the Insolvency and Bankruptcy Code due to default in a particular project, the corporate insolvency resolution process (CIRP) must be confined to that project alone.
The tribunal observed that extending insolvency proceedings to unrelated projects would adversely affect other stakeholders, including homebuyers in those developments, and would not serve their interests. It reiterated that the legal position on project-specific insolvency is well established and must be adhered to in such cases.
Applying this principle, the NCLAT directed that the ongoing CIRP against Raheja Developers be restricted to the Krishna Housing Scheme and not extended to the entire company or its other projects. The tribunal noted that a similar position had been upheld in a prior order related to another project of the developer, Raheja Shilas, and stated that the same reasoning applies in the present case.
The bench further held that claims submitted by creditors and stakeholders must also be limited to the project under insolvency proceedings. It stated that when CIRP is initiated on a project-specific basis, it is necessary that all claims be confined to that particular development to ensure procedural clarity and fairness.
In its order, the tribunal directed the resolution professional to issue a corrigendum to the earlier public notice in Form-A, instructing stakeholders associated with the Krishna Housing Scheme to submit their claims within 14 days, in accordance with CIRP Regulations, 2016.
The case originates from an order passed by the National Company Law Tribunal, New Delhi bench, which had admitted a Section 7 application on August 21, 2025, filed by homebuyers of the Krishna Housing Scheme. The project, developed under the affordable housing framework and eligible for Pradhan Mantri Awas Yojana and Rinn Yojana benefits, comprises 11 towers with 1 and 2 BHK units, totalling 1,644 residential units along with commercial space.
The developer had cited disruptions caused by the COVID-19 pandemic as a factor impacting construction timelines and escalating project costs from INR 183.36 crore to INR 204 crore. The delay in completion and handover of units led to defaults, prompting homebuyers to initiate insolvency proceedings.
The ruling provides further clarity on the application of insolvency laws in the real estate sector, particularly in safeguarding the interests of homebuyers across multiple projects of a developer.
Source - PTI
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