NCLAT Reaffirms Project-Specific Insolvency Proceedings Against Realty Firms

The National Company Law Appellate Tribunal has reaffirmed that insolvency proceedings initiated by homebuyers against realty firms must remain confined to the specific project where default has occurred and cannot extend to other projects of the corporate debtor.

The appellate tribunal highlighted that putting all other projects of the realty firms, which are unrelated to the default, is not in the interest of homebuyers and other stakeholders of other projects.

"The law is well settled that when financial creditors, homebuyers who belong to one project and who file a Section 7 application on account of default committed by the corporate debtor with respect to the project, the CIRP has to confine to the said projects," said the National Company Law Appellate Tribunal (NCLAT).

A two-member NCLAT bench, while deciding an appeal by Navin M Raheja, said jeopardising unrelated projects would not serve the interests of homebuyers and stakeholders elsewhere, making clear that the corporate insolvency resolution process (CIRP) is to be ring-fenced project-wise.

NCLAT, which last month passed an order related to another project of Raheja Developers and held that the CIRP is confined to only one project, Raheja Shilas, said that the judgment is fully applicable in the facts of the present case and has to be followed.

Applying the same, the NCLAT had confined the ongoing CIRP of Raheja Developers to "Krishna Housing Scheme" only, and not against the entire group.

Passing a final order, the appellate tribunal also held that in the project-wise insolvency proceedings against the realty firm, claims also filed by the creditors and stakeholders should be confined to that specific project.

"When the CIRP is initiated project-wise, it is but natural that the claims filed by the stakeholders have to be confined to the project against which the CIRP is proceeding," said the NCLAT bench, comprising Chairperson Justice Ashok Bhushan and Member (Technical) Barun Mitra.

The insolvency appellate tribunal also directed the resolution professional "to issue a corrigendum" to the publication issued in ‘Form-A’ asking the stakeholders pertaining to “Krishna Housing Scheme” to submit the claim within 14 days as per CIRP Regulations, 2016.

"We, however, are of the view that in view of this appeal being decided today and CIRP being confined to the Project “Krishna Housing Scheme”, the IRP is required to issue reference in pursuance of his earlier publication, requiring the claims to be confined to Project “Krishna Housing Scheme," the tribunal said in its 30-page-long order.

Navin M Raheja has challenged an earlier order passed by the New Delhi Bench of the National Company Law Tribunal (NCLT), which had, on August 21, 2025, admitted a Section 7 application filed by several flat buyers of Project Raheja Krishna Housing Scheme.

Krishna Housing Scheme was developed under the Affordable Housing framework, qualifying for Pradhan Mantri Awas Yojana and Rinn Yojana benefits. It comprises 11 towers, with 1-2 BHK configurations and offers a total of 1,644 residential units, along with commercial spaces.

Raheja had pleaded that constructions were adversely impacted by the COVID–19 pandemic. The cost of the residential project increased from Rs 183.36 crore to Rs 204 crore.

It had defaulted in completing the construction and delivering possession within the stipulated period.