When a real estate developer defaults on one project, the first question for everyone else involved is whether insolvency will engulf the whole company or only the project that failed. The Insolvency and Bankruptcy Code, 2016 (IBC) is built around the corporate debtor as a whole, so a single stalled tower can, on the default rule, bring a moratorium and a single committee of creditors down on every site the company is building. Over the last six years the tribunals, the Supreme Court and the Insolvency and Bankruptcy Board of India (IBBI) have moved steadily towards project-wise insolvency instead. This article traces that shift and what it means for homebuyers, lenders and developers.
The default rule: the IBC admits a company, not a project
An application under Section 7 or Section 9 of the IBC is made against a corporate debtor. Once it is admitted, the corporate insolvency resolution process (CIRP) covers the company and all its assets:
- the moratorium under Section 14 bars suits, enforcement and recovery against the corporate debtor and its assets generally;
- an interim resolution professional takes over management of the whole company;
- a single committee of creditors (CoC) is constituted from the financial creditors of the company, across all its projects; and
- historically, a single resolution plan was invited for the corporate debtor as a whole.
For a developer with several projects, the results can be severe. Homebuyers in a project that is on schedule find their building frozen alongside a failed one. Lenders who financed a healthy project find their security pooled with the rest. Construction that could have continued stops while a resolution plan for the entire company is negotiated.
Umang Realtech (2020): confining the CIRP to the project
The first decisive step was taken by the National Company Law Appellate Tribunal (NCLAT) in Flat Buyers Association Winter Hills-77 v. Umang Realtech Pvt. Ltd. (Company Appeal (AT) (Insolvency) No. 926 of 2019, decided 4 February 2020).
The NCLAT held that the CIRP against a real estate company should be confined to the project in default and should not affect the company’s other projects, which had separate approvals and different allottees. Creditors of other projects were not to be brought into the process. The Tribunal also described what it called a “reverse corporate insolvency resolution process”: instead of seeking an outside resolution applicant, the promoter, staying outside the CIRP and acting as a financial creditor, would infuse funds to complete the project under the supervision of the interim resolution professional, so that flats could be handed over to the allottees.
The reasoning reflected a basic feature of real estate insolvency. For homebuyers, the value lies in completed homes, not in a liquidation dividend. A process that keeps construction going on the project in default, while ring-fencing the rest, is more likely to deliver that value.
Supertech: project-wise resolution at scale
The Supertech insolvency tested the approach on one of the largest residential developers in the National Capital Region.
The NCLAT’s order of 10 June 2022
After a Section 7 application was admitted against Supertech Limited, the NCLAT modified the process. The CIRP was confined to one project, Eco Village-II, with a committee of creditors for that project alone. The company’s other projects were to be continued as ongoing projects under the supervision of the interim resolution professional, with the assistance of the ex-management, and funds infused by the promoter in different projects were to be treated as interim finance.
Indiabulls Asset Reconstruction Co. v. Ram Kishor Arora (2023)
Financial creditors challenged this before the Supreme Court, seeking a CoC for the corporate debtor as a whole. In Indiabulls Asset Reconstruction Company Ltd. v. Ram Kishor Arora (2023 INSC 523, order of May 2023), the Court declined to grant interim relief. It took the view that greater inconvenience was likely to be caused by an interim order constituting a CoC for the corporate debtor as a whole, which might cause irreparable injury to the homebuyers, and allowed the NCLAT’s order to operate subject to the final outcome of the appeals. For Eco Village-II, it directed that nothing beyond voting on a resolution plan was to be undertaken without its specific orders, and kept other questions, including maintainability, open.
The 2026 judgment on completion by NBCC
The NCLAT later, on 12 December 2024, appointed NBCC (India) Ltd. as project management consultant to complete sixteen stalled Supertech projects. On 5 February 2026, a Bench of the Supreme Court led by the Chief Justice upheld that order, holding that it was neither unfair nor contrary to the provisions of the IBC, and indicated that financial and operational creditors would have to accept such haircuts as the tribunals found just and equitable. Supertech illustrates both the strength of the project-wise approach and its limits: it keeps homebuyers at the centre, but it requires sustained judicial supervision and a credible party to finish construction.
The IBBI regulations now provide for it
What began as judicial improvisation has since been written into the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
- Separate plans for each project (February 2024). Amendments notified in February 2024 clarified, in Regulation 36A, that the resolution professional may, with the approval of the CoC, invite resolution plans for each real estate project or group of projects of the corporate debtor. The same amendments made it mandatory to operate a separate bank account for each real estate project.
- Handover of possession during CIRP (February 2025). Amendments notified on 3 February 2025 inserted Regulation 4E, which empowers the resolution professional to hand over possession of a plot, apartment or building to allottees who have met their obligations, during the CIRP, with the approval of the CoC by not less than sixty-six per cent of the voting share. The same amendments allow authorities responsible for land development to be invited to CoC meetings and require the resolution professional to report on the status of development rights and approvals within sixty days.
Separately, the IBC (Amendment) Act, 2026, which received assent on 6 April 2026, widens the definition of a resolution plan to include the sale of one or more assets through one or more plans proposed by one or more applicants. This points in the same direction, although how it will interact with the real estate provisions of the regulations remains to be worked out in practice.
Mansi Brar Fernandes (2025): project-specific as the rule
The clearest statement from the Supreme Court came in Mansi Brar Fernandes v. Shubha Sharma (2025 INSC 1110, decided 12 September 2025, J.B. Pardiwala and R. Mahadevan, JJ.). The case is better known for its holding that speculative investors, as distinct from genuine homebuyers, cannot invoke the IBC. But among the directions issued at the end of the judgment, the Court stated:
Resolution of real estate insolvency should, as a rule, proceed on a project-specific basis rather than the entire corporate debtor, unless circumstances justify otherwise. This would protect solvent projects and genuine homebuyers from collateral prejudice.
The Court also directed the IBBI, in consultation with RERA authorities, to constitute a council to frame specific guidelines for real estate insolvency, including timelines for project-wise CIRP and safeguards for allottees, and to devise a mechanism for handover of possession to willing allottees where substantial units in a project are complete. At the admission stage of Section 7 applications by allottees, the NCLT must record a prima facie finding on whether the applicant is a genuine homebuyer or a speculative investor.
What this means in practice
For homebuyers
- Allottees who wish to initiate CIRP under Section 7 must still meet the threshold in the proviso to Section 7(1): at least one hundred allottees, or ten per cent of the allottees, of the same real estate project, whichever is less.
- Where a CIRP is admitted, it is now realistic to ask the NCLT, and the CoC, to confine the process to the project in default, and to seek a project-specific resolution plan under Regulation 36A.
- Where units are complete, Regulation 4E offers a route to possession without waiting for the whole process to end.
For lenders
Project-wise resolution aligns more naturally with project finance, where security is usually ring-fenced to a project. A lender with exposure to a healthy project has a stronger argument that its project should not be dragged into a process triggered elsewhere, but it should also expect pressure to accept haircuts where a stalled project is being rescued for allottees.
For developers
The approach offers a way to keep viable projects running. It also means that the promoter may be expected to fund completion of the project in default, as in the reverse CIRP model, and that cross-subsidising projects through common accounts will be scrutinised, given the requirement of separate project accounts.
Frequently Asked Questions
Does insolvency of a developer stop all its projects?
On the default rule, a CIRP covers the whole company and the moratorium applies to all its assets. However, tribunals have repeatedly confined the process to the project in default, and the Supreme Court in Mansi Brar Fernandes v. Shubha Sharma (2025) said that real estate insolvency should, as a rule, proceed project-specifically unless circumstances justify otherwise.
What is a reverse CIRP?
It is the model described by the NCLAT in Umang Realtech (2020). The promoter, rather than an outside resolution applicant, funds completion of the project in default under the supervision of the insolvency professional, so that homes can be handed over to allottees.
Can there be separate resolution plans for different projects of the same developer?
Yes. Since the February 2024 amendments, Regulation 36A of the CIRP Regulations allows the resolution professional, with the CoC’s approval, to invite resolution plans for each real estate project or group of projects.
Can a homebuyer get possession while the CIRP is still going on?
Regulation 4E, inserted in February 2025, allows the resolution professional to hand over possession of a completed unit to an allottee during the CIRP, with the approval of the CoC by at least sixty-six per cent of the voting share. It is available to allottees who have met their obligations under the allotment.
How many homebuyers are needed to start insolvency against a developer?
Under the proviso to Section 7(1) of the IBC, an application by allottees must be filed jointly by at least one hundred allottees or ten per cent of the allottees of the same project, whichever is less. After Mansi Brar Fernandes, the NCLT must also record a prima facie finding that the applicants are genuine homebuyers.
This article is for general information and is not legal advice.
- Mansi Brar Fernandes v. Shubha Sharma, 2025 INSC 1110 (Supreme Court of India judgment)
- Indiabulls Asset Reconstruction Company Ltd vs Ram Kishor Arora on 11 May, 2023 (Indian Kanoon)
- NCLAT sets out 'reverse corporate insolvency process' for real estate companies (Shardul Amarchand Mangaldas)
- IBBI amends the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (Argus Partners)
- CIRP Amendment Regulations 2025: Streamlining Resolution Processes and Protecting Homebuyer Interests (S&R Associates)
- Supreme Court Clears Way For NBCC To Complete 16 Supertech Housing Projects (ETV Bharat)
This article is for general information only and is not legal advice or an invitation to engage the firm. Laws and judgments change; please obtain specific legal advice before acting.
