“Project-Wise Versus Company-Wide Real-Estate Insolvency: Rights of Homebuyers in Different Projects”

PROJECT-WISE VERSUS COMPANY-WIDE REAL-ESTATE INSOLVENCY: RIGHTS OF HOMEBUYERS IN DIFFERENT PROJECTS

Abstract

Real-estate insolvency presents a problem that is structurally different from ordinary corporate insolvency. A real-estate company may develop several projects in different cities, with separate approvals, land arrangements, lenders, allottees and sources of finance. When default takes place in one project, the central question is whether the Corporate Insolvency Resolution Process (CIRP) should affect the entire corporate debtor or remain confined to the project connected with the default. The Insolvency and Bankruptcy Code, 2016 (IBC) is principally framed around the “corporate debtor”, while the Real Estate (Regulation and Development) Act, 2016 (RERA) treats a registered real-estate project as a distinct regulatory unit. This structural tension has produced considerable judicial development.

The present position has moved strongly towards a project-specific approach. The Supreme Court in Mansi Brar Fernandes v. Shubha Sharma & Anr., 2025 INSC 1110, expressly directed that resolution of real-estate insolvency should, as a rule, proceed on a project-specific basis rather than against the entire corporate debtor, unless circumstances justify otherwise. Subsequent NCLAT decisions in 2026 have applied this principle, particularly where the relevant creditor’s debt or security is connected with identified projects. The important unresolved question is not simply whether project-wise insolvency is legally possible, but how the courts should determine the boundary between the affected project and the remaining projects of the same developer.

Research cut-off date: 2 October 2026. Jurisdiction: India.

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1. Introduction

A modern real-estate developer rarely operates through a single economically homogeneous project. One company may simultaneously develop several residential townships, commercial developments and plotted colonies. Some projects may be almost complete, while another may be stalled because of financing, regulatory or construction difficulties. The same corporate debtor may also have different lenders and security arrangements for different projects.

This creates a serious insolvency problem. Suppose a financial creditor has financed Project A and the developer defaults in relation to that facility. The creditor files an application under Section 7 of the IBC. If the entire corporate debtor enters CIRP, projects B, C and D—although financially independent or progressing normally—may also come under the control of the Interim Resolution Professional. The homebuyers of those projects may consequently face uncertainty despite having no connection with the original default.

At the same time, an automatic project-wise model cannot be applied mechanically in every case. A lender may have a charge over several projects, common receivables may secure more than one facility, or the financial affairs of multiple projects may be so interconnected that separating them would prejudice creditors. The legal problem is therefore one of drawing an appropriate boundary between the corporate entity and the individual economic project.

This issue has become particularly important because homebuyers are recognised as financial creditors under the IBC. The purpose of insolvency proceedings in their context is ordinarily not merely recovery of money, but completion of construction and delivery of the promised property.

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2. Research Question

The principal research question is:

When a real-estate company develops multiple projects and insolvency is triggered because of default connected with one project, should CIRP be conducted on a project-wise or company-wide basis, and what are the rights of homebuyers belonging to other projects of the same corporate debtor?

The connected questions are whether the IBC itself expressly authorises project-wise CIRP, how RERA influences the interpretation, when other projects may legitimately be brought within CIRP, and how the interests of project-specific homebuyers and financial institutions should be balanced.

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3. Statutory Framework

3.1 Section 5(8)(f), IBC — Homebuyers as Financial Creditors

Section 5(8) defines “financial debt”. Clause (f) includes amounts raised under transactions having the commercial effect of borrowing. Its Explanation specifically provides that an amount raised from an allottee under a real-estate project is deemed to have the commercial effect of borrowing.

The Supreme Court upheld this statutory treatment in Pioneer Urban Land and Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416. The Court recognised that amounts paid by homebuyers in real-estate projects have the character of financing and therefore allottees fall within the category of financial creditors.

This provision is fundamental to the present issue because the identity of the “project” becomes significant at the very stage at which homebuyers invoke Section 7.

3.2 Section 7, IBC — Initiation of CIRP

Section 7 permits a financial creditor to initiate CIRP upon default. In the case of homebuyers, the provisos require a collective application by not less than 100 allottees of the same real-estate project or 10% of the total number of allottees in that project, whichever is less.

The Supreme Court upheld this requirement in Manish Kumar v. Union of India, (2021) 5 SCC 1. The Court specifically held that the qualifying allottees must relate to the same real-estate project. The Court considered the requirement constitutionally valid and explained that commonality of interests among allottees of the same project justified the classification.

This produces an important statutory link between the homebuyer and the project in which the homebuyer has an allotment.

3.3 Section 21(6A) — Representation of Allottees

Homebuyers are not only financial creditors; Section 21(6A) provides for their representation in the Committee of Creditors through an authorised representative. This ensures that the collective interests of a large class of dispersed homebuyers can participate in CIRP.

The statutory mechanism is therefore collective rather than individual. This principle has also been emphasised by the Supreme Court in Pioneer Urban and later judgments.

3.4 Sections 30 and 31 — Resolution Plan

Section 30 governs the contents and approval process of a resolution plan, while Section 31 deals with approval of the plan by the Adjudicating Authority and its binding effect.

In real-estate insolvency, these provisions create a practical question: whether a resolution plan should concern the whole corporate debtor or can be structured around an identified project. Judicial decisions have increasingly accepted project-wise resolution as a workable mechanism where the factual and financial structure supports separation.

3.5 RERA, 2016

RERA creates a regulatory structure based upon the real-estate project rather than merely upon the corporate identity of the promoter.

Section 3 requires registration of a real-estate project. Importantly, where a project is developed in phases, each phase is treated as a stand-alone real-estate project for registration purposes.

Section 4 governs registration requirements and requires project-related approvals and information. Section 11 requires continuing disclosure by promoters. Section 18 provides remedies involving refund, interest and compensation in specified circumstances, while Section 19 recognises rights and duties of allottees.

The RERA structure therefore supports the argument that different projects of the same corporate entity may possess sufficiently distinct legal and economic characteristics to justify separate treatment during insolvency.

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4. Judicial Development of Project-Wise Insolvency

4.1 Flat Buyers Association Winter Hills-77, Gurgaon v. Umang Realtech Pvt. Ltd.

The decision of the NCLAT in Flat Buyers Association Winter Hills-77, Gurgaon v. Umang Realtech Pvt. Ltd., Company Appeal (AT) (Insolvency) No. 926 of 2019, decided on 4 February 2020, is one of the foundational decisions in this area.

The Tribunal held that where CIRP is initiated in relation to one project of a real-estate company, the process should be confined to that project where the financial creditors, allottees and operational creditors are connected with that particular project. Other projects with separate approvals, land arrangements and creditor interests should not automatically be brought into the same process.

The case also developed the idea of “reverse CIRP”, under which the existing promoter, subject to judicial and insolvency supervision and appropriate safeguards, could assist in completing a stalled project. The factual circumstances demonstrated that a significant number of homebuyers had already obtained possession during the process, showing why completion can sometimes produce a more meaningful result than liquidation.

4.2 Manish Kumar v. Union of India

Although Manish Kumar was primarily concerned with the constitutional challenge to the homebuyer threshold under Section 7, it is highly relevant to the project-wise debate.

The Supreme Court expressly accepted that the qualifying homebuyers must belong to the same real-estate project. It reasoned that allottees of the same project have commonality of interest and therefore constitute a rational group for the purpose of initiating insolvency proceedings.

Thus, the statutory architecture already recognises a project-based grouping of homebuyers even though CIRP is otherwise formulated around the corporate debtor.

4.3 Indiabulls Asset Reconstruction Company Ltd. v. Ram Kishore Arora & Ors.

In the Supertech insolvency, the NCLAT had issued interim directions substantially adopting a project-wise approach in relation to Eco Village-II. The matter reached the Supreme Court in Indiabulls Asset Reconstruction Company Ltd. v. Ram Kishore Arora & Ors., Civil Appeal No. 1925 of 2023 and connected matters.

On 11 May 2023, the Supreme Court did not interfere, at that interim stage, with the direction concerning the constitution of a CoC for Eco Village-II, while requiring further judicial control over steps beyond voting on the resolution plan. The Court expressly recorded that the issues beyond the interim arrangement remained open.

Therefore, this decision should not be overstated as a final Supreme Court pronouncement creating a universal rule of project-wise insolvency. Its importance lies in demonstrating that project-specific treatment was judicially workable in an appropriate real-estate insolvency.

4.4 Mansi Brar Fernandes v. Shubha Sharma & Anr.

The most important development is the Supreme Court judgment dated 12 September 2025, reported as 2025 INSC 1110.

The Court examined the role of homebuyers under the IBC and directed several systemic measures relating to real-estate insolvency. Most significantly for this research question, paragraph 21.2(6) states that resolution of real-estate insolvency should, as a rule, proceed on a project-specific basis rather than against the entire corporate debtor, unless circumstances justify otherwise. The Court further directed that mechanisms be developed for handing over possession to willing allottees where substantial units in a project are complete.

This is a significant shift in legal position. The project-specific approach is no longer merely an innovation appearing in isolated NCLAT decisions. It has received an express direction from the Supreme Court.

The qualification—“unless circumstances justify otherwise”—is nevertheless crucial. It means that project-wise treatment is not an absolute rule irrespective of the facts. A court must still examine the nature of the debt, security, project structure, interlinkages and interests of stakeholders.

4.5 Amit Jain v. IDBI Trusteeship Services Ltd.

In Amit Jain (Member of the Suspended Board of Directors of Mahagun India Pvt. Ltd.) v. IDBI Trusteeship Services Ltd., Company Appeal (AT) (Insolvency) Nos. 1186, 1254, 1258 and 1314 of 2025, decided on 6 November 2025, the NCLAT considered a developer having several projects, including Mahagun Manorialle.

The Tribunal took note of the Supreme Court’s direction in Mansi Brar Fernandes and recognised that the existence and status of other projects could not simply be ignored while determining the scope of the insolvency proceedings. It referred to the possibility of confining CIRP to the concerned project and required consideration of the factual position of different projects.

4.6 Gagan Tondon & Ors. v. IL&FS Financial Services Ltd. & Ors.

On 7 January 2026, the NCLAT delivered a detailed judgment in Gagan Tondon & Ors. v. IL&FS Financial Services Ltd. & Ors., Company Appeal (AT) (Insolvency) Nos. 500 & 502 of 2025.

The Tribunal examined a developer having projects across several cities and states. It identified the central problem: whether CIRP initiated by a creditor relating to one project should cover all projects, and whether the extent of CIRP should depend upon the assets and projects forming the security for the particular financial facility.

The Tribunal ultimately held that where a Section 7 proceeding relates to one project, CIRP should be confined to that project and should not automatically extend to unrelated projects in other cities or states. In the case before it, because the lender’s security covered specified projects and assets, the Tribunal confined the CIRP to those projects and assets.

This judgment is particularly useful because it shows that “project-wise” does not necessarily mean “one geographical project only”; the precise extent may depend on the security package and contractual structure of the financial debt.

4.7 Surender Singh v. IDBI Trusteeship Services Ltd.

The NCLAT again addressed the issue on 27 March 2026 in Surender Singh, Suspended Director of Vatika Ltd. v. IDBI Trusteeship Services Ltd. & Ors., Company Appeal (AT) (Insolvency) No. 266 of 2026.

The debenture documentation and security were found to relate to land forming part of the project subsequently registered as “Aspirations”. The Tribunal held that the finance was project-specific and concluded that CIRP ought to be confined to Project Aspirations rather than being extended to the company’s other projects. The admission of CIRP itself was upheld, but its scope was modified so that it remained confined to the identified project.

This decision is valuable because it demonstrates how contractual security documents can determine the appropriate boundary of CIRP.

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5. Rights of Homebuyers in Different Projects

The question of rights of homebuyers in other projects requires a distinction between being a creditor of the corporate debtor and being entitled to participate in a particular project’s CIRP.

A homebuyer of Project B may have a genuine financial claim against the developer. However, if CIRP is confined to Project A because the default and financial security relate specifically to Project A, it does not automatically follow that Project B’s homebuyers become creditors of the Project A resolution process.

The principle was clearly expressed in Flat Buyers Association Winter Hills. The Tribunal held that claims relating to another project cannot simply be brought into the CIRP of the project in which the creditor has no connection.

At the same time, homebuyers of other projects are not without legal protection. They may seek appropriate relief before the Adjudicating Authority where the scope of CIRP threatens their project, particularly where there are questions regarding common assets, common financing, cross-collateralisation or the actual extent of the corporate debtor’s insolvency.

In Gagan Tondon, the NCLAT specifically clarified that unrelated projects should not be unnecessarily affected and permitted the continuation of resolution in the projects actually connected with the creditor’s security.

Therefore, the rights of other-project homebuyers may be summarised in three propositions:

First, they retain their status as financial creditors if the requirements of Section 5(8)(f) are satisfied.

Second, their project should not automatically be absorbed into another project’s CIRP merely because the same company is the promoter.

Third, where there is genuine financial, contractual or asset-level interconnection, the Adjudicating Authority may need to examine whether a broader scope is justified.

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6. Project-Wise Versus Company-Wide CIRP: The Legal Tension

The apparent conflict can be explained through two competing models.

Entity-centric model

The IBC ordinarily identifies the corporate debtor as the relevant legal person. Once CIRP commences, the IRP takes control over the assets and affairs of the corporate debtor. This model supports company-wide administration and can simplify valuation, creditor coordination and resolution of common liabilities.

It also protects a creditor whose loan was advanced on the strength of the developer’s entire balance sheet rather than a single project.

Project-centric model

The project-centric model recognises that real-estate projects may have separate approvals, land parcels, receivables, homebuyers and lenders. It attempts to prevent a viable project from being dragged into insolvency merely because another project of the same developer has defaulted.

The Supreme Court’s direction in Mansi Brar Fernandes establishes project-specific resolution as the rule, but expressly preserves an exception where circumstances justify otherwise.

The real legal test, therefore, is not simply:

“Is the company insolvent?”

It is increasingly:

“Which projects, assets, liabilities and stakeholders are economically and legally connected with the default that triggered CIRP?”

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7. When Can Company-Wide Treatment Be Justified?

A company-wide approach may become relevant where the evidence demonstrates substantial interdependence.

Examples include:

1. A lender’s security extends over multiple projects.

2. Project receivables are expressly pooled or cross-collateralised.

3. Common assets are essential for the functioning of several projects.

4. There is substantial financial interdependence between projects.

5. Fraudulent diversion or commingling of project funds prevents reliable separation.

6. The contractual and regulatory structure makes genuine project-level segregation impossible.

The reasoning in Gagan Tondon is important here. The Tribunal did not treat project-wise CIRP as a mechanical formula. It examined the loan agreements and security documents and determined which projects were actually covered.

Therefore, a company-wide process may still be legally conceivable where the factual circumstances establish that the corporate debtor cannot fairly be separated into independent project-level units.

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8. The 2026 Regulatory Development

Following Mansi Brar Fernandes, the IBBI constituted a committee to formulate guidelines for insolvency proceedings in the real-estate sector. The committee submitted its report on 7 April 2026. The IBBI stated that the committee considered 55 key issues and made 155 recommendations. One of the central themes was movement from an entity-centric model towards a project-centric, completion-oriented approach.

The committee recommended, among other matters, that real-estate insolvency should ordinarily be admitted and conducted on a project-wise basis, with solvent or unrelated projects excluded except in exceptional circumstances involving substantial interlinkages or fraud. It also recommended a completion-first approach and mechanisms for facilitating possession during CIRP.

However, these are committee recommendations and not, by themselves, statutory provisions. They therefore should not be cited as though Parliament has already enacted every recommendation.

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 also received Presidential assent on 6 April 2026. The Act expressly provides that it will come into force on dates appointed by the Central Government, and therefore amendments must be checked provision-by-provision against their notified commencement dates.

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9. Critical Legal Issue

The present law has substantially reduced the uncertainty surrounding the possibility of project-wise CIRP, but an important gray area remains concerning the boundary of the project.

For example, a developer may have one RERA-registered project but several phases, common infrastructure and common financing. Conversely, several projects may exist within the same township or under the same development agreement but have separate RERA registrations and separate homebuyer groups.

The courts therefore cannot rely only on the corporate name or merely on geographical identity. They need to examine:

– the RERA registration and approved project structure;

– the allotment agreements;

– the source and use of financing;

– the security documents;

– project-specific receivables;

– common or cross-collateralised assets;

– separate or pooled accounts; and

– the effect of the insolvency process on homebuyers in both the affected and unaffected projects.

This fact-sensitive analysis is essential to prevent two opposite errors: artificially enlarging CIRP to the entire company where separation is practical, or artificially fragmenting CIRP when the financial structure is genuinely integrated.

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10. Conclusion

Indian real-estate insolvency law has moved from an uncertain and largely judge-developed project-wise approach towards a more clearly recognised project-specific model. Flat Buyers Association Winter Hills-77 laid an important NCLAT foundation. Manish Kumar reinforced the significance of the same-project concept for homebuyer initiation. Indiabulls ARC v. Ram Kishore Arora demonstrated that project-wise arrangements could operate judicially in appropriate circumstances, although the Supreme Court’s order there was interim.

The decisive development came with Mansi Brar Fernandes v. Shubha Sharma on 12 September 2025. The Supreme Court expressly directed that resolution of real-estate insolvency should, as a rule, be project-specific rather than company-wide, unless circumstances justify otherwise.

The 2026 NCLAT decisions of Gagan Tondon, Surender Singh and Navin M. Raheja demonstrate the practical application of this principle. In particular, Gagan Tondon and Surender Singh show that the nature of the lender’s security and the contractual connection of the debt with particular projects can determine the permissible scope of CIRP.

The position can therefore be stated carefully: project-wise CIRP is now the judicially preferred rule in real-estate insolvency, but it is not an absolute rule. The expression “unless circumstances justify otherwise” preserves a fact-specific exception where projects or assets are materially interconnected.

For homebuyers, the central protection is that a viable and unrelated project should not ordinarily be sacrificed merely because another project of the same developer has suffered default. At the same time, a project-wise structure cannot be used to defeat legitimate rights of secured creditors where their contractual security genuinely extends across projects.

The future development of this area will depend on how courts and insolvency regulators translate the Supreme Court’s project-specific direction into a consistent operational framework dealing with admission, claims, CoC composition, project accounts, valuation, cross-collateralisation, resolution plans and final distribution.

Case Law Authorities

1. Pioneer Urban Land and Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416 — Homebuyers/allottees recognised as financial creditors under Section 5(8)(f), with RERA and consumer remedies operating alongside the IBC.

2. http://Manish Kumar v. Union of India, (2021) 5 SCC 1— Constitutional validity of the 100/10% same-project threshold for homebuyer Section 7 applications upheld.

3. Flat Buyers Association Winter Hills-77, Gurgaon v. Umang Realtech Pvt. Ltd., Company Appeal (AT) (Insolvency) No. 926 of 2019, NCLAT, decided 04.02.2020 — project-wise CIRP and reverse CIRP.

4. Indiabulls Asset Reconstruction Company Ltd. v. Ram Kishore Arora & Ors., Civil Appeal No. 1925 of 2023 and connected matters, Supreme Court, order dated 11.05.2023 — interim judicial acceptance of project-wise arrangements in the Supertech/Eco Village-II context, with final issues left open at that stage.

5. Mansi Brar Fernandes v. Shubha Sharma & Anr., 2025 INSC 1110, Supreme Court, decided 12.09.2025 — project-specific resolution directed as the rule in real-estate insolvency unless circumstances justify otherwise.

6. Amit Jain v. IDBI Trusteeship Services Ltd. & Anr., Company Appeal (AT) (Insolvency) Nos. 1186, 1254, 1258 & 1314 of 2025, NCLAT, decided 06.11.2025 — consideration of project-wise scope after Mansi Brar Fernandes.

7. Gagan Tondon & Ors. v. IL&FS Financial Services Ltd. & Ors., Company Appeal (AT) (Insolvency) Nos. 500 & 502 of 2025, NCLAT, decided 07.01.2026 — CIRP confined to projects/assets connected with the creditor’s security; unrelated projects not automatically affected.

8. Surender Singh, Suspended Director of Vatika Ltd. v. IDBI Trusteeship Services Ltd. & Ors., Company Appeal (AT) (Insolvency) No. 266 of 2026, NCLAT, decided 27.03.2026 — CIRP confined to Project Aspirations because the financing and security were project-specific.

9. Navin M. Raheja v. Shravan Minocha & Ors., Company Appeal (AT) (Insolvency) No. 1276 of 2025, NCLAT, decided 10.04.2026 — reaffirmation that where allottees’ Section 7 proceeding concerns one project, CIRP is to be confined to that project.

FAQs

Q1. Does the IBC expressly contain a separate chapter called “project-wise insolvency” for real-estate companies?

Answer: No. The expression “project-wise insolvency” is not expressly created as a standalone CIRP mechanism in the original statutory structure of the IBC. It has developed through judicial interpretation and directions, most significantly through Flat Buyers Association Winter Hills-77 and, later, the Supreme Court’s direction in Mansi Brar Fernandes. The Supreme Court’s direction now provides a strong judicial basis for a project-specific approach, subject to the exception where circumstances justify a wider process.

Q2. Can homebuyers of different projects combine their numbers to satisfy the Section 7 threshold?

Answer: Ordinarily, no. Section 7 requires the relevant allottees to belong to the same real-estate project. The Supreme Court expressly upheld this requirement in Manish Kumar v. Union of India.

Q3. If one project enters CIRP, are homebuyers of another project automatically part of that CIRP?

Answer: No. Project-specific judicial decisions indicate that unrelated projects should not automatically be included. The rights of another-project homebuyers have to be examined separately, especially where their project has separate approvals, assets, financing and creditor relationships.

Q4. Can a lender’s security over several projects justify a wider CIRP?

Answer: Yes, potentially. Gagan Tondon demonstrates that the extent of CIRP may depend upon the projects and assets actually covered by the loan and security documents.

Q5. Is the IBBI’s 2026 committee report itself law?

Answer: No. The report contains recommendations made pursuant to the Supreme Court’s directions. It is an important policy and regulatory source, but recommendations should not be treated as enacted statutory provisions unless and until they are incorporated through valid legislative or regulatory action.