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Informist, Friday, Sept. 12, 2025

NEW DELHI – The Supreme Court Friday held that Right to Housing was not merely a contractual entitlement but a facet of the fundamental Right to Life under Article 21 of the Indian Constitution. The apex court directed a bunch of insolvency reforms in the Insolvency and Bankruptcy Code, 2016 "to restore faith in the regulatory and insolvency framework, deter speculative misuse, and ensure that the dream home of India's citizens does not turn into a lifelong nightmare".

While this is a matter of policy falling within the exclusive domain of the government, the court cannot remain a silent spectator, said a bench of Justice J.B. Pardiwala and Justice R. Mahadevan. The government is constitutionally obliged to protect the interests of homebuyers and the economy at large, said the bench. It is not merely about houses or apartments, the banking sector, allied industries, and employment for a large populace are also at stake, the bench added. "Genuine homebuyers represent the backbone of India's urban future, and their protection lies at the intersection of constitutional obligation and economic policy," said the court.

The top court asked the government to fill vacancies in National Company Law Tribunal and National Company Law Appellate Tribunal "on a war footing". Dedicated insolvency and bankruptcy benches with additional strength should be constituted, said the court, adding that the services of retired judges may be utilised on ad hoc basis until regular appointments are made.

The Centre shall file a compliance report within three months on measures taken to upgrade the tribunal and appellate tribunal's infrastructure nationwide, said the court. The recent closure of Chandigarh tribunal and portions of Delhi tribunal due to water seepage in the courtrooms and members' chambers underscores the urgency of robust infrastructural support, said the top court.

Within three months, a committee chaired by a retired high court judge shall be constituted, with representatives from the Ministry of Law, Ministry of Housing, domain experts in real estate, finance and insolvency, as well as two eminent industry representatives, said the court. The committee shall suggest commercially viable systemic reforms for cleansing and infusing credibility into the real estate sector, said the court. NITI Aayog and National Institute of Urban Affairs shall provide research and secretarial support, said the court. The committee shall submit its report within six months of its constitution, the court directed.

The top court asked states to ensure that real estate regulatory authorities are adequately staffed with infrastructure, experts, and resources. At least one member of every real estate regulatory authority must be a legal expert or consumer advocate with proven expertise in the real estate field, said the court. These authorities must conduct thorough diligence before granting approval to any project, said the court. Failure to do so, resulting in miscarriage of justice, shall amount to an error unpardonable in law and may invite strict intervention by the court, it added.

Since real estate is the second largest sector in insolvency proceedings, Insolvency and Bankruptcy Board of India, in consultation with real estate authorities, shall constitute a council to frame specific guidelines for insolvency proceedings in real estate, including timelines for project-wise insolvency, and safeguards for allottees, said the court. 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, said the court. This would protect solvent projects and genuine homebuyers from collateral prejudice, the court said. The insolvency board shall also devise a mechanism to enable handover of possession to willing allottees where substantial units in a project are completed, the court added.

Further, the Centre shall consider establishing a revival fund under the National Asset Reconstruction Co. Ltd. or expanding the Special Window for Affordable and Mid-Income Housing Fund, to provide bridge financing for stressed projects undergoing insolvency, thereby preventing liquidation of viable projects and safeguarding homebuyer interests, said the court. To prevent misuse, we direct that a comprehensive periodic performance audit by the Comptroller and Auditor General of India be carried out, with reports placed in the public domain in a form comprehensible even to laypersons, said the court.

Among future reforms, the top court asked housing boards and state-level urban development authorities to establish dedicated wings to revive and complete stalled projects under insolvency mechanisms. This would instil faith in the sector, ensure affordable housing, and protect genuine homebuyers, said the court.

The Centre may also consider establishing a body corporate, on the lines of NARCL or otherwise, promoted by real estate or construction-focussed public sector units or through public-private partnerships, to identify, take over, and complete stalled projects under the insolvency framework, said the court. Unsold inventory from such projects could be utilised towards affordable housing schemes like Pradhan Mantri Awas Yojana or for government quarters, thereby addressing both the housing shortage and revival of sick projects, said the court.

The top court upheld the appellate tribunal's order to set aside insolvency proceedings against Gayatri Infra Planner Pvt. Ltd. The top court upheld the appellate tribunal's ruling that petitioners Mansi Brar Fernandes and others were "speculative investors" and not genuine homebuyers or financial creditors of Gayatri Infra Planner.  End

Reported by Surya Tripathi

Edited by Nishant Maher

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