This blog discusses how the Supreme Court in its recent judgment of Mansi Brar Fernandez vs. Subha Sharma[1] (“Mansi Brar”), has reinforced theprinciple laid down in the case of Pioneer Urban Land and Infrastructure Ltd v. Union of India,[2] (“Pioneer Urban”) of distinguishing a speculative investor from a genuine homebuyer. It also highlights the Court’s key directives and suggestions aimed at reforming real estate insolvency framework.

Introduction

Real estate insolvencies have always garnered significant attention from the judiciary and legislature because of the sector’s inherent complexities and sensitivities, including homebuyer involvement and employment generation. When the landmark amendment to the Insolvency and Bankruptcy Code, 2016 (“IBC”), which was aimed at safeguarding the interests of genuine homebuyers, included real estate allotees within the definition of “financial creditors”, it empowered them with a seat on the committee of creditors (“CoC”) and a right to participate in the corporate insolvency resolution process (“CIRP”) of a real estate company.[3] However, this led to some unintended consequences, and petitions began mounting under Section 7[4] of the IBC, as “speculative investors” increasingly sought returns on their investment rather than resolution of the company and getting possession.

Despite continuous demand, delays and lack of accountability in the real estate sector have led to several incomplete projects, severely affecting homebuyers, many of whom struggle to get possession despite having invested their life savings into such projects.[5] While the legislature and judiciary have tried creating a favourable framework to address real estate insolvency, inherent issues, including delayed CIRPs, prolonged litigation, and lack of a robust ecosystem, have hindered successful resolution of real estate companies.

In the Mansi Brar case , the Supreme Court reaffirmed the principles of curbing the menace of speculative investors in residential real estate insolvency and issued key directions and suggestions aimed at timely project completion, to ensure the protection of an individual’s constitutional right to shelter.[6]

Reaffirming the Pioneer Principle

While highlighting that speculative practices in the real estate sector not only disrupt market integrity through artificial demand creation and transparency erosion but also burden the NCLT[7] through bogus insolvency petitions, the Supreme Court held that admitting real estate allottees’ insolvency petitions necessitates a more nuanced approach towards distinguishing “genuine homebuyers” seeking resolution of the corporate debtor to obtain possession of their homes from “speculative investors” masquerading as homebuyers to recover their investments. It also held that arrangements involving guaranteed returns, compulsory buybacks, or liberal withdrawal rights mislead prospective homeowners and permit “trigger happy” investors to “jump the ship” or misuse insolvency proceedings as a recovery tactic.

This case analysed an MoU[8] that granted the developer/corporate debtor a buyback option,  and an agreed return on the appellant’s initial investment amount at the end of a specified period together with PDCs [9] issued by the developer. 

Calling it a straightforward case of speculative investment, the Court held that determining whether an allottee is a genuine homebuyer or a speculative investor will depend on case-specific facts and contextual inquiry into identifying the real intent of the parties. That the MoU included a buyback option in favour of the developer with agreed returns to the appellant, who also filed Section 138 proceedings under the Negotiable Instruments Act, 1881, demonstrates that taking possession was never the intention, instead the insolvency application was merely a recovery tactic.

The Court also laid down certain indicative factors to help distinguish between genuine homebuyers and speculative investors (terms of the contract, presence of assured returns or buyback clauses, existence of alternative arrangements in lieu of possession, significant deviations from RERA[10] model agreement, etc.).[11] Relying on the Pioneer Urbancase which had clarified that the IBC is not intended to operate as a mere debt recovery mechanism for speculative investors, the Court held that “the present case affords an opportunity to reinforce that distinction through a principled intelligible differentia, so as to protect bona fide homebuyers, deter misuse of the Code by speculative investors, and prevent dishonest developers from exploiting systemic loopholes”.[12]

Reforms for Revamping Real Estate Insolvency

The Court emphasised that timely completion of real estate projects must be central to India’s urban policy. Recognising the need to uphold the promise of the right to shelter under Article 21 of the Indian Constitution to bonafide homebuyers and to promote stability in the sector, it issued several directions to the relevant authorities[13] and proposed reforms,[14] including the following:

• Regulatory changes with focus on project-wise CIRP: IBBI[15] has been directed[16] to frame specific guidelines for real estate insolvencies, ensuring adequate safeguards for allottees, and to conduct project-specific real estate insolvencies, as a matter of rule (basis the circumstances involved), to protect the solvent projects (and their homebuyers) from being pushed into an insolvency proceedings. Courts/tribunals have been advocating project-wise CIRP, with the Winter Hills Case[17] establishing the cornerstone by acknowledging that real estate companies should ensure project-specific resolution to maximize assets and balance the stakeholders’ interests.[18] The Whispering Tower case[19] wasthe first instance of project-wise resolution, where the NCLAT,[20] after considering the unique circumstances and to achieve resolution over liquidation, granted a 90-day extension to explore its viability. Project-wise resolution has been implemented in several cases since.[21] Although project-wise CIRP is not yet formalised in the IBC,[22] recent amendments to the CIRP Regulations[23] allow the resolution professional (“RP”), with CoC approval, to invite distinct resolution plans for individual or grouped projects.
• Safeguarding interests of allottees: To safeguard genuine homebuyers’ interests, IBBI has been directed to devise a mechanism that (i) enables handover of possession to willing allottees where substantial units are complete and (ii) ensures meaningful representation of allottees in the CoC through authorised representatives, without any conflict of interest. Recent CIRP Regulations amendments empower the RP (with CoC approval) to hand over possession of plots or apartments to homebuyers and facilitate registration during CIRP and appoint facilitators in certain cases to coordinate communication between allottees and authorised representatives.[24] To prevent unnecessary admissions and reduce docket burden, NCLTs have also been directed to record a prima facie finding at the admission stage of Section 7 petitions filed by allottees on whether the applicant is a genuine homebuyer or speculative investor. Separately, for nascent-stage projects, it also mandates that proceeds from allottees be placed in an escrow account and disbursed in phases aligned with project progress.
• Ensuring completion of stalled projects: The Court has also recommended (a) introducing “Basel-like” early-warning frameworks to prevent defaults, (b) establishing a revival fund to provide bridge financing for stressed projects, and (c) establishing a body corporate (backed by housing boards and urban development authorities, similar to NARCL[25]) to take over and complete stalled projects under IBC. 

Conclusion

The residential real estate sector plays a systemically important and dual role in the Indian economy, serving as one of the country’s largest employment generators and catering to the housing needs of the populace. Considering it fulfils the social purpose linked to the constitutional right to shelter, its stability becomes paramount, and the constitutional responsibility squarely falls on the State and its instrumentalities to provide a robust ecosystem for the sector.

The Supreme Court’s directions and suggestions serve as a guidance note for the State to operationalise and implement the much-needed reforms for overhauling the real estate sector to ensure that (i) real estate projects are completed on time by introducing accountability and credibility; (ii) IBC is used as a forum of last resort, focusing on revival and completion of stalled projects; and (iii) the interests of genuine homebuyers are safeguarded.

Beyond the concept of project-wise CIRP, the State may consider incorporating other ideas / concepts focused on the completion of stalled projects, including (A) Reverse CIRP, which allows, with NCLT’s permission, existing promoters of the corporate debtor to complete the construction under supervision of the RP, upon demonstrating (i) firm intention, (ii) source of funding, and (iii) support of the allottees; [26] and (B) Group Insolvency, which provides for a consolidated resolution framework for projects spread across associated companies of the corporate debtor to be resolved under one umbrella proceeding, depending on the interconnected nature of the entities.[27]

It is, however, important that all the relevant authorities and stakeholders take serious note of the Supreme Court’s directions and suggestions and take swift action to achieve the underlying objectives.

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[1] 2025 SCC OnLine SC 1972, judgment dated September 12, 2025

[2] (2019) 8 SCC 416

[3] This was introduced vide Insolvency and Bankruptcy (Second Amendment) Act, 2018.

[4] Section 7 of IBC allows financial creditors to file insolvency petition against a defaulting corporate debtor

[5] As per a recent data, approximately 1,626 residential projects consisting of 432,000 homes in 15 major locations are stalled and an amount of INR 10.79 trillion invested by the homebuyers are stuck. Please see Business Standard article on stalled housing projects.

[6] Right to shelter is a fundamental right under Article 21 of the Constitution of India, as held by the Supreme Court in U.P. Avas Evam Vikas Parishad v. Friends Coop. Housing Society Ltd., (1995 Supp (3) SCC 456); Anita Kushwaha v. Pushap Sudan, (2016) 8 SCC 509

[7] National Company Law Tribunal

[8] Memorandum of Understanding entered into between the corporate debtor and the appellant investor

[9] Post-dated cheques

[10] Real Estate Regulatory Authority

[11] Supra Note 1, paragraph 18.4.5; in paragraph 18.4, the Supreme Court also analysed the definition of speculative investors to mean that a person who “makes risky investment of money for the sake of and in expectations of usually large profits”

[12] Supra Note 2,, at paragraph 56

[13] Supra Note 1, at Paragraph 21.2

[14] Ibid

[15] Insolvency and Bankruptcy Board of India

[16] Through constitution of a council and in consultation with RERA

[17] Flat Buyers Association Winter Hills – 77, Gurgaon vs Umang Realtech^, CA (AT) (Ins.) No. 926 of 2019, (Order Dated February 04, 2020)

[18]Ibid, Paragraph 21

[19] Whispering Tower Flat Owner Welfare Association Vs. Abhay Narayan Mundane, RP of Corporate Debtor, Company Appeal (AT) (Insolvency) No. 896 of 2021(Order dated January 4, 2022).

[20] National Company Law Appellate Tribunal

[21] Bank of India Vs. Housing Development Infrastructure Limited, C.P. (IB)/27/MB/2019. Also, the Supreme Court in the case of Indiabulls Asset Reconstruction Company Limited Vs. Ram Kishore Arora and Ors., Civil Appeal No. 1925 of 2023, order dated May 11, 2023, allowing for project wise CIRP held that “if at the present stage, on the submissions of the appellants, CoC is ordered to be constituted for the corporate debtor as a whole in displacement of the directions of the Appellate Tribunal, it is likely to affect those ongoing projects and thereby cause immense hardship to the home buyers while throwing every project into a state of uncertainty”.

[22] Recommendation for formalizing project wise resolution in the IBC also finds place in the report issued by the committee (chaired by Mr. Amitabh Kant) constituted by the Ministry of Housing and Urban Affairs. See b614f39d0f66b3a37737adbfc3c6dbfe.pdf (ibbi.gov.in). The Committee also pointed out that RERA should require all projects to be pre-registered, thereby making each project distinctly segregated and hence, making implementation of project wise resolution feasible.

[23] Insolvency Resolution Process for Corporate Persons (Amendment) Regulations, 2024 as notified on February 15, 2024. These amendments also mandate the RP to maintain separate bank accounts for each real estate project.

[24] Insolvency Resolution Process for Corporate Persons (Amendment) Regulations, 2025, as notified on February 03, 2025

[25] National Asset Reconstruction Company Limited

[26] Reverse CIRP was allowed by the Supreme Court for the first time in the Winter Hills case, at Supra Note, 17. Further, the same was also allowed by the Supreme Court in the cases of Narendra Singh vs. M/s Umang Realtech Pvt. Ltd (Civil Appeal No. 2942 of 2020) and Anand Murti vs. Soni Infratech Private Limited(Civil Appeal No.7534 of 2021). Further, in the case of Mr. Vijay Kumar Pasricha Vs. Mr. Manish Kumar Gupta, (Company Appeal (AT) (Ins.) No. 926 of 2019, Order dated March 24, 2023) NCLAT observed that “Reverse CIRP is rather an exception to normal rules and has to be decided carefully on specific and relevant facts of each case”.

[27] Group insolvency was recently allowed in the matter of Edelweiss Asset Reconstruction v. Sachet Infrastructure, (Company Appeal (AT) (Insolvency) No. 377 of 2019), order dated September 20, 2025, where five connected entities of the principal borrower were put under a consolidated CIRP with a common RP.