Shreya Gupta
On 12th September, 2025, the Supreme Court issued a comprehensive set of directions to improve the functioning of the National Company Law Tribunal (NCLT), the National Company Law Appellate Tribunal (NCLAT), and the Real Estate Regulatory Authorities (RERAs), while also calling for systemic reforms in the real estate sector.
A Division Bench of Justice J.B. Pardiwala and Justice R. Mahadevan, while deciding the case, said the measures were necessary to restore faith in the regulatory and insolvency framework, deter speculative misuse of the Insolvency and Bankruptcy Code (IBC), and protect genuine homebuyers from being trapped in incomplete housing projects.
The Court underscored that the Government is constitutionally obligated to safeguard the interests of homebuyers and the broader economy, noting that delays, defaults, and a lack of accountability have left countless families stranded despite having invested their lifelong savings. Many citizens, it noted, are compelled to pay both EMIs and rent, with their dream home reduced to an unfinished building.
While reiterating that the IBC is a remedial framework aimed at reviving sick companies and protecting genuine allottees, the Court warned against its use as a bargaining tool by speculative investors. It emphasised that individual investors and allottees have alternative remedies under consumer law, RERA, or civil courts.
Directions for NCLT/NCLAT and RERA
The Court ordered that vacancies in NCLT and NCLAT be filled on a war footing and that dedicated IBC benches with additional strength be constituted. It also suggested utilising retired judges on an ad hoc basis until regular appointments are made. The Union Government has been directed to file a compliance report within three months on measures taken to upgrade infrastructure nationwide.
The judgment also highlighted recent operational setbacks, such as the closure of Chandigarh NCLT and portions of Delhi NCLT due to water seepage, to underline the urgency of infrastructural upgrades.
For RERA authorities, States have been directed to ensure adequate staffing, infrastructure, and expertise. Every RERA must have at least one legal expert or consumer advocate with proven expertise in real estate, and strict diligence must be undertaken before granting approvals.
Systemic reforms and guidelines
The Court ordered the constitution of a Committee, chaired by a retired High Court judge, with representatives from key ministries, NITI Aayog, NIUA, IIMs, NLUs, HUDCO’s HSMI, and two industry experts. The panel must submit its report within six months, suggesting commercially viable reforms to bring credibility to the real estate sector.
It also directed IBBI, in consultation with RERAs, to frame sector-specific insolvency guidelines, including project-wise timelines for Corporate Insolvency Resolution Processes (CIRP) and safeguards for allottees. As a rule, insolvency proceedings should be carried out on a project-specific basis rather than for the entire corporate debtor. NCLTs, at the admission stage, must assess whether an applicant is a genuine homebuyer or a speculative investor.
Protection for homebuyers and financing mechanisms
The Court mandated that every residential real estate transaction be registered with revenue authorities once at least 20% of the property cost is paid. For nascent projects, funds collected from buyers must be kept in escrow and released in phases aligned with project progress, based on RERA-approved SOPs.
The judgment also suggested uniform RERA rules across states and proposed the creation of a body corporate on the lines of NARCL to take over and complete stalled projects. Unsold inventory could be deployed for affordable housing schemes such as PMAY. It further called for revival funding under NARCL or expansion of the SWAMIH Fund, with periodic audits by the CAG to ensure transparency and prevent misuse of public money.
Concluding, the Bench said the directions are aimed at fortifying safeguards for bona fide homebuyers, insulating the real estate sector from speculative misuse, and ensuring time-bound adjudication in line with the IBC.
Case Title: Mansi Brar Fernandes v. Shubha Sharma and Anr.
Bench: Justice J.B. Pardiwala and Justice R. Mahadevan
Case Number: Civil Appeal No. 3826 OF 2020
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