Supreme Court Issues Key Directions to Protect Homebuyers and Strengthen NCLT, NCLAT, RERAs
Court Calls for Systemic Reforms and Accountability to Prevent Nightmare for Genuine Homebuyers in Mansi Brar Fernandes v Shubha Sharma and Anr
The Supreme Court has issued a comprehensive set of directions aimed at safeguarding homebuyer interests and improving the regulatory and insolvency framework in the real estate sector. The Bench of Justices JB Pardiwala and R Mahadevan emphasized that the government’s duty to protect homebuyers goes beyond housing; it affects banking, allied industries, and employment, and the ongoing plight of middle-class citizens must be addressed. The Court drew attention to the plight of families paying both EMIs and rent, yet left without possession due to incomplete projects.
The judgment highlighted that while investors are an integral part of the industry, speculative misuse of the Insolvency and Bankruptcy Code (IBC) must not be permitted. The Court clarified that the IBC is designed to revive sick companies and genuinely help homebuyers, not serve as a tool for individual disputes or bargaining. Homebuyers have additional remedies under consumer law, RERA, or civil courts.
To restore faith and deter speculative misuse, the Court directed urgent reforms for NCLT, NCLAT, and real estate regulatory authorities (RERAs). Vacancies in NCLT and NCLAT must be filled on a war footing, with dedicated IBC benches established and ad hoc use of retired judges until regular appointments are made. The government was ordered to prioritize infrastructural upgrades, including e-filing, video-conferencing, and case management systems, with compliance to be reported in three months. States must ensure RERA bodies have adequate staffing and legal expertise, conduct thorough due diligence before project approval, and face strict intervention for failure.
Further, a Committee chaired by a retired High Court Judge will be constituted within three months, including experts from various fields, to recommend systemic reforms for the real estate sector. Specific guidelines for real estate insolvency proceedings, including project-wise timelines and safeguards for homebuyers, must be formulated by a council comprising the Insolvency and Bankruptcy Board of India (IBBI) and RERA authorities. Residential real estate transactions must be registered with revenue authorities upon payment of at least 20% of property cost, with nascent project proceeds placed in escrow and disbursed in phases aligned with construction progress.
The Court also urged uniform RERA rules across States and proposed a dedicated corporate body or revival fund, possibly expanding existing mechanisms like NARCL or SWAMIH, to facilitate completion of stalled projects and utilize unsold inventory for public or affordable housing. A comprehensive performance audit of the SWAMIH Fund by the CAG, with public disclosure, was ordered to ensure transparency and prevent misuse.
The judgment aims to insulate real estate from speculation and artificial inflation, ensure time-bound adjudication, and secure the fundamental right to shelter for genuine homebuyers, restoring trust in India’s housing market.