Reverse CIRP: A Homebuyer-Centric Shift in Real Estate Insolvency
The insolvency framework governing real estate projects in India has undergone a significant transformation with the recognition of “Reverse CIRP”, a judicial innovation designed to protect homebuyers’ interests while ensuring completion of stalled real estate projects. This mechanism was recently endorsed by the National Company Law Appellate Tribunal (“NCLAT”) in the Satish Chander Verma v. Grand Reality Private Limited[1] ("Grand Reality Case"). The decision marks a sea change in the development of insolvency jurisprudence under the Insolvency and Bankruptcy Code, 2016 ("IBC"), which is particularly relevant in the real estate sector where the interests of homebuyers often conflict with the constraints of the conventional Corporate Insolvency Resolution Process ("CIRP").
The Grand Reality Case and the Emergence of Reverse CIRP
Ordinarily, CIRP under the IBC contemplates either a third-party resolution applicant stepping in to revive the corporate debtor or, in the absence of such an applicant, liquidation of the corporate debtor’s assets. Both outcomes, however, have proved inadequate in the real estate context. A third-party applicant is often unwilling to assume incomplete projects weighed down by financial and operational complexities, while liquidation leaves homebuyers treated as financial creditors, without the essential relief of possession. It was in this backdrop that the dispute in Grand Reality Case arose. The case started when financial creditors filed an application under Section 7 of IBC[2] against Grand Reality Private Limited, a business building a residential project in New Delhi. The National Company Law Tribunal (“NCLT”) accepted the petition and started CIRP in its order dated February 14, 2023. Following the NCLT's order, an appeal was filed before the NCLAT by Satish Chander Verma challenging the NCLT's decision. In the ordinary course, the Resolution Professional (“RP”) would have invited expressions of interest from third parties. However, recognizing the peculiarities of real estate projects, the NCLAT adopted an alternative approach that allowed the original developer to resume construction under judicial supervision.
The Tribunal permitted Pax Homes LLP, the original developer under a development agreement dated 18 November 2011, to take charge of the project despite ongoing CIRP. By its order dated 26 September 2023, the NCLAT authorized Pax Homes LLP to complete the project so that homebuyers’ interests were secured. This marked the application of “Reverse CIRP”, a process where, instead of replacing the debtor with a third party, the developer itself completes the project under the oversight of the RP and the Tribunal. Pax Homes LLP completed the project, and occupation certificates were issued on 10 May 2024 and 22 May 2024. A local commissioner appointed by the Tribunal submitted a report on 9 August 2024 confirming that construction obligations had been discharged and possession could be delivered once remaining formalities with allottees were completed. The commissioner also noted that fittings and appliances would be installed at the stage of final payments, an arrangement acceptable to homebuyers. The project was thus delivered, demonstrating that Reverse CIRP could achieve what traditional mechanisms could not.
Objections initially raised by the RP were resolved. Certain financial creditors confirmed they had relinquished claims or already received possession. The Income Tax Department, which had raised a claim for AY2015–16, stated it had no objection to closure of the CIRP provided its rights in pending tax disputes were preserved. The appellant confirmed through an affidavit that the closure would not affect any pending tax liabilities. Since no objections remained, the Tribunal was satisfied that the concerns of all stakeholders had been addressed.
Judicial Recognition and Implications of Reverse CIRP
The NCLAT closed the CIRP proceedings by using its inherent authority under Rule 11 of the NCLAT Rules, 2016, concluding that this course of action was appropriate in cases where all claims had been resolved and all parties involved were satisfied. The Tribunal did this by citing rulings such as Sachin Malde v. Hemant Nanji Chheda and Gaurav Bhati v. Smriti Bhati[3], which acknowledged that where circumstances call for closure, a formal withdrawal under Section 12A of the IBC[4] is not required. Its approach was further reinforced by the apex court[5], which affirmed that Tribunals may invoke inherent powers to secure the ends of justice.
The NCLAT took a practical, stakeholder-focused view of insolvency in the real estate sector by recognizing Reverse CIRP. The ruling highlights how judicial intervention can adapt statutory processes to better reflect the needs of homebuyers. Notably, it avoids the loss of value and uncertainty that often come with lengthy insolvency proceedings by allowing the original developer to complete construction under court supervision. This ensures that homebuyers’ core expectation, i.e., the delivery of their homes is met, while also preserving the overall value of the project. The decision reflects an effort to balance substantive justice with procedural requirements. The Tribunal gave priority to results that safeguarded stakeholders and furthered the IBC's goals rather than demanding technical conformity that was inappropriate for real estate ventures. This adaptability guarantees that the insolvency discipline's application stays sensitive to sector-specific difficulties without weakening it.
The Grand Reality Case carries broader implications. It sends a message to developers that effective, court-approved escapes from insolvency can be achieved via collaboration with the courts and dedication to project completion. It gives homebuyers comfort in knowing that courts are prepared to create remedies that put their needs first. For the insolvency framework, it introduces a tested alternative to traditional CIRP that could guide future cases involving stalled projects.
Conclusion
The closure of CIRP in the Grand Reality Case through the Reverse CIRP model represents a landmark development in Indian insolvency law. It is the first formal recognition by the NCLAT of Reverse CIRP as a judicially acceptable resolution mechanism, particularly tailored for the real estate sector. By enabling project completion and ensuring delivery of possession to homebuyers, the model has proven to be more effective than conventional CIRP mechanisms. In order to improve efficiency and equity in real estate insolvencies, the Insolvency and Bankruptcy Board of India recently released a notification[6] amending the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations,2016 and introducing homebuyer-centric measures. With this reform, the insolvency framework's safeguards for homebuyers are being strengthened in a step forward.
Going forward, Reverse CIRP should not be viewed as an exceptional measure but as a legitimate resolution strategy for real estate insolvencies. With the support of the Supreme Court, the NCLAT’s approach lays the foundation for a more pragmatic, stakeholder-driven insolvency framework in India—one that balances the legal process with economic realities and keeps the interests of homebuyers at its core.
References
[1] Satish Chander Verma v. Grand Reality Pvt. Ltd., MANU/NL/0554/2025.
[2] Initiation of corporate insolvency resolution process by financial creditor.
[3] Sachin Malde v. Hemant Nanji Chheda and Gaurav Bhati v. Smriti Bhati, Company Appeal (AT) (Ins.) No. 123 of 2024.
[4] The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10,on an application made by the applicant with the approval of ninety per cent. voting share of the committee of creditors, in such manner as may be specified.
[5] GLAS Trust Company LLC v. BYJU Raveendran , 2024INSC 811.
[6] IBBI Notification No. IBBI/PR/2025/03, dated 4February, 2025.