'Right To Housing A Fundamental Right Under Article 21': Supreme Court Urges Centre To Create Revival Fund For Stressed Real Estate Projects

In a significant judgment aimed at safeguarding homebuyers, the Supreme Court declared that the right to housing is a fundamental right under Article 21 of the Constitution and urged the Union Government to come up with a revival fund to provide financing for stressed real estate projects undergoing insolvency proceedings.

A Bench of Justice JB Pardiwala and Justice R Mahadevan said that the objective must be to prevent liquidation of otherwise viable real estate projects and to protect the interests of genuine homebuyers.

"It is not merely about houses or apartments. The banking sector, allied industries, and the employment of a large populace are also at stake," the Court observed, adding that the government is constitutionally obliged to safeguard the interests of homebuyers and the economy at large.

The Court passed these directions while upholding an NCLAT judgment which had rejected the claims of speculative buyers in insolvency proceedings.

The Court held that speculative participants driven purely by profit motives cannot be permitted to misuse the Insolvency and Bankruptcy Code (IBC), which is a remedial framework for the revival and protection of sick companies.

"In the case of real estate, the IBC's purpose is to protect genuine homebuyers," the judgment underscored, clarifying that such speculative investors have alternative remedies under consumer protection laws, RERA, or through civil courts.

Directing immediate follow-up action, the Supreme Court ordered that a copy of its judgment be circulated by the Registry to the Cabinet Secretary and Chief Secretaries of all States, who must take necessary steps at the earliest.

“The Union Government shall consider establishing a revival fund under the relevant scheme to provide bridge financing for stressed projects undergoing CIRP proceedings, thereby preventing liquidation of viable projects and safeguarding home buyer interest…. To prevent misuse, we direct that a comprehensive periodic performance audit by CAG be carried out, with reports placed in the public domain in a form comprehensible even to laypersons.”, the Court observed.

The Court stressed that the government cannot remain a “silent spectator” and must fulfil its constitutional duty to safeguard homebuyers and the wider economy, highlighting that the banking sector, allied industries, and employment are directly impacted.

“Ultimately, this is a matter of policy. Falling within the exclusive domain of the Government, it cannot remain a silent spectator. The Government is constitutionally obliged to protect the interests of home buyers and the economy at large….Before parting, we observe that the right of housing is not merely a contractual entitlement but a facet of the fundamental right to life under Article 21.”, the Court observed.

“Genuine home buyers represent the backbone of India's urban future, and their protection lies at the intersection of constitutional obligation and economic policy. Through these directions, this Court seeks to restore faith in the regulatory and insolvency framework, better speculate to misuse, and ensure that the dream home of India's citizens does not turn into a lifelong nightmare.”, the Court added.

Background

A Bench of Justices JB Pardiwala and R Mahadevan heard the matter that stemmed from a 2020 NCLAT judgment which rejected a Section 7 IBC petition filed by an allottee, Ms. Fernandes-Appellant. The tribunal found her Memorandum of Understanding (MoU) with the builder was not a standard builder-buyer agreement but a financial investment scheme with a compulsory buyback clause.

Appellant had invested ₹35 lakh and was promised ₹1 crore after 12 months, backed by post-dated cheques. When the cheques bounced, she sought insolvency proceedings. The NCLAT classified her as a “speculative investor” attempting to misuse the IBC as a coercive recovery mechanism, noting she had already pursued remedies under the Negotiable Instruments Act

Against the NCLAT's ruling, she approached the Supreme Court.

Decision

Affirming the NCLAT's ruling, the judgment authored by Justice Mahadevan ruled against the misuse of the Insolvency and Bankruptcy Code, 2016 (“IBC”) by the speculative investors, stating that “the investors are integral to any industry and their interest warrants protection. Speculative participants driven purely by profit motives cannot be permitted to misuse the insolvency and bankruptcy code, which is a remedial framework conceived for revival and protection of companies and in the case of real estate genuine home buyers.”

The Court reiterated that the IBC is not a recovery mechanism for speculative investors who are driven by profit motives and must explore other alternative remedies enshrined under relevant statutes.

“Such investors have alternative remedies under consumer law or RERA and even recourse to civil courts in appropriate cases. To admit speculative claim into insolvency proceedings would dilute the intelligible differential underlying the legislative scheme, destabilize the residential real estate sector and erode the social purpose embedded in housing as a fundamental right. The present case therefore provides an occasion to fortify safeguards for bona fide home buyers who have invested their life savings to insulate the real estate market from speculation and artificial inflation and to secure speedy and time-bound adjudication as mandated by the court.”, the court observed.

Also from the judgment -

Every New Housing Project Must Be Registered With Local Revenue Authority On Buyer Paying 20% Cost : Supreme Court

NCLT, NCLAT Vacancies Must Be Filled On War Footing; RERA Must Be Adequately Staffed : Supreme Court

Accordingly, the appeal was dismissed.

Cause Title: MANSI BRAR FERNANDES Versus SHUBHA SHARMA AND ANR. (and connected cases)

Citation : 2025 LiveLaw (SC) 903

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