The rise of “Consolidated Insolvency” in real estate sector

Posted On - 3 April, 2023 • By - Souvik Ganguly


The Insolvency and Bankruptcy Code, 2016 (Code) provides for initiation of corporate insolvency resolution process (CIRP) against a corporate debtor in case of debt and default of such debt. However, there may be a situation, especially in companies engaged in development and construction of real estate projects when the resolution of debt or development of the project is dependent on multiple companies having inter-related business relations. To address the peculiarities of the real estate sector and all stakeholders’ concerns, the insolvency tribunals have repeatedly customised the insolvency framework for real estate developers introducing a novel concept of consolidated consolidated CIRP[1].

Approach of insolvency courts

The Code is silent on conducting CIRP of related parties in a consolidated manner. However, in some cases, as we have analysed below, the insolvency tribunals have consolidated the CIRP proceedings of related corporate debtors to be concurrently handled by a single insolvency professional. This ensures a higher possibility of revival, improved procedural coordination and better value realisation.

In Edelweiss Asset Reconstruction Company Limited v. Superlative Infrastructure Private Limited; Adel Landmarks Limited (Adel) was the principal borrower of a loan taken for development of a real estate project. The land on which the project was to be developed was owned by five companies who stood as corporate guarantors as well as co-borrowers for the loan availed by Adel. The National Company Law Appellate Tribunal (NCLAT) noted that since the development of the project is dependent on the land owned jointly by the corporate guarantors, group CIRP against all the concerned entities is essential for the successful CIRP of Adel.

In Lavasa Corporation Limited v. Warasgaon Assets Maintenance Limited, separate CIRP was initiated against the holding company and its wholly owned subsidiaries engaged in the business of development and maintenance of townships. The financial creditors of the holding company applied for consolidation of CIRP of the holding company and its subsidiaries as the resolution applicant of the holding company had proposed for resolution of the entire debt of the group company as a whole. The National Company Law Tribunal (NCLT) noted that the concerned companies were part of the same group and were Inter-dependent for survival and therefore, allowed the consolidation of CIRP stating that conducting separate CIRP may result in loss of value to the stakeholders.

In the recent case of LIC Housing Finance Limited v. SRS Real Estate Limited and Ors. (LIC Housing Finance Case), the NCLT initiated consolidated CIRP against SRS Real Estate Limited – the developer and SRS Retreat Services Limited – the plot owner. As evident from the case laws cited above, there seems to be an emergence of the concept of ‘consolidated CIRP’ in the real estate sector, as an alternative to the rigid entity-by-entity approach.

Our thoughts

In cases involving real estate companies, it is often seen that the project developer and the landowner are members of the same group and have deep inter-connected operational and financial relationships. In insolvency of real estate developers, the biggest concern of homebuyers is completion of the real estate project. This completion hits a roadblock when one of the key constituents of the project, such as land, is not owned by the defaulting corporate debtor. Therefore, initiating separate CIRPs against different group companies may not result in achieving the optimum solution for the homebuyers, other financial creditors and stakeholders.

In view of the above, the novel concept of consolidated CIRP introduced by the insolvency courts is worth applauding. This is so because consolidated CIRP ensures that there is a more realistic chance of project completion; thereby benefiting the key stakeholders, i.e., the homebuyers and other financial creditors. Another such experimental approach is ‘Reverse CIRP’[2] which involves limiting the corporate insolvency process to only a particular real estate project. Both consolidated CIRP and reverse CIRP, though aim to ensure the completion of the real estate project and securing the interest of the homebuyers.

Authors: Souvik Ganguly, Altamash Qureshi and Shrishti Mishra

The information contained in this document is not legal advice or legal opinion. The contents recorded in the said document are for informational purposes only and should not be used for commercial purposes. Acuity Law LLP disclaims all liability to any person for any loss or damage caused by errors or omissions, whether arising from negligence, accident, or any other cause.

  1. Refer paragraph 12.2. of the “Invitation of comments from the public on changes being considered to the Insolvency and Bankruptcy Code, 2016“ available at

  2. Flat Buyers Association Winter Hills v. Umang Realtech Pvt. Ltd.