Reverse CIRP in 2025: A Turning Point in Insolvency Law

[Mahi is a student at Hidayatullah National Law University.]

The real estate sector in India has grappled with chronic project delays, cost overruns, and opaque financing, often leaving homebuyers (allottees) stranded without possession of their flats. The reverse corporate insolvency resolution process (Reverse CIRP) is a judicial innovation in India’s insolvency regime, pioneered by the National Company Law Appellate Tribunal (NCLAT) to address distress in real estate projects. Unlike a traditional CIRP under the Insolvency and Bankruptcy Code 2016 (IBC), where control shifts to a resolution professional (RP) and the committee of creditors (CoC), Reverse CIRP allows the promoter of a distressed real estate company to act as a lender to the project. The promoter commits fresh funds to complete a stalled project while remaining largely outside the formal insolvency process. 

This approach seeks to expedite project completion and protect homebuyers’ interests, who are treated as financial creditors, at the cost of altering the usual hierarchy of creditor claims. Over time, a series of judicial decisions have shaped the contours of Reverse CIRP, and in February 2025 the Insolvency and Bankruptcy Board of India (IBBI) amended the CIRP Regulations to codify certain aspects of this process. This article explains the concept and evolution of Reverse CIRP, especially in real estate, analyzes the key changes introduced by the IBBI’s 2025 amendments, and contrasts them with prior IBC reforms. The implications for homebuyers, promoters, creditors, and insolvency professionals are also discussed, drawing on the latest legal developments up to 2025.

Evolution of Reverse CIRP in Indian Law

The genesis and evolution of Reverse CIRP can be outlined as follows:

2018	Homebuyers as financial creditors	The IBC (Second Amendment) Act 2018 inserted Section 5(8)(f), formally recognizing homebuyers as financial creditors, though it did not establish a reverse process.
2020	NCLAT introduces Reverse CIRP	In Flat Buyers Assn. Winter Hills-77, Gurgaon v. Umang Realtech Private Limited, the Delhi NCLAT introduced Reverse CIRP, recognizing that in largely complete projects, it may be more efficient for the promoter to fund and finish the project rather than pursue resolution or liquidation.
	Threshold for homebuyer petitions	The IBC (Second Amendment) Act 2020 introduced a threshold under Section 7: at least 100 or 10% of homebuyers (whichever is lower) must jointly file a petition, aiming to curb speculative filings. Its constitutionality was upheld  by the Supreme Court in Pioneer Urban Land & Infrastructure Limited v. UoI.
2022	Supreme Court endorses Reverse CIRP	The first official apex court approval came in Anand Murti (S) v. Soni Infratech Private Limited, where the promoter settled with most creditors and committed via affidavit to complete the project on time without raising flat prices. With only a few dissenting homebuyers and considering the cost and delay of CIRP, the court allowed the promoter’s plan, deeming it viable and stakeholder-friendly. Notably, it waived RERA’s 70% escrow requirement, relying instead on the promoter’s undertakings.
	Tribunal guidelines and controversies	Numerous NCLT/NCLAT orders followed, some upholding and some critiquing Reverse CIRP. For example, Whispering Tower Owners’ Assn. v. Abhay Manudhane upheld project-wise Reverse CIRP without enforcing the 70% rule, while in Supertech litigation (Ram Kishor Arora v. Union Bank of India), the NCLAT required separate accounts and RERA compliance, marking a rare insistence on the 70% usage rule.
	Other Supreme Court pronouncements	In the broader real estate-IBC context, the Supreme Court held in Bikram Chatterji v. Union of India that homebuyers’ claims have priority over other financial creditors and government dues.
2024	Project-wise resolution in regulations	Prefiguring legislative sanction, IBBI on 15 Feb 2024 amended the CIRP Regulations to introduce “project-wise” resolution for real estate companies.

The 2025 IBC regulations mark a key advancement in addressing the distinct challenges of real estate insolvency. They introduce facilitators, formal mechanisms for transferring possession, mandatory 60-day progress reports, and stronger roles for monitoring committees. While earlier reforms in 2018 and 2020 gave homebuyers creditor status and set filing thresholds, they did not alter the CIRP’s core structure. By 2024, the IBBI introduced project-wise accounting and resolution plans, institutionalizing practices already adopted by tribunals. These reforms acknowledged the need to treat each real estate project separately but focused largely on administrative processes without deeply enhancing buyer protections. 

The IBBI (CIRP) Amendment Regulations 2025: Key Changes

The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations 2025 primarily target insolvencies involving real estate projects, introducing new provisions to aid homebuyers and streamline project completion. Key reforms include allowing RPs to hand over possession of completed flats or plots to homebuyers during the insolvency process upon CoC approval (66% vote) and payment compliance by allottees. To improve coordination among large creditor classes like homebuyers, the CoC can now appoint “Facilitators” to act as communication bridges between authorized representatives and sub-groups of creditors. Additionally, competent development authorities such as NOIDA or HUDA can now participate in CoC meetings to offer insights on project approvals and regulatory compliance.

Further, RPs must submit a comprehensive report within 60 days detailing development rights and statutory clearances for each project, enhancing transparency and helping stakeholders make informed decisions. Homebuyer associations, if representing at least 10% or 100 creditors, can now submit resolution plans with relaxed eligibility conditions, addressing the practical constraints faced by non-corporate applicants. To ensure effective implementation of approved plans, CoCs must consider forming Monitoring Committees, including the RP and stakeholders, to submit regular progress reports. Lastly, RPs must now disclose whether the debtor is registered as an MSME, aiding potential applicants in assessing benefits under the Code. Collectively, these amendments formalize judicial innovations and align CIRP procedures with the unique demands of real estate insolvencies.

Impact of the 2025 Amendments on Various Stakeholders

The 2025 IBC regulations mark a significant evolution in the insolvency framework for the real estate sector. They require CoCs to vote specifically on flat handovers during the resolution process, with a 2/3^rd majority needed. This procedural shift not only adds an agenda item to creditor meetings but compels RPs to secure separate approvals for possession in addition to plans. The broader responsibilities of RPs now turn them from financial overseers into quasi-project managers, responsible for legal compliance, stakeholder communication, and supervising plan execution.

For homebuyers, the changes are cautiously empowering. They can receive possession during the process, have better access through facilitators, and may now submit plans via associations. However, without integration of project-level fund safeguards from real estate law, risks persist. Promoters face heightened scrutiny. While they can retain control and complete projects with support from creditors, they must give affidavits, face closer monitoring, and may need to co-develop with public agencies. Those with prior defaults risk disqualification, and even eligible promoters now operate under tighter checks. Creditors like banks benefit from improved oversight through regular reporting and committee participation but retain voting power to block plans that dilute recovery. Still, cooperation remains key: if completion yields better returns, banks may prefer it over liquidation.

For professionals managing the process, the amendments bring both clarity and burden. They now have legal authority to do what courts previously directed them to handle, such as forming oversight committees or engaging with municipal bodies. However, the volume of tasks has grown. From verifying legal titles before handover to managing multiple votes and liaising with facilitators, professionals must balance legal, financial, and administrative roles. Other stakeholders such as land authorities or construction firms may now enter the process as collaborators, especially when buyer groups become successful applicants. The new regime places a premium on coordination and compliance, aiming to convert distressed projects into habitable homes within a regulated but evolving framework.

Critical Analysis and Future Outlook

Despite various advances, the legal foundation for what is commonly called Reverse CIRP remains unsettled. It still does not appear in the core insolvency statute and exists only through a combination of regulatory updates and judicial interpretations. One of the most persistent issues is the lack of alignment between the insolvency regime and real estate regulation. While the new rules aim to address structural inefficiencies, they stop short of integrating key safeguards mandated under the real estate law, such as project-specific escrow accounts. This disconnect can lead to friction between two regulatory regimes, particularly when it comes to fund management and buyer protections. There is an urgent need for deeper reform, including mandatory financial monitoring by independent experts, restricting errant promoters to non-decision-making roles, and stricter eligibility filters based on past compliance and financial capability. Without such guardrails, the process risks being undermined by poor execution or regulatory arbitrage. 

From the perspective of different stakeholders, the outlook is mixed but cautiously optimistic. Homebuyers now have a legal voice in the process and access to mechanisms that support their interests, such as facilitators and early possession. Promoters still have a chance to revive stalled projects, though under greater regulatory scrutiny. Creditors benefit from structured oversight tools like the mandatory monitoring committee, but they remain concerned about preserving the value of their claims. RPs face a wider scope of duties, from legal compliance to on-ground coordination, which requires new expertise and workflows. 

In conclusion, the Reverse CIRP model remains judicially constructed and lacks a statutory base. The reforms provide structure and direction but require legislative harmonization to fully stabilize the process. Professionals must now juggle legal, financial, and administrative duties, coordinating with authorities and managing complex voting and compliance mechanisms. While the changes hold promises for converting stalled projects into livable homes, their long-term success depends on seamless implementation and future reforms that integrate real estate-specific provisions into the insolvency regime. The intent is clear: to protect homebuyers, enable promoter accountability, and encourage creditor cooperation, turning real estate insolvency from gridlock to resolution.