SC asks Centre to consider expanding SWAMIH to finance insolvent projects

The apex court said that liquidation of viable projects must be avoided and that the state cannot remain a "silent spectator" when the livelihoods of millions are at stake

The Supreme Court has directed the Centre to consider expanding the scope of the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund and use it as a bridge financing mechanism for stalled real estate projects undergoing insolvency.

 

Ruling that the right to housing is a facet of the fundamental right to life under Article 21 of the Constitution, a bench of Justices JB Pardiwala and R Mahadevan on Friday said that liquidation of viable projects must be avoided and that the state cannot remain a “silent spectator” when the livelihoods of millions are at stake. 

 

“It is not merely about houses or apartments. The banking sector, allied industries, and employment of a large populace are also involved,” the court said.

 

The court's directions came while upholding a 2020 judgment of the National Company Law Appellate Tribunal (NCLAT), which had rejected an insolvency plea filed by an allottee against a builder.

 

The appellate tribunal found that the allottee’s arrangement, in which she invested ₹35 lakh in exchange for a promised buyback of ₹1 crore after 12 months, was not a standard builder-buyer agreement but a financial investment scheme. When the post-dated cheques bounced, she sought to invoke insolvency proceedings.

 

The NCLAT classified her as a “speculative investor” and held that the Insolvency and Bankruptcy Code (IBC) could not be used as a recovery tool. The Supreme Court agreed with the appellate tribunal’s conclusion while dismissing the appeal.

 

In its judgment, the apex court bench held that speculative participants driven purely by profit motives cannot misuse the IBC, which was conceived as a remedial framework for reviving companies. The IBC’s purpose, the bench said, is to protect genuine homebuyers who have invested their life savings. 

 

Speculative investors have remedies under consumer law, the Real Estate Regulatory Authority (RERA), or civil courts, but not under insolvency proceedings.

 

"...we observe that the right to housing is not merely a contractual entitlement but a facet of the fundamental right to life under Article 21," the order said. 

 

Genuine homebuyers represent the backbone of India’s urban future, and their protection lies at the intersection of constitutional obligation and economic policy, the court said.

 

"Through these directions, this Court seeks to restore faith in the regulatory and insolvency framework, deter speculative misuse, and ensure that the 'dream home' of India’s citizens does not turn into a lifelong nightmare."

 

Ordering follow-up action, the SC Bench also directed that a copy of the judgment be circulated to the Cabinet Secretary and Chief Secretaries of all States for immediate steps. 

 

It also asked the Union government to consider creating a revival fund for stressed projects under corporate insolvency resolution, subject to periodic audits by the Comptroller and Auditor General (CAG). The audit reports, the Court stated, must be made public in a manner that is easily understood by citizens.