The KMRCL counsel told the division bench of Chief Justice T.B.N. Radhakrishnan and Justice Arijit Banerjee that the work was halted on Sunday and would be resumed only after the green signal from the court.
The cracks, apparently due to the tunnelling work for the project, were visible in the houses on Bowbazar area's Durga Pithuri Lane, where the construction work was on, on Sunday.
The KMRC counsel said 323 dwellers were rescued and shifted to alternative accommodation after the cracks were seen.
The court will again hear the matter on September 16.
During the day, two houses emptied of people on Sunday gave in.
"Today, two buildings have collapsed. Hence, we have all unanimously decided that this should be properly and extensively examined by experts so that further, even after the work is complete, such incidents do not recur," Chief Minister Mamata Banerjee said after a review meeting with KMRCL authorities.
She announced Rs 5 lakh as immediate compensation per family who have been directly affected.
According to her, residents of 52 houses have been taken to safer accommodations.
However, a few shopkeepers have refused to shift despite their outlets being shut as they feared their valuables will be stolen.
Banerjee said till normalcy was restored, the shopkeepers and workers in the shops would receive a monthly allowance.
A core group would be formed comprising the Chief Secretary, Home Secretary, City Police Commissioner and representatives of affected houses and shops regarding the problem relating to tunelling work from time to time.
The project connects a stretch of 16.6 km from Howarah Maidan to Rajarahat Newtown in the city's northeastern fringes and includes tunnelling under the river Hooghly.
Of the 10.9 km-long underground tunnel, work has been completed for 9.8 km.
Once commissioned fully, one would travel more than a 10-storied building below the water surface for almost half a kilometer across the 460-m wide Hooghly river.
( With inputs from IANS )