diff --git a/application/src/main/kotlin/application/BackwardCompatibilityCheckCommand.kt b/application/src/main/kotlin/application/BackwardCompatibilityCheckCommand.kt
index 5d194a570..09724908c 100644
--- a/application/src/main/kotlin/application/BackwardCompatibilityCheckCommand.kt
+++ b/application/src/main/kotlin/application/BackwardCompatibilityCheckCommand.kt
@@ -11,10 +11,12 @@ import java.io.File
 import java.util.concurrent.Callable
 
 @Component
-@Command(name = "backwardCompatibilityCheck",
-        mixinStandardHelpOptions = true,
-        description = ["Checks backward compatibility of a directory across the current HEAD and the main branch"])
-class BackwardCompatibilityCheckCommand(
+@Command(
+    name = "backwardCompatibilityCheck",
+    mixinStandardHelpOptions = true,
+    description = ["Checks backward compatibility of a directory across the current HEAD and the main branch"]
+)
+open class BackwardCompatibilityCheckCommand(
     private val gitCommand: GitCommand,
 ) : Callable<Unit> {
 
@@ -29,7 +31,7 @@ class BackwardCompatibilityCheckCommand(
 
     override fun call() {
         val filesChangedInCurrentBranch: Set<String> = getOpenAPISpecFilesChangedInCurrentBranch()
-        if(filesChangedInCurrentBranch.isEmpty()) exitWithMessage("$newLine OpenAPI spec files were changed, skipping the check.$newLine")
+        if (filesChangedInCurrentBranch.isEmpty()) exitWithMessage("$newLine OpenAPI spec files were changed, skipping the check.$newLine")
 
         val filesReferringToChangedSchemaFiles = filesReferringToChangedSchemaFiles(filesChangedInCurrentBranch)
 
@@ -42,7 +44,7 @@ class BackwardCompatibilityCheckCommand(
 
         val result = runBackwardCompatibilityCheckFor(filesToCheck)
 
-        if(result == FAILED) {
+        if (result == FAILED) {
             exitWithMessage("$newLine Verdict: FAIL, backward incompatible changes were found.")
         }
         println("$newLine Verdict: PASS, all changes were backward compatible")
@@ -50,7 +52,7 @@ class BackwardCompatibilityCheckCommand(
 
     private fun runBackwardCompatibilityCheckFor(files: Set<String>): String {
         val currentBranch = gitCommand.currentBranch()
-        val currentTreeish = if(currentBranch == HEAD) gitCommand.detachedHEAD() else currentBranch
+        val currentTreeish = if (currentBranch == HEAD) gitCommand.detachedHEAD() else currentBranch
 
         try {
             val failures = files.mapIndexed { index, specFilePath ->
@@ -74,7 +76,11 @@ class BackwardCompatibilityCheckCommand(
                     SUCCESS
                 } else {
                     println("$newLine ${backwardCompatibilityResult.report().prependIndent(MARGIN_SPACE)}")
-                    println("$newLine *** The file $specFilePath is NOT backward compatible. ***$newLine".prependIndent(MARGIN_SPACE))
+                    println(
+                        "$newLine *** The file $specFilePath is NOT backward compatible. ***$newLine".prependIndent(
+                            MARGIN_SPACE
+                        )
+                    )
                     FAILED
                 }
             }.filter { it == FAILED }
@@ -85,7 +91,10 @@ class BackwardCompatibilityCheckCommand(
         }
     }
 
-    private fun logFilesToBeCheckedForBackwardCompatibility(changedFiles : Set<String>, filesReferringToChangedFiles: Set<String>) {
+    private fun logFilesToBeCheckedForBackwardCompatibility(
+        changedFiles: Set<String>,
+        filesReferringToChangedFiles: Set<String>
+    ) {
         println("Checking backward compatibility of the following files: $newLine")
         println("Files that have changed - ")
         changedFiles.forEach { println(it) }
@@ -98,18 +107,22 @@ class BackwardCompatibilityCheckCommand(
         println()
     }
 
-    private fun filesReferringToChangedSchemaFiles(schemaFiles : Set<String>): Set<String> {
-        if(schemaFiles.isEmpty()) return emptySet()
+    internal fun filesReferringToChangedSchemaFiles(schemaFiles: Set<String>): Set<String> {
+        if (schemaFiles.isEmpty()) return emptySet()
 
         val schemaFileBaseNames = schemaFiles.map { File(it).name }
-        return allOpenApiSpecFiles().filter {
+        val result = allOpenApiSpecFiles().filter {
             it.readText().let { specContent ->
                 schemaFileBaseNames.any { schemaFileBaseName -> schemaFileBaseName in specContent }
             }
         }.map { it.path }.toSet()
+
+        return result.flatMap {
+            filesReferringToChangedSchemaFiles(setOf(it)).ifEmpty { setOf(it) }
+        }.toSet()
     }
 
-    private fun allOpenApiSpecFiles(): List<File> {
+    internal fun allOpenApiSpecFiles(): List<File> {
         return File(".").walk().toList().filterNot {
             ".git" in it.path
         }.filter { it.isFile && it.isOpenApiSpec() }
@@ -117,12 +130,12 @@ class BackwardCompatibilityCheckCommand(
 
     private fun getOpenAPISpecFilesChangedInCurrentBranch(): Set<String> {
         return gitCommand.getFilesChangeInCurrentBranch().filter {
-           File(it).exists() && File(it).isOpenApiSpec()
+            File(it).exists() && File(it).isOpenApiSpec()
         }.toSet()
     }
 
     private fun File.isOpenApiSpec(): Boolean {
-        if(this.extension !in CONTRACT_EXTENSIONS) return false
+        if (this.extension !in CONTRACT_EXTENSIONS) return false
         return OpenApiSpecification.isParsable(this.path)
     }
 }
diff --git a/application/src/test/kotlin/application/BackwardCompatibilityCheckCommandTest.kt b/application/src/test/kotlin/application/BackwardCompatibilityCheckCommandTest.kt
new file mode 100644
index 000000000..5b34ecc3c
--- /dev/null
+++ b/application/src/test/kotlin/application/BackwardCompatibilityCheckCommandTest.kt
@@ -0,0 +1,39 @@
+package application
+
+import io.mockk.every
+import io.mockk.mockk
+import org.junit.jupiter.api.Assertions.*
+import org.junit.jupiter.api.Test
+import java.io.File
+
+class BackwardCompatibilityCheckCommandTest {
+
+    @Test
+    fun `filesReferringToChangedSchemaFiles returns empty set when input is empty`() {
+        val command = BackwardCompatibilityCheckCommand(mockk())
+        val result = command.filesReferringToChangedSchemaFiles(emptySet())
+        assertTrue(result.isEmpty())
+    }
+
+    @Test
+    fun `filesReferringToChangedSchemaFiles returns empty set when no files refer to changed schema files`() {
+        val command = BackwardCompatibilityCheckCommand(mockk(relaxed = true))
+        every { command.allOpenApiSpecFiles() } returns listOf(
+            File("file1.yaml").apply { writeText("content1") },
+            File("file2.yaml").apply { writeText("content2") }
+        )
+        val result = command.filesReferringToChangedSchemaFiles(setOf("file3.yaml"))
+        assertTrue(result.isEmpty())
+    }
+
+    @Test
+    fun `filesReferringToChangedSchemaFiles returns set of files that refer to changed schema files`() {
+        val command = mockk<BackwardCompatibilityCheckCommand>(relaxed = true)
+        every { command.allOpenApiSpecFiles() } returns listOf(
+            File("file1.yaml").apply { writeText("file3.yaml") },
+            File("file2.yaml").apply { writeText("file4.yaml") }
+        )
+        val result = command.filesReferringToChangedSchemaFiles(setOf("file3.yaml"))
+        assertEquals(setOf("file1.yaml"), result)
+    }
+}
\ No newline at end of file