TaxTMI 
TaxTMI 
2025 (9) TMI 879
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....sposed of by this common judgment. 2. The first three appeals, viz., C.A. No. 3826 of 2020, C.A. No. 540 of 2021, and C.A. No. 5495 of 2025 arise out of the final judgment and order dated 17.11.2020 ["the first impugned order"] passed by the National Company Law Appellate Tribunal, New Delhi ["the NCLAT"], in Company Appeal (AT) (Insolvency) No. 83 of 2020. The fourth appeal, viz., C.A. No. 3903 of 2022, is directed against the final judgment and order dated 12.08.2021 ["the second impugned order"] passed by the NCLAT in Company Appeal (AT) (Insolvency) No.1020 of 2019. 3. C.A. No. 3826 of 2020 has been preferred by the appellant - Mansi Brar Fernandes in her capacity as a homebuyer / financial creditor. Cross-appeals, viz., C. A. No. 540 of 2021 and C.A. No. 5495 of 2025 have been filed by Shubha Sharma and Ashlesh Gupta, respectively - former and present directors of Gayatri Infra Planner Private Limited - Respondent No. 2 / Corporate Debtor. C.A. No. 3903 of 2022 has been filed by the appellant - Sunita Agarwal, also a homebuyer / financial creditor, against the Corporate Debtor Antriksh Infratech Pvt. Ltd. 4. By the first impugned order dated 17.11.2020, the NCLAT reve....
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.... initially lacked representation in the Committee of Creditors (CoC). To correct this imbalance, Parliament amended the IBC to recognize allottees as "financial creditors", thereby ensuring that their voices are represented in the resolution process. The legislative intent was to protect genuine homebuyers, secure completion of projects, and ensure delivery of homes. For such stakeholders, liquidation rarely yields meaningful relief. 5.2. However, this amendment also gave rise to an unintended consequence: a surge of individual Section 7 petitions, often filed not by genuine homebuyers but by speculative investors seeking premature exits or enhanced returns. Many of these applications were aimed at holding promoters to ransom by threatening commencement of the Corporate Insolvency Resolution Process. Such misuse burdened the adjudicatory machinery, strained the real estate sector, and stalled projects that could otherwise have been revived. To curb this mischief, through an ordinance and subsequent amendment, Parliament introduced a threshold requirement: at least 10% of the allottees or 100 in number must act collectively to file a Section 7 application against a real estate de....
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....the same, Respondent No. 1 preferred an appeal before the NCLAT, which allowed the appeal and set aside the CIRP proceedings initiated by the appellant against the Corporate Debtor, by the first impugned order. 7. The appellants in C.A. No. 540 of 2021 and C.A. No. 5495 of 2025 assail the first impugned order dated 17.11.2020 passed by the NCLAT on the limited ground of non-compliance with the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019, promulgated on 28.12.2019. The appellants stated that the Section 7 petition under the IBC filed by Respondent No. 1 (Mansi Brar Fernandes) on 02.01.2020, was reserved on 04.12.2019, i.e., prior to the promulgation of the Ordinance. As on 28.12.2019, the application was still pending consideration. Consequently, the Ordinance and the subsequent Amendment Act squarely applied to the proceedings. It was urged that the failure of Respondent No. 1 to satisfy the threshold requirement mandated under the Ordinance is fatal to the maintainability of the petition. 7.1. The appellants further stated that specifically, the third proviso to Section 7 IBC mandated compliance even for insolvency applications filed by financial creditors tha....
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.... construction was never commenced and, as reported by the Insolvency Resolution Professional appointed by the NCLT, even land had not been acquired by Respondent No. 2, the appellant issued a demand notice/e-mail dated 01.02.2019 demanding a sum of Rs. 47,31,164.38 (comprising the principal amount of Rs. 25,00,000/- plus interest @ 25% per annum till 08.02.2019). Respondent No. 2, however, refused to accept the notice. The appellant also sent the notice through e-mail on 01.02.2019. 8.2. Thereafter, the appellant filed an application under Section 7 IBC before the NCLT. On 02.05.2019, the NCLT issued notice to Respondent No. 2 and directed filing of an affidavit of service, renotifying the case on 10.05.2019. The appellant served the complete set of the petition and documents on Respondent No. 2 through e-mail on 07.05.2019, and filed an affidavit of service along with a certificate under Section 65B of the Indian Evidence Act on 14.05.2019. Vide order dated 15.05.2019, the NCLT directed that the matter proceed ex parte as Respondent No. 2 failed to appear. Arguments were heard on 30.08.2019, and by order dated 17.09.2019, the NCLT admitted the Section 7 IBC petition and appoint....
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....t the appellant was a homebuyer / financial creditor under Section 5(8)(f), and that the Corporate Debtor had committed default. However, on appeal, the NCLAT reversed the admission, branding the appellant as a speculative investor. The learned counsel submitted that this finding is wholly erroneous, as it was based merely on the existence of the buy-back clause, the dishonour of post-dated cheques, and the appellant's resort to remedies under the N.I. Act. None of these, it was argued, demonstrate speculative intent. On the contrary, the appellant never withdrew from the MoU and was always willing to accept possession of the flats, while the option of buy-back was solely with the Corporate Debtor, not the appellant. The NCLAT's approach, according to the learned counsel, disregards the builder's default and unfairly penalise the homebuyer. 9.2. It was also submitted that the transaction clearly bears the hallmarks of a financial debt, having the commercial effect of borrowing and carrying the element of time value of money, as recognized in the IBC. The sum of Rs. 35 lakhs was duly received by the Corporate Debtor, reflected in its financial records, and is undisputed. The tran....
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....te debtor / Respondent No. 2. The members of the applicant who hold 89 apartment units in the said project, had supported the appellant - Mansi Brar Fernandes - before the NCLAT by filing affidavits in support of initiation of CIRP against the corporate debtor. They continue to support the appellant / homebuyer in seeking admission of the builder to insolvency proceedings. Therefore, there is material and substantial compliance with the amendment introduced on 28th December 2019 to Section 7 of the IBC, and the hyper-technical objections taken by the corporate debtor in this regard merit rejection. 11. On behalf of Respondent No. 2 (Gayatri Infra Planner Private Limited), the Resolution Professional made the following submissions: (i) The appellant, claiming to be a financial creditor, seeks to rely on a Memorandum of Understanding dated 06.04.2016, which was purely provisional in nature and did not result in final allotment. The appellant had paid Rs. 35 lakhs out of a total consideration of Rs. 1,03,78,521/- for four flats and the MoU provided the company a discretionary option to repurchase the flats for Rs. 1 crore within 12 months, failing which the appellant would....
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....der-buyer agreement, lack of follow-up for possession, and reliance on section 138 N.I. Act proceedings all point to the appellant's intent to profit financially rather than obtain residential possession. (iv) The NCLAT, in the first impugned order, rightly found that the appellant was a speculative investor and not a genuine allottee. It specifically observed that the MoU was a highly lucrative agreement designed to yield massive returns with no real obligation on the part of the appellant to pay the balance amount for the flats. Further, the appellant never sought possession during the term of the MoU, nor monitored the project's progress, thereby indicating the absence of genuine buyer conduct. The transaction lacked the characteristics of a real estate allotment protected under the IBC or the Real Estate (Regulation and Development) Act, 2016 (RERA). The appellant's failure to produce any registered builder-buyer agreement or other formal documentation also supports the conclusion that the arrangement was speculative in nature. (v) Moreover, the appellant's attempt to use the IBC framework only after dishonour of the PDCs and commencement of CIRP proceedings r....
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....ned senior counsel for the appellants in C.A. No. 540/2021 and C.A No. 5495 of 2025 assailed the finding of the NCLAT in the first impugned order in respect of inapplicability of Ordinance / Amendment Act, to the facts of the present case, on the following grounds: (i) The NCLAT erred in concluding that the provisions of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 (later enacted as Amendment Act, 2020) were inapplicable to the present case. The Ordinance was promulgated on 28.12.2019, prior to the NCLT's admission order dated 02.01.2020. Hence, its provisions squarely governed the present proceedings. (ii) The Ordinance / Amendment Act does not envisage any carve-out or exception in favour of real estate allottees. The statutory threshold introduced by the amendment applies uniformly, and an allottee is required to comply with the threshold requirement before initiating proceedings under Section 7 IBC. The company cannot be deprived of its right to insist on such compliance before being subjected to CIRP. (iii) The NCLAT erroneously assumed that this court's interim order in the earlier proceedings had the effect of staying the Ordinanc....
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.... 13.2. It was also submitted that the second impugned order was passed ignoring the interim order dated 11.12.2020 passed by this Court in C.A. No. 3826/2020 [Mansi Brar Fernandes v. Shubha Sharma and another]. Moreover, the corporate debtor is admittedly, withholding the money of the appellant since 13.07.2015 and did not deliver the promised unit. 13.3. The learned senior counsel further submitted that vide orders dated 01.10.2019, 13.11.2019 and 19.11.2019, the NCLAT had recorded the submissions of the IRP that "there is no land for project". In these circumstances, the second impugned order is liable to be set aside. ANALYSIS AND FINDINGS 14. We have heard the learned senior counsel appearing for all the parties, and perused the materials available on record. 14.1. This Court by order dated 11.12.2020 in Civil Appeal No. 3826 of 2020, granted an ad-interim direction to the effect that the finding of the National Company Law Appellate Tribunal that the appellant is a 'speculative investor' is confined to the facts of the present case and shall not be treated as a precedent in any other case for the present. 15. The present matter, though seemingly straightforwa....
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....5.4. Strict adherence to IBC timelines and settled precedent is imperative to realise two complementary objectives: (i) ensuring revival and completion of stalled projects for the benefit of genuine homebuyers; and (ii) curbing speculative activity which has functioned as a "slow poison" for the residential real estate sector and, by extension, the Indian middle class. 15.5. A balanced judicial approach in this regard will have far-reaching benefits: protecting homebuyers, restoring confidence in the real estate market, and encouraging reputed business houses and conglomerates to participate in residential development. In taking this approach, this Court seeks to contribute towards cleansing and strengthening a core economic sector that sustains millions of livelihoods in both the organised and unorganised economy and touches the lives of people at their most fundamental level. 16. In the present case, as indicated above, there are two impugned orders, whereby the NCLAT set aside the admission of Section 7 IBC applications by the NCLT, holding that the appellants in C.A. No. 3826 of 2020 and 3903 and 2022 viz., Mansi Brar Fernandes and Sunita Agarwal, respec....
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....oercive recovery mechanism, thereby creating a situation of 'heads I win, tails you lose'. This Court, in Madhubhai Amathalal Gandhi v. the Union of India AIR 1961 SC 21 while deprecating speculative activities in the stock market, strongly cautioned against such distortions, observing: "These mischievous potentialities inherent in the transactions, if left uncontrolled, would tend to subvert the main object of the institution of stock exchange and convert it into a den of gambling which would ultimately upset the industrial economy of the country". 18.3. This Court in Pioneer Urban Land and Infrastructure Ltd v. Union of India (supra), while upholding the constitutional validity of the 2018 amendment recognising allottees as financial creditors, drew a crucial distinction between genuine homebuyers and speculative investors. It clarified that speculative investors cannot be permitted to misuse the Code as a debt recovery mechanism. The judgment struck a balance: ensuring representation of genuine homebuyers in the CoC, while shielding developers and projects from being derailed by investors who never intended to take possession. 18.3.1. The Court further noted that ....
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....example, that the allottee who has knocked at the doors of NCLT is a speculative investor and not a person who is genuinely interested in purchasing a flat/apartment. They can also point out that in a real estate market which is falling, the allottee does not, in fact, want to go ahead with its obligation to take possession of the flat/apartment under RERA, but wants to jump ship and really get back, by way of this coercive measure, monies already paid by it. Given the above, it is clear that it is very difficult to accede to the petitioners' contention that a wholly one-sided and futile hearing will take place before NCLT by trigger-happy allottees who would be able to ignite the process of removal of the management of the real estate project and/or lead the corporate debtor to its death." Criteria to identify speculative investors 18.4. "Speculation" has been defined in P. Ramanatha Iyer's Law Lexicon (6th edition) as "a risky investment of money for the sake of and in expectation of unusually large profits". A "speculator" is "one who practices speculation in trade or business". Two elements emerge: (i)expectation of unusually high profits; and (ii)activity in the nature o....
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....whether an allottee is a speculative investor, must be holistic, having regard to the terms of the agreement, the allotment letter, the payment terms, and the overall conduct of the allottee. 18.4.5. Non-exhaustive indicators include: (1) If the agreement substitutes possession with a buyback or refund option, or any other special arrangement, the allottee is likely a speculative investor. (2) Insistence on refund with high interest, coupled with refusal to accept possession would indicate speculation. (3) Purchase of multiple units, especially in double digits, shall invite greater scrutiny, though it is not conclusive. If the terms of the agreement provide for possession or refund in the event of failure to give possession alone, this factor may not be held against the allottee. (4) Special rights, preferential treatment, or unusual privileges to the allottee would signal investment intent. (5) Deviation from the RERA Model Agreement shall be a crucial indicator as to the nature of the transaction - the greater the departure, the greater the likelihood of speculation. (6) Unrealistic interest rates and promises of 20 - 25% ....
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....20], despite interim order of this Court, does not vitiate its reasoning. An interim order suspends enforcement between parties, but does not efface the declaration of law or reasoning in a judgment. Unless specifically overruled, such reasoning remains available for guidance, particularly when judicial discipline demands consistency in sensitive sectors such as real estate. 18.7. On the facts and law, it is evident that both appellants are speculative investors. Their claims are in the nature of recovery, not insolvency resolution. Consistent with Pioneer Urban, speculative investors cannot be permitted to trigger CIRP as this would undermine revival, destabilise projects, and prejudice genuine homebuyers. 18.8. Accordingly, the findings of the NCLAT treating the appellants as speculative investors warrant no interference. Both impugned orders, setting aside admission of the Section 7 applications, stand affirmed. However, liberty is reserved to the appellants to pursue their remedies before appropriate fora in accordance with law. In such proceedings, the bar of limitation shall not apply, in line with settled jurisprudence of this Court15. Issue No. 2 - Applicability of....
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.... the appellant's application had already been admitted on 02.01.2020, prior to the status quo order of this court dated 13.01.2020, whereas the Section 7 application filed by Sushil Ansal was admitted only on 17.03.2020. Thus, while the decision in Sushil Ansal was correct on its own facts, NCLAT wrongly applied it in Mansi Brar. 19.3. In the present case, limitation was due to expire on 27.01.2020. Even if computation is reckoned from 02.01.2020 (the date of reopening of the NCLT after the winter recess), the limitation period would have run its course by 31.01.2020. Although the affidavits bear the date 27.01.2020, the undisputed position is that they were actually filed before the NCLAT only on 01.02.2020, by which time the limitation period had already lapsed. Consequently, the appellant had no option but to comply with the requirements of the Ordinance which had come into effect on 28.12.2019. However, it was incumbent upon the NCLT to take cognizance of the Ordinance and afford an opportunity to the appellant to meet its stipulations. Since no such opportunity was granted, the appellant had no occasion to comply before the NCLT. 19.4. Indeed, even the respondents have c....
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.... III 1869-71 page 465 at page 475, as quoted in A.R. Antulay v. R.S. Nayak MANU/SC/0002/1988 wherein, it was observed thus: "Now, their Lordships are of opinion, that one of the first and highest duties of all Courts is to take care that the act of the Court does no injury to any of the suitors. And when the expression 'the act of the Court' is used, it does not mean merely the act of the primary Court, or of any intermediate Court of appeal, but the act of the Court as a whole, from the lowest Court which entertains jurisdiction over the matter up to the highest Court which finally disposes of the case. It is the duty of the aggregate of those Tribunals, if I may use the expression, to take care that no act of the Court in the course of the whole of the proceedings does an injury to the suitors in the Court." 19.7. Accordingly, the outcome on grounds of equity should be determined as on the date the order was reserved, and no subsequent legislative or administrative change should prejudice the parties. In conclusion, while the validity of the threshold requirement introduced by the Ordinance has been upheld by this court in Manish Kumar v. Union of India (supra), its a....
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....tive that the life savings of a common person culminate in timely possession of their promised home. Article 21 would mandate nothing less. In Samatha v. State of A.P. (1997) 8 SCC 191, this Court reiterated that the right to social and economic justice as well as the right to shelter are fundamental rights encompassed within the ambit of the right to life. Similarly, in Chameli Singh v. State of U.P. (1996) 2 SCC 549, this Court observed: "Shelter for a human being, therefore, is not a mere protection of his life and limb. It is home where he has opportunities to grow physically, mentally, intellectually and spiritually. Right to shelter, therefore, includes adequate living space, safe and decent structure, clean and decent surroundings, sufficient light, pure air and water, electricity, sanitation and other civic amenities like roads etc. so as to have easy access to his daily avocation. The right to shelter, therefore, does not mean a mere right to a roof over one's head but right to all the infrastructure necessary to enable them to live and develop as a human being. Right to shelter when used as an essential requisite to the right to live should be deemed to have been....
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....y own. India must ensure, through robust policies and strict enforcement, that such a crisis never arises here. 20.7. While recent amendments and regulatory measures are welcome - and the Government merits commendation for undertaking proactive structural reforms - much remains to be done. It is imperative that RERA authorities are not reduced to toothless tigers. They must be equipped with adequate infrastructure, empowered tribunals, and effective enforcement mechanisms so that their orders are implemented swiftly, in letter and spirit. Only then can the constitutional promise of the Right to Shelter under Article 21 be meaningfully realized for homebuyers. CONCLUSION 21. This Court reiterates that while investors are integral to any industry and their interests warrant protection, speculative participants driven purely by profit motives cannot be permitted to misuse the Insolvency and Bankruptcy Code, which is a remedial framework conceived for revival and the protection of sick companies and, in the case of real estate, genuine homebuyers. Such investors have alternative remedies under consumer law or RERA and even recourse to Civil Courts in appropriate cases. To admi....
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....port within six months of its constitution. (4) States shall ensure that RERA authorities are adequately staffed with infrastructure, experts, and resources. At least one member of every RERA must be a legal expert or consumer advocate with proven expertise in real estate field. RERAs must conduct thorough diligence before granting approval to any project. Failure to do so, resulting in miscarriage of justice, shall amount to an error unpardonable in law and may invite strict intervention by this Court. (5) Since real estate is the second largest sector in IBC proceedings, IBBI [Insolvency and Bankruptcy Board of India], in consultation with RERA authorities, shall constitute a council to frame specific guidelines for insolvency proceedings in real estate, including timelines for project-wise CIRP, and safeguards for allottees. (6) Resolution of real estate insolvency should, as a rule, proceed on a project-specific basis rather than the entire corporate debtor, unless circumstances justify otherwise. This would protect solvent projects and genuine homebuyers from collateral prejudice. IBBI shall also devise a mechanism to enable handover of possession to....
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.... (1) IBBI may consider introducing "Basel-like" early warning frameworks, drawing from comparative practices, such as, pre-bankruptcy mediation and preventive restructuring, requiring directors to initiate restructuring before defaults spiral out of control. (2) The Union Government should undertake a consultative exercise to bring about uniformity in RERA Rules across States, to remove ambiguity and fill lacunae in what is otherwise a watershed legislation. (3) Housing Boards, State-level Urban Development Authorities (e.g., DDA, GMADA, MHADA, CHB) and CPSUs should establish dedicated wings to revive and complete stalled projects under IBC mechanisms. This would instill faith in the sector, ensure affordable housing, and protect genuine homebuyers. (4) It is a matter of grave concern that despite funding hundreds of crores into various government-run think tanks and management institutions such as IIMs and IITs, India still requires a robust homegrown consulting industry. Collaboration with Indian think tanks and academic institutions should be strengthened to build indigenous capacity for sectoral restructuring. This has the potential to improve In....