Case Note

Homebuyers, RERA and Insolvency

The Supreme Court considered the treatment of real-estate allottees under the Insolvency and Bankruptcy Code, 2016, particularly the distinction between genuine homebuyers and speculative investors. The Court also examined the applicability of the statutory threshold for homebuyer applications introduced by the 2019 Ordinance and 2020 Amendment Act.

Case Note 8 min read 12 Sep 2025

Background

The proceedings arose from four connected appeals concerning real-estate projects and the initiation of insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC). The principal appeal, filed by Mansi Brar Fernandes, involved an arrangement for the purchase of four flats in the “Gayatri Life” project of Gayatri Infra Planner Pvt. Ltd.

Mansi entered into a Memorandum of Understanding dated 6 April 2016 and paid ₹35 lakh towards the proposed purchase. The arrangement contained a buy-back clause under which the corporate debtor could, at its discretion, buy back the flats for ₹1 crore within the stipulated period. If the option was not exercised, possession of the flats was to be given without further payment.

The MoU was extended twice. The flats were not delivered and post-dated cheques issued by the corporate debtor for ₹1 crore were dishonoured. Mansi thereafter initiated proceedings under Section 7 of the IBC before the National Company Law Tribunal (NCLT), in addition to proceedings under Section 138 of the Negotiable Instruments Act.

A connected appeal concerned Sunita Agarwal, who had invested ₹25 lakh in another real-estate project, “Antriksh Urban Greek”, under a buy-back arrangement. Construction had not commenced and the land itself had not been acquired.

The appeals also raised questions concerning the statutory threshold introduced for homebuyers seeking to initiate insolvency proceedings against a real-estate developer.

Proceedings Before the Supreme Court

The matters reached the Supreme Court through appeals against the orders of the National Company Law Appellate Tribunal (NCLAT).

NCLT	Mansi’s Section 7 application was admitted on 2 January 2020. Sunita Agarwal’s application was also admitted in a separate matter.
NCLAT	The NCLAT set aside the admissions, holding that both Mansi and Sunita were speculative investors rather than genuine homebuyers.
Ongoing CIRP	During the pendency of the Supreme Court proceedings, another Section 7 application against Gayatri Infra Planner was admitted by the NCLT on 28 March 2023 and a Corporate Insolvency Resolution Process (CIRP) was ongoing. Mansi submitted her claim in that CIRP and stated that she did not seek revival of her individual application, but challenged the finding that she was a speculative investor.
Supreme Court	The Supreme Court heard the connected matters together and delivered a common judgment on 12 September 2025.

Issues Before the Court

The Court identified two principal questions:

Speculative investor
Whether Mansi Brar Fernandes and Sunita Agarwal fell within the category of “speculative investors” so as to disentitle them from initiating proceedings under Section 7 of the IBC.
Statutory threshold
Whether the threshold requirement introduced by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 and subsequently enacted through the 2020 Amendment Act applied to Mansi’s pending Section 7 application.

Submissions Before the Court

The parties and intervenors made the following submissions:

Mansi Brar Fernandes

She was a homebuyer and therefore a financial creditor within Section 5(8)(f) of the IBC.
The buy-back option was available to the corporate debtor and not to her, and she remained willing to accept possession.
The transaction had the characteristics of financial debt and the NCLAT had incorrectly inferred speculative intent.
The Section 7 application was filed before the 2019 Ordinance and had already been argued and reserved for orders when the Ordinance came into force.

Corporate debtor / Resolution professional

The MoU was provisional and did not constitute a final allotment.
The buy-back arrangement, the promised return and the absence of conduct consistent with seeking possession demonstrated that the transaction was an investment for financial gain.
The IBC could not be used as a recovery mechanism by an investor seeking repayment or assured returns.

Connected appellants (including Sunita Agarwal)

The 2019 Ordinance had come into force before the NCLT admitted Mansi’s application and the statutory threshold therefore applied.
The Section 7 application could not proceed without compliance with the threshold requirement.

The Court’s Reasoning

Whether an allottee is a speculative investor

The Court held that the determination cannot be made solely from the existence of a buy-back clause or any single contractual feature. It must be assessed from the facts and circumstances of the particular transaction and the intention of the parties.

The Court referred to earlier decisions, including Pioneer Urban Land and Infrastructure Ltd. v. Union of India, and reiterated the distinction between genuine homebuyers and speculative investors. Possession of a dwelling unit remains central to determining whether the transaction reflects the intention of a genuine homebuyer.

Factors relevant for determination

The nature and terms of the contract.
The number of units purchased.
The presence of assured returns or buy-back clauses.
The stage of completion of the project when the investment was made.
The existence of alternative arrangements in place of actual possession.

Applying these considerations, the Court found that the transactions involving Mansi and Sunita were in the nature of recovery claims rather than attempts to secure insolvency resolution of the respective projects. It therefore upheld the NCLAT’s finding that both were speculative investors.

Application of the 2019 Ordinance and statutory threshold

The Court examined the amendment introducing a threshold for homebuyers seeking to initiate insolvency proceedings against a real-estate developer. The amended Section 7 requires an application to be filed jointly by at least 100 allottees or 10% of the total number of allottees in the same project, whichever is less.

Mansi’s application had been filed on 18 March 2019. The Ordinance came into force on 28 December 2019, while the matter had already been argued and reserved for orders on 4 December 2019. The NCLT admitted the application on 2 January 2020 without considering the Ordinance.

The Court held that the NCLAT had erred in treating the amendment as inapplicable. At the same time, it noted that the NCLT should have taken the legislative change into account and afforded Mansi an opportunity to comply. The Court considered that the threshold requirement was procedural in the circumstances and applied the principle that an act of the court should not prejudice a litigant. It held that subsequent compliance with the threshold requirement cured the procedural defect.

Right to shelter

The Court reiterated that the right to shelter forms part of the right to life under Article 21. In this context, it emphasised the need to distinguish genuine homebuyers from investors using real-estate arrangements primarily for financial returns. The Court reiterated that the IBC is a resolution framework rather than a general mechanism for recovering investments.

Decision

The Supreme Court held as follows:

The NCLAT was justified in treating Mansi Brar Fernandes and Sunita Agarwal as speculative investors on the facts of their respective transactions.
The orders setting aside the admission of their Section 7 applications were affirmed.
Both appellants were left at liberty to pursue remedies before appropriate forums in accordance with law, with the Court directing that the bar of limitation would not apply in such proceedings.
The 2019 Ordinance and subsequent Amendment Act introducing the threshold requirement were applicable to Mansi’s case.
The NCLAT’s finding that the amendment did not apply to the proceedings was set aside.
The Court issued a series of directions concerning the functioning of NCLT/NCLAT, RERA authorities and insolvency proceedings involving real-estate projects, including measures for project-specific resolution and the treatment of stressed housing projects.

Judgment in Brief

The Supreme Court upheld the treatment of Mansi Brar Fernandes and Sunita Agarwal as speculative investors for the purpose of Section 7 IBC proceedings, while preserving their right to pursue other remedies. The Court also held that the statutory threshold for homebuyer insolvency applications applied to Mansi’s pending proceedings, but that the procedural consequences of the amendment could not operate to her prejudice where the NCLT had failed to account for the legislative change. The judgment also reiterates the distinction between insolvency resolution and recovery proceedings and addresses the relationship between the IBC, real-estate regulation and the protection of genuine homebuyers.

Source Supreme Court of India, Mansi Brar Fernandes v. Shubha Sharma & Anr., 2025 INSC 1110 (12 September 2025).