The NCLT Mumbai, ruled that the investors who purchase commercial or industrial premises for business, trade, warehousing, manufacturing, or assured returns fall squarely outside this category of the ‘financial creditors’. Essentially, the commercial unit purchasers cannot be recognised as homebuyers and IBC protections meant for residential allottees cannot be allotted to such commercial investors.
The Appellate Tribunal therefore held that the Applicant, being a purchaser of an industrial unit with an assured return mechanism, cannot claim classification as a Financial Creditor under Section 5(8)(f) of the IBC, as the IRP has already admitted the Applicant’s claim under Other Creditors.
To treat homes like tradeable financial assets or speculative instruments would undermine the constitutional protection afforded to shelter, when the State carries a constitutional duty to ensure that homebuyers are not exploited and that real estate projects are completed on time. It must curb speculative practices and the parallel cash economy that distort housing markets and harm genuine home-seekers, added the Tribunal.
Thus, the Appellant Tribunal explained that timely possession of a home is not a commercial expectation but a constitutional imperative flowing directly from the right to life.
The Division Bench comprising Mohan Prasad Tiwari (Judicial Member) and Charanjeet Singh Gulati (Technical Member) observed that deeming fiction under Section 5(8)(f) of the IBC expressly applies only to allottees of a “real estate project” as defined under Sections 2(d) and 2(zn) of the RERA Act, which concerns the development of apartments or plots for the purpose of habitation, thereby preserving the legislative intent to protect individuals seeking shelter a facet of Article 21 of the Constitution.
The Bench went on to observe that right to shelter has been recognised by the Supreme Court as an intrinsic component of the right to life under Article 21 of the Constitution, and therefore occupies a higher constitutional pedestal. Whereas, the legislative intent underlying the RERA Act and the subsequent introduction of the Explanation to Section 5(8)(f) of the IBC was to extend statutory protection to such genuine homebuyers whose life savings are invested for securing residential shelter.
Conversely, the Bench highlighted that a purchaser of a commercial, industrial, or investment-oriented unit operates squarely within the domain of the right to profession or trade under Article 19(1)(g), which is an economic right and not a facet of the right to life. Such purchasers ordinarily enter into transactions for business purposes, profit generation, or commercial exploitation, and cannot claim parity with homebuyers who seek a dwelling.
Therefore, the Bench concluded that the statutory deeming fiction applicable to homebuyers under Section 5(8)(f) of the IBC cannot be automatically extended to purchasers of industrial or commercial premises, whose rights and risks arise from commercial undertakings. The Applicant, having invested in an industrial unit with an assured return arrangement, thus stands on a footing markedly different from a homebuyer, and cannot invoke the protections designed for the latter class.
Briefly, the applicant, which had purchased an industrial gala in the Renaissance Industrial Smart City project through a registered Agreement for Sale and an MoU, stated that the total consideration paid exceeded Rs. 40 lacs, including GST, and argued that the unit should be covered by the deeming fiction applicable to real estate allottees, and therefore the claim should be recognised as a financial debt. The IRP admitted the monetary claim but classified the applicant as an “other creditor”, giving rise to the present challenge.
Appearances:
Advocate Harshul Shah, for the Petitioner
Advocate Kunal Kanungo, for the Respondent
