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Vishal Chelani & Ors. vs. Debashis Nanda

Civil Appeal · 2023 INSC 913Decided 6 Oct 2023
Civil Appeal No. 3806 of 2023
S. Ravindra Bhat · Aravind Kumar

Background

The appellants were home buyers who had booked flats in a project of Bulland Buildtech Pvt. Ltd. When the project was delayed, they approached the UP Real Estate Regulatory Authority (UPRERA), which ordered a refund of their deposits with interest. Later, insolvency proceedings began against the builder under the IBC, and the resolution plan classified home buyers who had already obtained RERA orders/decrees as a separate, less-favoured category, giving those who had NOT gone to RERA 50% better terms. The appellants challenged this differential treatment, but the Resolution Professional's approach was upheld by the adjudicating authority (NCLT) and then the NCLAT, leading to this appeal.

Decision Breakdown

The Supreme Court held that the 2018 amendment to Section 5(8)(f) of the IBC (via its Explanation) deems any amount raised from an allottee in a real estate project to be a financial debt, meaning all such home buyers, regardless of whether they also obtained a RERA order/decree, remain "financial creditors" under the Code. The Court agreed with an NCLT Mumbai ruling that obtaining a decree merely crystallizes the claim; it does not strip the allottee of their underlying status as a financial creditor. It rejected the argument that home buyers who used RERA remedies had "opted out" of the financial creditor class, noting only home buyers can invoke RERA remedies in the first place, so penalizing them for doing so is inequitable. It also held that IBC's overriding clause (Section 238) gives it primacy over RERA, and that creating a "hyper-classification" between the two groups of home buyers was artificial and violated Article 14 (equality before law). The impugned NCLAT order was set aside and the appellants were declared entitled to be treated the same as other home buyers/financial creditors under the pending resolution plan.

Lesson Learnt

A home buyer does not lose their status as a "financial creditor" in a builder's insolvency merely because they earlier obtained a refund order from RERA: resolution plans cannot penalize buyers for having pursued their RERA remedy by giving them worse terms than buyers who did not.

Official source (sci.gov.in)View Judgment (PDF)

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