Kiran Raj

The Supreme Court of India Division Bench of Justice J.B. Pardiwala and Justice R. Mahadevan has declared that access to housing forms part of the fundamental right to life under Article 21 of the Constitution. Delivering its judgment in a set of appeals under the Insolvency and Bankruptcy Code, 2016, the Court directed the Union Government to consider creating a dedicated revival fund to support financing of stalled real estate projects facing insolvency. The Bench stated that the priority of the insolvency framework must be to avoid liquidation of otherwise viable developments and to ensure protection of genuine homebuyers, while distinguishing them from speculative investors.

The judgment consolidated four appeals. The first three stemmed from the National Company Law Appellate Tribunal’s order of 17 November 2020 in Company Appeal (AT) (Insolvency) No. 83 of 2020, and the fourth from NCLAT’s order of 12 August 2021 in Company Appeal (AT) (Insolvency) No. 1020 of 2019.

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In Civil Appeal No. 3826 of 2020, appellant Mansi Brar Fernandes had entered into a Memorandum of Understanding with Gayatri Infra Planner Pvt. Ltd. for four flats in the “Gayatri Life” project at Greater Noida. She paid ₹35,00,000 under the agreement, which contained a buy-back clause at the discretion of the developer. Despite extensions, neither possession was given nor repayment made. Post-dated cheques issued for ₹1 crore were dishonoured. Fernandes filed a petition under Section 7 of the Code before the NCLT, which was admitted on 2 January 2020. NCLAT later reversed the admission, holding her to be a speculative investor.

Two connected appeals were filed by Shubha Sharma and Ashlesh Gupta, directors of Gayatri Infra Planner, challenging the same NCLAT order on the basis that Fernandes’ petition did not comply with the threshold requirement introduced by the IBC Amendment Ordinance, 2019, mandating applications by at least 100 or 10% of allottees. They argued that the petition should be deemed withdrawn.

In Civil Appeal No. 3903 of 2022, appellant Sunita Agarwal had invested ₹25,00,000 in a proposed 4BHK unit in the “Antriksh Urban Greek” project of Antriksh Infratech Pvt. Ltd. under an MoU that promised 25% annual returns and contained a buy-back clause. The project never commenced. NCLT admitted her Section 7 application on 17 September 2019, but NCLAT set aside the admission on the ground that she too was a speculative investor.

The appellants argued before the Supreme Court that they qualified as financial creditors under Section 5(8)(f) of the Code, that the buy-back terms were devised by developers, and that they were ready to take possession. Respondents maintained that the transactions were devised only for assured returns and lacked the attributes of genuine allotments.

The Court recorded that the Code is designed as a resolution mechanism and not as a recovery forum: “It privileges resolution over ruin, revival over decay, and seeks to breathe life back into companies where revival is possible.”

On the distinction between investors and homebuyers, it observed: “Possession of a dwelling unit remains the sine qua non of a genuine homebuyer’s intent. The presence of buy-back clauses, assured returns, and refusal to accept possession signify speculative investment.” Relying on Pioneer Urban Land and Infrastructure Ltd. v. Union of India, it noted: “Speculative investors cannot be permitted to misuse the Code as a debt recovery mechanism.”

Examining the facts, the Court held that both Fernandes’ and Agarwal’s agreements were in substance buy-back contracts: “The MoU was in substance a buyback contract, not an agreement to sell flats.” It affirmed NCLAT’s findings that their petitions could not be sustained as CIRP initiations.

The Bench also considered the statutory threshold introduced in December 2019. It recorded that once orders had been reserved by the NCLT on 4 December 2019, Fernandes could not have complied with the new requirement: “An act of the Court shall prejudice no one. Where prejudice arises solely because of a judicial act, such as reserving orders without accounting for a legislative change, the Court must neutralise the effect so that no party suffers.”

Turning to constitutional issues, the Bench observed: “The right to housing is not merely a contractual entitlement but a facet of the fundamental right to life under Article 21. Genuine homebuyers represent the backbone of India’s urban future, and their protection lies at the intersection of constitutional obligation and economic policy.”

The Court noted that real estate is the second largest contributor to insolvency cases and requires project-specific solutions: “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.”

The Bench expressed concern over regulatory oversight: “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.” It further remarked that failure to exercise diligence in approvals would be an “unpardonable error in law.”

On broader reform, it suggested that IBBI 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.” It also called for uniformity in State RERA rules and urged public authorities such as Housing Boards and CPSUs to create dedicated wings for reviving stalled projects.

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The Court highlighted the need for indigenous restructuring expertise: “Despite funding hundreds of crores into government-run think tanks and management institutions, 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.”

The Court ordered: “Vacancies in NCLT / NCLAT shall be filled on a war footing. Dedicated IBC benches with additional strength should be constituted. Services of retired judges may be utilized on ad hoc basis until regular appointments are made. The Union Government shall, within three months, file a compliance report on measures taken to upgrade NCLT/NCLAT infrastructure nationwide.”

It mandated constitution of a high-level committee within three months chaired by a retired High Court Judge with representatives from government, industry, and academia, to propose systemic reforms. It required every RERA to design standard operating procedures for escrow mechanisms within six months.

“The Union Government shall consider establishing a revival fund under NARCL or expanding the SWAMIH Fund, to provide bridge financing for stressed projects undergoing CIRP, thereby preventing liquidation of viable projects and safeguarding homebuyer interests.” It also directed that the fund be subject to periodic CAG audits with reports made public.

“At the admission stage of Section 7 petitions filed by allottees, NCLTs must record a prima facie finding on whether the applicant is a genuine homebuyer or speculative investor.” It further directed strengthening of e-filing, video-conferencing, and case management systems for IBC matters.

“The findings of the NCLAT holding the appellants (Mansi Brar Fernandes and Sunita Agarwal) to be speculative investors are affirmed. Consequently, both the impugned orders setting aside the admission of the Section 7 applications by the NCLT, also stand affirmed. However, the appellants are at liberty to pursue their remedies before the appropriate forum in accordance with law, and in such event, the bar of limitation shall not apply. Ordinance / Amendment Act is squarely applicable to the facts of the present case and to that extent, the first impugned order stands set aside.

With the aforesaid directions and suggestions, all the appeals stand disposed of. There is no order as to costs. Connected Miscellaneous Application(s), if any, stand disposed of.”

The Registry was directed to circulate the judgment to the Cabinet Secretary and Chief Secretaries of all States for necessary action.

Case Title: Mansi Brar Fernandes v. Shubha Sharma and Anr. And connected cases

Neutral Citation: 2025 INSC 1110

Case Numbers: Civil Appeal Nos. 3826 of 2020, 540 of 2021, 5495 of 2025, and 3903 of 2022

Bench: Justice J.B. Pardiwala; Justice R. Mahadevan