NCLT Mumbai: Purchasers of Industrial Units Are Not Homebuyers, Cannot Be Treated as Financial Creditors Under IBC
Sangeetha Prathap
The National Company Law Tribunal (NCLT) Mumbai has held that purchasers of commercial or industrial units cannot claim parity with homebuyers and therefore cannot seek recognition as financial creditors under the Insolvency and Bankruptcy Code, 2016. The Tribunal made it clear that the legal fiction created under Section 5(8)(f) of the Code applies only to genuine homebuyers who intend to reside in the premises and not to investors purchasing property for commercial or profit-driven purposes.
A coram of Judicial Member Mohan Prasad Tiwari and Technical Member Charanjeet Singh Gulati was hearing an application filed by Harisharan Hi-Tech Industries, which had purchased an industrial gala in the Renaissance Industrial Smart City project through a registered Agreement for Sale and an MoU. The applicant stated that the total consideration paid exceeded ₹40 lakh, 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 Interim Resolution Professional had admitted the monetary claim but classified the applicant as an “other creditor”, giving rise to the present challenge.
The applicant submitted that the nature of the premises—industrial or commercial—was irrelevant for the purposes of Section 5(8)(f) of the Code and relied on various decisions to contend that industrial units may fall within the ambit of RERA. The IRP opposed this argument and maintained that the project was an Integrated Industrial Area under the Maharashtra Industrial Development Act and not a real estate project, and therefore purchasers of industrial premises cannot be treated as homebuyers or allottees for the purpose of the IBC. The IRP also relied on the assured return clause in the MoU to indicate that the transaction was commercial in nature.
Accepting the IRP’s position, the Tribunal noted that the deeming fiction in Section 5(8)(f) is intended to protect people who invest in a dwelling house for the purpose of residence, and not those investing for commercial gain. It recorded that the applicant had purchased an industrial unit and entered into an arrangement providing for “assured returns”, thereby demonstrating a profit-oriented intention rather than the intent to seek residential shelter. It observed: “Thus, the Applicant acted as an investor in a commercial/industrial asset, not as a homebuyer seeking a residence. Accordingly, the essential requirements for treating the Applicant’s claim as a ‘financial debt’ under Section 5(8)(f) are not satisfied.”
The Tribunal further held that the applicant’s reliance on the Supreme Court’s ruling in Mansi Brar (2020) was misplaced and clarified that the decision does not expand the definition of homebuyer nor permit commercial, industrial, warehousing or speculative investors to be treated as financial creditors under Section 5(8)(f) of the Code. It emphasised that the protections accorded to homebuyers under the IBC stem from their connection to the fundamental right to shelter under Article 21, whereas those who purchase property for business or investment fall within the domain of the economic right to trade under Article 19(1)(g).
Concluding that purchasers of industrial or commercial units stand on a fundamentally different footing from homebuyers, the Tribunal dismissed the application. The classification of the applicant by the IRP under the category of “other creditors” was upheld, and the request to treat the claim as a financial debt was rejected.
Appearance
For Petitioner: Advocate Harshul Shah
For Respondent: Advocate Kunal Kanungo
Cause Title: Catalyst Trusteeship Limited vs Renaissance Indus Infra Private Limited
Case No: CP(IB)/979(MB)2022
Coram: Judicial Member Mohan Prasad Tiwari, Technical Member Charanjeet Singh Gulati
