NCLT Mumbai Rules, Operational Creditor Cannot Become Financial Creditor Through Settlement
Sangeetha Prathap
The National Company Law Tribunal (NCLT), Mumbai Bench has reiterated that an operational creditor cannot be reclassified as a financial creditor merely because a corporate debtor allots flats or units to settle outstanding operational dues. The tribunal held that such settlement-based allotments do not satisfy the essential statutory requirements of a financial debt under Section 5(8)(f) of the Insolvency and Bankruptcy Code (IBC), which mandate that funds must have been raised from the allottee under a real estate project.
A Bench of Judicial Member Lakshmi Gurung and Technical Member Hariharan Neelakanta Iyer delivered the ruling while deciding an application filed by Capacite Infraprojects Limited, seeking reclassification of its admitted claim from “other creditors” to “financial creditor in the class of homebuyers.” The tribunal noted that Capacite was engaged as a contractor for construction of 16 SRA buildings and that the relationship between the parties originated solely from a construction contract, not from a real estate transaction. The flats later offered were only part of a settlement mechanism for pending operational dues and were not the result of any investment or monetary disbursal by Capacite toward the real estate project.
Capacite and the corporate debtor, Radius & Deserve Builders LLP, had executed a settlement whereby ₹6 crore was to be paid for pending contractor dues. After part payment of ₹4.98 crore, the developer offered 10 flats in its “Anantya” project toward the balance. Although Capacite initially denied the offer and continued with its Section 9 insolvency proceedings, it later agreed to accept the flats and withdrew the petition on 19 April 2023 when the developer confirmed the allotment during the proceedings.
Following the corporate debtor’s admission into insolvency in September 2023 on a petition filed by Amit Infra-Logic (India) Pvt. Ltd., Capacite submitted a claim in Form CA as a financial creditor in the homebuyer class. It argued that the allotment entitled it to be treated as an allottee under Section 2(d) of RERA and that the value of the flats should be considered a financial debt under Section 5(8)(f) of the Code. Capacite contended that although no money was paid in the traditional sense, the settlement had the commercial effect of a borrowing because the operational dues were adjusted against the value of the flats.
The resolution professional and other stakeholders disputed this position. They argued that no consideration was ever paid by Capacite toward purchasing the flats, no registered agreement for sale existed, and the units were accepted solely as a settlement of dues arising from a construction contract. The tribunal also noted that Capacite itself had earlier denied the validity of the allotment letters and accepted them only in the context of settlement discussions, thereby demonstrating that the flats did not originate from a genuine real estate transaction.
In assessing the legal position, the tribunal emphasised that the Supreme Court in Pioneer Urban Land and Infrastructure Ltd. v. Union of India held that homebuyers qualify as financial creditors only where they have actually disbursed money to the developer, which constitutes funding of the real estate project in exchange for the time value of money. The tribunal observed that for a debt to fall within Section 5(8)(f), “there must be amount raised from the allottee under a real estate project.” In this case, there was no monetary disbursal by Capacite to the developer, and the flats were not allotted pursuant to a real estate sale but only to settle unpaid contractor dues.
Applying this principle, the Bench concluded that Capacite could not be categorised as a financial creditor or homebuyer. It held that the nature of the debt remained operational throughout and could not be converted into a financial debt by way of settlement. The tribunal therefore directed the resolution professional to examine and verify Capacite’s claim only as an operational creditor.
Appearance
For Applicant: Advocates Pulkit Sharma along with Advocates Siddha Pamecha, H. Sukhia instructed by Mulla Associates
For Respondents: Advocate Amir Arsiwala along with Advocate Vaishnavi Dhure for Respondent 1; Advocates Rohit Gupta and Aneesa Cheema along with Harsh Nanda for Respondent 2; Advocate Sushmita Gandhi along with Advocates Anamika Singh and Kushal Boolchandani instructed by Trilegal For Respondent 3
Cause Title: Capacite Infraprojects Ltd. Vs. Jayesh Natvarlal Sanghrajka (RP) of Radius & Deserve Builders LLP and Ors
Case No: I.A. 2802/2024 In C.P.(IB) 592/MB/C-III/2022
Coram: Judicial Member Lakshmi Gurung, Technical Member Hariharan Neelakanta Iyer
