INTRODUCTION
The Supreme Court of India in Mansi Brar Fernandes v. Shubha Sharma & Ors., 2025 INSC 1110, decided on 12 September 2025, by Justice R. Mahadevan, delivered a landmark Judgment addressing the interplay between genuine homebuyers and speculative investors under the Insolvency and Bankruptcy Code, 2016 (IBC). The decision, arising out of multiple connected appeals, sought to clarify the extent to which homebuyers with assured return or buyback arrangements could invoke insolvency proceedings under Section 7 of the Code. The Court’s reasoning balances economic objectives, legislative intent, and the constitutional right to shelter under Article 21.
BRIEF FACTS
The case originated when the Appellant, Mansi Brar Fernandes, entered into a Memorandum of Understanding (MoU) with Gayatri Infra Planner Pvt. Ltd., a Real Estate developer, for purchasing four flats in its project “Gayatri Life” in Greater Noida. She paid ₹35 lakhs under a clause that allowed the builder to “buy back” the flats at its discretion for ₹1 crore within a specified period. When neither possession nor refund was provided, and post-dated cheques were dishonoured, the Appellant invoked Section 7 of the IBC, seeking initiation of the Corporate Insolvency Resolution Process (CIRP).
The National Company Law Tribunal (NCLT) admitted the application, treating her as a financial creditor. However, the National Company Law Appellate Tribunal (NCLAT) reversed the Order, branding her as a “speculative investor” who lacked genuine homebuying intent. The NCLAT also dealt with similar appeals filed by one Sunita Agarwal, another investor with a comparable buyback clause. Cross-appeals by former directors questioned whether the 2019 IBC Amendment introducing a threshold for homebuyer applications (10% or 100 allottees) applied to these proceedings.
Thus, the Supreme Court was called upon to decide: (1) whether such investors qualify as “financial creditors” under Section 5(8)(f); and (2) whether the 2019 Amendment Ordinance was applicable to pending cases.
ISSUES OF LAW
1)Whether the Appellants were “speculative investors” disentitled from initiating insolvency proceedings under Section 7 of the IBC.
2)Whether the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019, introducing the threshold requirement for homebuyers, applied to the pending proceedings.
3)Whether the right to shelter under Article 21 warrants enhanced protection for genuine homebuyers under the IBC framework.
ANALYSIS
1. Distinction between Genuine Homebuyers and Speculative Investors
Justice Mahadevan drew heavily from Pioneer Urban Land and Infrastructure Ltd. v. Union of India [(2019) 8 SCC 416], reaffirming that while homebuyers are recognized as financial creditors, speculative investors cannot exploit the IBC as a recovery tool. The Court observed that the presence of buyback clauses, post-dated cheques, and guaranteed returns are strong indicators of a speculative transaction rather than a genuine purchase.
Applying this test, the Court found that Fernandes’ and Agarwal’s agreements bore hallmarks of speculation—promises of 20–25% annual returns, optional buybacks, and lack of intention to occupy the flats. The MoUs were “financial derivatives masquerading as housing contracts,” devised to secure profits rather than homes. Thus, the Appellants were classified as speculative investors.
2. Applicability of the 2019 Ordinance
The Court analysed whether the 2019 IBC Amendment Ordinance—requiring a minimum of 100 allottees or 10% of the total to jointly file a Section 7 application—applied retrospectively. It held that since the order of admission was reserved before the Ordinance came into effect (28 December 2019), the Appellant could not have complied. The “Actus Curiae Neminem Gravabit” doctrine (an act of the court shall prejudice no one) was invoked, clarifying that procedural amendments cannot retroactively prejudice a litigant. Hence, while upholding the constitutional validity of the Amendment, the Court exempted such cases where compliance was impossible due to judicial delays.
3. Article 21 and the Right to Shelter
In an eloquent constitutional reflection, the Court extended the discussion beyond insolvency law, reaffirming that the Right to Shelter is intrinsic to the Right to Life. Drawing from Chameli Singh v. State of U.P. [(1996) 2 SCC 549] and Samatha v. State of A.P. [(1997) 8 SCC 191], Justice Mahadevan underscored that housing is not a commercial luxury but a fundamental human necessity. The Judgment lamented the plight of the middle-class homebuyer burdened by EMIs and rent, emphasizing the State’s duty to prevent exploitation in the real estate sector.
4. Institutional and Policy Directives
Beyond resolving the individual disputes, the Court issued a series of systemic directions to strengthen the real estate insolvency ecosystem:
1)Expedited appointments in NCLT/NCLAT and creation of dedicated IBC benches.
2)Formation of a High-Level Committee with NITI Aayog and domain experts to reform insolvency and housing mechanisms.
3)Enhanced empowerment of RERA Authorities to ensure timely project delivery.
4)CAG audits of SWAMIH and NARCL revival funds to prevent misuse.
5)Mandatory scrutiny of MoUs containing buyback or assured return clauses to protect senior citizens and small investors.
6)Preference for project-specific insolvency resolution rather than corporate-wide CIRP to protect solvent ventures.
5. Jurisprudential Significance
The Court’s nuanced approach situates the IBC as a revival mechanism, not a recovery tool. By distinguishing legitimate allottees from speculative investors, it preserves the Code’s collective purpose while discouraging its misuse for individual profit-seeking. The Judgment also bridges commercial and constitutional jurisprudence by integrating the right to shelter within the operational logic of insolvency law.
CONCLUSION
The Supreme Court’s decision in Mansi Brar Fernandes v. Shubha Sharma & Ors. redefines the contours of homebuyer participation under the IBC, balancing investor protection with systemic integrity. While upholding the NCLAT’s finding that the Appellants were speculative investors, the Court simultaneously reaffirmed procedural fairness by applying equitable doctrines to the 2019 Amendment.
Most significantly, the Judgment elevates housing justice to a constitutional plane, affirming that home ownership is not a speculative enterprise but a facet of human dignity under Article 21. By merging commercial prudence with social conscience, the Court ensures that the IBC continues to serve its foundational aim—revival over ruin, resolution over recovery.
SUSHILA RAM VARMA
Chief Legal Consultant
The Indian Lawyer & Allied Services
Please log on to our YouTube channel, The Indian Lawyer Legal Tips, to learn about various aspects of the law. Our latest video, titled “Legal Aspects of Start-up Funding in India | Complete Guide 2025 | Advocate Sushila Ram Varma”