NCLT: Buyer of Industrial Unit with Assured Returns is an Investor, Not a Financial Creditor Under IBC

Mumbai | The National Company Law Tribunal (NCLT), Mumbai Bench, has ruled that a company that purchased an industrial unit with a guaranteed monthly return scheme cannot be classified as a 'Financial Creditor' under the Insolvency and Bankruptcy Code , 2016 (IBC). The bench, comprising Judicial Member Sh. Mohan Prasad Tiwari and Technical Member Sh. Charanjeet Singh Gulati, affirmed the Interim Resolution Professional's (IRP) decision to categorize the applicant as an 'Other Creditor', thereby excluding it from the Committee of Creditors (CoC).

The Tribunal drew a sharp distinction between genuine homebuyers seeking shelter—a right protected under Article 21 of the Constitution—and commercial investors seeking profits from real estate.

Case Background

The case involved an application filed by Catalyst Trusteeship Limited against the IRP of Renaissance Indus Infra Private Limited. Catalyst had purchased an industrial unit (Gala) in the "Renaissance Industrial Smart City Project" for a total consideration of over ₹40 lakhs. The agreement included a Memorandum of Understanding (MOU) that guaranteed Catalyst a monthly "assured return" of ₹22,914.

When Renaissance Indus Infra entered the Corporate Insolvency Resolution Process (CIRP) in March 2023, Catalyst filed its claim as a 'Financial Creditor' under Section 5 (8)(f) of the IBC, which treats amounts raised from allottees of a real estate project as financial debt.

However, the IRP admitted the claim amount but classified Catalyst as an 'Other Creditor'. Aggrieved by this decision, which denied it a seat on the influential CoC, Catalyst approached the NCLT.

Arguments Presented

Applicant's Contentions (Catalyst Trusteeship Limited): - The applicant argued that its claim squarely falls under the definition of 'financial debt' as per Section 5 (8)(f) of the IBC. - It contended that the nature of the unit—whether industrial, commercial, or residential—is irrelevant, and the primary criterion is whether the claimant is an "allottee" in a real estate project. - The applicant accused the IRP of adopting an "opaque and arbitrary approach" by misclassifying several property buyers and refusing to share a legal opinion justifying the decision.

Respondent's Contentions (The IRP): - The IRP countered that the project is an "Integrated Industrial Area" under the Maharashtra Industrial Development Act , 1961, and not a typical "real estate project" as defined by the Real Estate (Regulation and Development) Act , 2016 (RERA). - It was argued that the deeming fiction of Section 5 (8)(f) was specifically created to protect vulnerable homebuyers, not commercially savvy investors who enter into transactions for profit, as evidenced by the assured return clause. - The IRP maintained that since the applicant's transaction was a commercial investment, it was correctly classified as an 'Other Creditor'.

Tribunal's Analysis and Reasoning

The NCLT's decision hinged on the legislative intent behind classifying homebuyers as financial creditors and the fundamental difference between investing for shelter versus investing for profit.

Homebuyer vs. Commercial Investor

The Tribunal emphasized that the protections under the IBC for real estate allottees are meant for a specific, vulnerable class. It observed:

> "The right to shelter has been recognised by the Hon’ble Supreme Court as an intrinsic component of the right to life under Article 21 of the Constitution, and therefore occupies a higher constitutional pedestal... Conversely, a purchaser of a commercial, industrial, or investment-oriented unit operates squarely within the domain of the right to profession or trade under Article 19(1)(g), which is an economic right and not a facet of the right to life."

The Tribunal concluded that the "assured return" mechanism was a clear indicator of a commercial transaction, placing the applicant in the category of an investor rather than a homebuyer.

Interpretation of Supreme Court Precedent

The applicant cited the Supreme Court's judgment in * Mansi Brar * to support its claim. However, the NCLT dissected this argument, stating that the precedent does not aid the applicant's case. The Tribunal clarified:

> "Nowhere does the Hon’ble Supreme Court expand the definition of 'homebuyer,' nor does it permit an investor in a commercial, industrial, warehousing, or investment-oriented project... to be treated as a Financial Creditor for the purposes of Section 5 (8)(f) of the IBC."

The bench noted that while the * Mansi Brar * judgment allows speculative investors to file claims for their principal amount, it does not grant them the coveted status of a 'Financial Creditor'.

Final Decision

Based on its analysis, the NCLT held that the applicant's claim does not qualify as a 'Financial Debt' under the IBC. The Tribunal rejected the plea to be declared a 'Financial Creditor' and upheld the IRP's classification.

The judgment reinforces the principle that the special protections afforded to homebuyers under the IBC are not a blanket cover for all real estate transactions. Courts will scrutinize the nature and intent of the transaction to distinguish genuine homebuyers from commercial investors, particularly in cases involving assured return schemes.