Summary and Analysis of Mansi Brar Fernandes & Ors vs Shubha Sharma & Ors 2025 INSC 1110
1. Heading of the Judgment
Mansi Brar Fernandes & Ors. vs. Shubha Sharma & Ors. (Civil Appeal Nos. 3826 of 2020, 540 of 2021, 5495 of 2025, and 3903 of 2022)
Date of Judgment: September 12, 2025
Coram: Justice R. Mahadevan and Justice J.B. Pardiwala
Citation: 2025 INSC 1110
2. Related Laws and Legal Provisions
This judgment primarily interprets and applies the following laws:
The Insolvency and Bankruptcy Code, 2016 (IBC):
Section 7: Initiation of Corporate Insolvency Resolution Process (CIRP) by a financial creditor.
Section 5(8)(f): Definition of "financial debt" which includes the amount raised from an allottee under a real estate project.The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 / Amendment Act, 2020: Introduced a threshold requirement for homebuyers to file a joint application under Section 7 of the IBC.
The Real Estate (Regulation and Development) Act, 2016 (RERA): Referred to for the definition of an "allottee" and the standard model agreement.
Constitution of India, Article 21: Right to Life and Personal Liberty, interpreted to include the Right to Shelter.
Negotiable Instruments Act, 1881, Section 138: Regarding dishonour of cheques.
3. Basic Details of the Case
This common judgment disposes of four interconnected appeals arising from orders of the National Company Law Appellate Tribunal (NCLAT). The core dispute revolved around whether certain allottees in real estate projects were "genuine homebuyers" or "speculative investors," which determines their right to initiate insolvency proceedings under the IBC.
Appeals: Civil Appeal No. 3826/2020 (Mansi Brar Fernandes) and No. 3903/2022 (Sunita Agarwal) were filed by allottees challenging the NCLAT's order that set aside the admission of their individual Section 7 applications, branding them as "speculative investors."
Cross-Appeals: Civil Appeal No. 540/2021 and No. 5495/2025 were filed by the directors of the corporate debtor (Gayatri Infra) challenging the NCLAT's finding that the 2019 Amendment (which mandates a minimum number of allottees to file a joint application) was not applicable to Mansi Brar Fernandes's case.
Underlying Agreements: Both Mansi Brar Fernandes and Sunita Agarwal had entered into Memorandums of Understanding (MoUs) with the builders that featured lucrative "buy-back" clauses, promising high assured returns (e.g., return of ₹1 crore on an investment of ₹35 lakhs within 12 months) instead of the immediate delivery of possession.
4. Explanation of the Judgment
The Supreme Court's judgment is a landmark ruling that provides an in-depth analysis of the IBC's application to the real estate sector, clearly distinguishing between genuine homebuyers and speculative investors.
A. Core Legal Issue 1: Who is a "Speculative Investor"?
The Court affirmed the NCLAT's finding that both Mansi Brar Fernandes and Sunita Agarwal were speculative investors and not genuine homebuyers. Consequently, they were not entitled to individually trigger the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC.
Reasoning and Criteria Established:
The Court relied heavily on its earlier precedent in Pioneer Urban Land and Infrastructure Ltd. v. Union of India (2019) 8 SCC 416. It held that the IBC is a tool for resolution and revival, not a recovery mechanism for investors seeking high returns. The determination is factual and contextual. The Court provided a non-exhaustive list of indicators to identify a speculative investor:
Nature of the Contract: Agreements that substitute possession with a buy-back, refund option, or assured return clauses are strong indicators of speculation.
Demand for Refund with High Interest: Insisting on a refund with unrealistically high interest while refusing to accept possession shows an intent to profit, not to own a home.
Purchase of Multiple Units: Buying a large number of units (especially in double digits) invites greater scrutiny, though it is not conclusive by itself.
Special Rights or Privileges: Terms that grant the allottee preferential treatment or unusual privileges signal an investment intent.
Deviation from RERA Model Agreement: Significant departure from the standard RERA agreement is a crucial indicator of a non-genuine transaction.
Unrealistic Returns: Promises of exorbitant returns (e.g., 20-25% per annum) over a short duration are indicative of a speculative financial arrangement, not a home purchase.
Conduct of the Allottee: Never following up on construction progress or seeking possession, and instead immediately invoking recovery proceedings (like under Section 138 of the NI Act upon cheque bounce) upon maturity of the buy-back period.
Application to the Cases:
In Mansi Brar Fernandes's case, the MoU was structured to return ₹1 crore on an investment of ₹35 lakhs within a year. The Court found that possession was never the true intent; the aim was the assured financial return.
In Sunita Agarwal's case, the MoU provided for 25% assured annual returns and a compulsory buy-back. The repeated use of the term "investment" and the risk-free exit option confirmed the speculative nature.
The Court clarified that this distinction is only relevant for the initiation of CIRP. Speculative investors are not barred from filing claims for their principal amount in an already ongoing CIRP or from pursuing remedies under RERA or consumer forums.
B. Core Legal Issue 2: Applicability of the 2019 Amendment (Threshold Requirement)
The Supreme Court held that the 2019 Amendment Ordinance (and subsequent Act) was indeed applicable to Mansi Brar Fernandes's case. This Amendment mandated that a Section 7 application against a real estate developer must be filed jointly by either at least 100 allottees or 10% of the total allottees in a project, whichever is less.
Reasoning:
The NCLAT had erroneously held the Amendment inapplicable. The Court found that:
Mansi's application was filed before the Ordinance but was pending and reserved for orders on December 4, 2019.
The Ordinance was promulgated on December 28, 2019.
The NCLT passed the admission order on January 2, 2020, without considering the new mandatory threshold requirement.
The Court applied the maxim "Actus Curiae Neminem Gravabit" (an act of the court shall prejudice no one). Since the delay in pronouncing the judgment was an "act of the court," the appellant could not be prejudiced for not complying with a law that came into effect while the matter was reserved. The Court noted that she later managed to secure the support of 10% of allottees during the appellate stage, which cured the initial defect. Therefore, on this specific ground, the NCLAT's finding of inapplicability was set aside.
C. The Constitutional Right to Shelter
The Court delivered a powerful discourse on Article 21 of the Constitution, recognizing the Right to Shelter as a fundamental facet of the right to life. It emphasized that a home is not a mere commodity for speculation but a fundamental human need that embodies safety, dignity, and family.
The judgment places a constitutional obligation on the State to create and enforce a robust framework that protects genuine homebuyers from fraudulent developers and speculative practices that artificially inflate prices and jeopardize projects. It warned against reducing housing to the status of speculative instruments like stocks and derivatives.
D. Supreme Court's Directions and Suggestions for Reform
To protect genuine homebuyers and ensure the stability of the real estate sector, the Supreme Court issued several mandatory directions and suggestions for systemic reform:
Strengthening Adjudicating Institutions: Vacancies in NCLT/NCLAT must be filled on a "war footing." The Union Government must upgrade infrastructure and file a compliance report within three months.
Expert Committee: A committee chaired by a retired High Court Judge should be formed to suggest systemic reforms for the real estate sector.
Empowering RERA: RERA authorities must be adequately staffed and resourced. They must conduct thorough diligence before project approvals.
Project-Specific CIRP: Insolvency resolution should typically be on a project-wise basis, not for the entire corporate debtor, to protect solvent projects.
Revival Fund: The government should consider expanding the SWAMIH Fund or establishing a new fund under NARCL for bridge financing of stressed projects, subject to audits by the Comptroller and Auditor General (CAG).
Scrutiny at Admission Stage: NCLTs must record a prima facie finding on whether a Section 7 applicant is a genuine homebuyer or a speculative investor at the admission stage itself.
Registration and Affidavits: To protect senior citizens, contracts with buy-back clauses for allottees over 50 must be supported by an affidavit sworn before a revenue authority certifying they understand the risks.
Escrow Accounts for Nascent Projects: For projects where land is not acquired or construction hasn't started, allottee funds must be placed in an escrow account and disbursed as per a RERA-approved plan.
Conclusion and Final Outcome
The Supreme Court dismissed the appeals of Mansi Brar Fernandes and Sunita Agarwal. The NCLAT's order branding them as speculative investors and setting aside the admission of their individual Section 7 applications was upheld.
The Court allowed the cross-appeals filed by the directors of Gayatri Infra on the limited issue, holding that the 2019 Amendment was applicable to the case, and set aside the NCLAT's finding on its inapplicability.
The appellants were granted liberty to pursue their remedies (for recovery of their principal investment) before appropriate fora like RERA or consumer courts, and the bar of limitation would not apply to such actions.
The Registry was directed to circulate the judgment to the Cabinet Secretary and all State Chief Secretaries for necessary compliance.