ut | Awards | Blog | NewsAlerc | &svardhmaanegmailcom Search for Articles Q ‘CONTRIBUTOR Mojacar pane @e00 India: Whether Home Buyers Are Financial Creditors Under The IBC? 27 November 2025, by Mustafa Kachwala and KetaktPansare ‘Your Linkedin Connections wth ee ators Introduction Recently, In the case of Vishal Chelanl& Ors . Debashis Nanda (Cl Appeal No. 3806 of 2023), Indla's Supreme Court (Sc) ruled on the interface ofthe insolvency and Bankruptcy Code, 2016 (IBC) with the Real Estate (Regulation and Development) Ac, 2016 (RERA). Factual background ‘The appellants, home buyers, invested ina real estate project developed by Bulland Buldtech Pvt.Ltd (Developers The Developer faced delays and did not complete the projectin time. Aggrieved, the home buyers approached the Uttar Pradesh Real Estate Regulatory Authority and obtained a decree for a refund with interest. Simultaneously, proceedings were niuated against the Developer under the IBC, and a resolution plan was put forth, However, a cruclal ssue surfaced from the resolution plan - how ta distinguish between home buyers whe sought remedies under the RERA and those who did not? This led to disparate terms, and home buyers not seeking RERA remedies enjoyed 50% better conditions than those that di, Dissatisfied with the resolution plan, the appellants contested i before the National Company Law Tribunal (NCLI), The NCLT rejected tne application. In appeal, the National Company Law Appellate Tribunal also ‘upheld the resolution plan, deeming tunlawed and net warranting interference, Consequently, the appellants fled an appeal in the SC ‘The question before the SC was whether there should be differential treatment under the I8C fortwo ‘categories of home buyers. The crux of the matter ly in the treatment of home buyers whe sought remedies under the RERA as compared to those who didnot, and whether the latter could be classified as "nancial cxeditors” Legal framework Toadéress this question, the SC delved into the key provisions ofthe IBC. 1. Section 5(7 defines a "financial creditor” as any person to whom a financial debts owed. 2, Section S(@XN species that financial debt, including amounts pald by allottees under real estate projects, shal be deemed to have the commercial effect of “borrowing.” 3. Section 238 ofthe IBC reinforces the primacy of IBC provisions over other laws. ‘The SC relied on the ruling in Natwar Agrawal (HUB) v. Ms Sakash Developers & Builders Pvt.Ltd, which ‘establishes that an allottee in realestate project, who subsequently became a decree holder under the RERA, ‘continued to bea financial creditor in the dass of home buyers and was governed by the threshold it prescribed under Section (1) second proviso ofthe IBC C's reasoning and judgementRelying on Section (8) ofthe IBC, the SC dismissed the artificial aistincton made in the resolution plan t _asserted that seeking diferent remedies under the RERA did not alter the appellants’ status as home buyers ‘The SC found itinequitable to treat a segment cifferently solely based on the ground that some had elected to reclaim their deposits along with interest as ordered under the RERA and others had not ‘The SC emphasized the overriding effect of Section 238 ofthe I8C and underscored the need for partyin the ‘treatment of home buyers under Arte 1 ofthe Constitution, which prohibits dliscrimination, Conclusion ‘This is an important judgment, where the SC has ensured that home buyers, regardless of thelr choice of remedy under the RERA, are treated uniformly under the IBC. The decision not anly uphold the principles of ‘equity and non-discriination but also reaffirms the supremacy and overriding effec of the IBC. This rulings poised to have far-reaching implications, setting a precedent fr future cases involving the intersection of real estate regulations and insolvency laws in India, The content of ths article i intended to provide a general guide tothe subject matter. Specialist advice ‘should be sought about your specific circumstances. AUTHOR(S) actwals ajmudor Yajur Partners e Us | Contributors | Feedback | FeeNews Aes | TACE | Unsubecrbe | Privacy Satement