Mansi Brar Fernandes v. Shubha Sharma 2025 INSC 1110 - IBC - RERA - Fundamental Right to Shelter

The IBC is a landmark economic legislation designed to reorganize and resolve the insolvency of corporate entities, partnership firms, and individuals in a time-bound manner. Its core objectives are to maximize asset value, promote entrepreneurship, ensure credit availability, and balance the interests of all stakeholders. Critically, the IBC prioritizes "resolution over ruin" and "revival over decay," aiming to resuscitate distressed companies where possible, with liquidation being a last resort. For homebuyers in real estate, the intent is to protect genuine allottees, ensure project completion, and guarantee the delivery of homes, recognizing that liquidation often provides little relief for them.

Homebuyers are recognized as "financial creditors" under the IBC, a legislative amendment introduced to ensure their representation in the Committee of Creditors (CoC) and protect their interests. However, this amendment led to an unintended consequence: a surge of individual Section 7 petitions filed by "speculative investors" seeking premature exits or enhanced returns rather than actual homes. This misuse strained the adjudicatory machinery and stalled projects. To counter this, Parliament introduced a threshold requirement, mandating that at least 10% of allottees or 100 in number must collectively file a Section 7 application against a real estate developer, to prevent a few disgruntled or speculative investors from derailing entire projects.

The determination is contextual and hinges on the intent of the parties, with possession of a dwelling unit being the "sine qua non" of a genuine homebuyer's intent. Indicative factors for identifying a speculative investor include:

• Nature and terms of the contract: If the agreement substitutes possession with a buyback or refund option, or other special arrangements.
• Number of units purchased: Purchase of multiple units, especially in double digits, warrants greater scrutiny.
• Assured returns or buyback clauses: Presence of schemes offering unusually high, assured returns (e.g., 20-25%) or compulsory buyback options.
• Project stage at investment: The stage of completion of the project at the time of investment.
• Alternative arrangements: Existence of alternative arrangements in lieu of possession.
• Conduct of the allottee: Insistence on high-interest refunds coupled with refusal to accept possession, lack of follow-up on project progress, or reliance on remedies like the Negotiable Instruments Act for recovery rather than seeking possession.
• Deviation from standard agreements: Significant deviations from the RERA Model Agreement to Sell, or inclusion of unrealistic interest rates.

The Supreme Court affirmed the National Company Law Appellate Tribunal's (NCLAT) findings that both Mansi Brar Fernandes and Sunita Agarwal were "speculative investors." In Mansi Brar Fernandes' case, the Memorandum of Understanding (MoU) stipulated a buyback with a substantial premium, no clear provision for the balance payment on flats, and the issuance of dishonored post-dated cheques, indicating an interest in assured returns rather than possession. Similarly, Sunita Agarwal's MoU provided for high assured returns (25% per annum) and a compulsory buyback clause, confirming that possession was never the primary intent. The Court emphasized that such risk-free contracts place speculative investors in an advantageous position to the detriment of genuine homebuyers and developers, and thus, speculative investors cannot trigger the Corporate Insolvency Resolution Process (CIRP) as it undermines revival and destabilizes projects.

The 2019 Ordinance, effective from December 28, 2019, introduced a threshold requirement for allottees to initiate CIRP. It mandated that Section 7 applications must be filed jointly by at least 100 allottees or 10% of the total allottees in a project, whichever is less. For pending applications not yet admitted, compliance was required within 30 days, or they would be deemed withdrawn.

In Mansi Brar Fernandes' case, her application was reserved for orders before the Ordinance's promulgation but admitted shortly after without reference to the new requirement. The NCLAT had erroneously deemed the Ordinance inapplicable. The Supreme Court clarified that while the Ordinance was indeed applicable, the appellant's subsequent compliance during appellate proceedings, albeit with slight delay, cured the defect. The Court invoked the doctrine of "Actus Curiae Neminem Gravabit" (an act of the court shall prejudice no one), stating that the appellant should not be penalized for the court's failure to consider the legislative change before delivering its order.

The Supreme Court reiterates that the Right to Shelter is an integral part of the right to life under Article 21 of the Constitution. A home is seen as more than just a roof; it's a place for growth, a reflection of hopes and dreams, and a fundamental human need. The anxiety of not having a home despite investing life savings takes a serious toll on individuals. Therefore, the timely possession of a promised home is a facet of this fundamental right. This constitutional obligation places a duty on the State to ensure access to adequate housing and to create a framework that prevents developers from defrauding or exploiting homebuyers. It underscores that housing is neither a luxury nor a commodity for speculation but a basic human need, justifying the Court's efforts to protect genuine homebuyers and ensure the stability of the real estate sector.

The Supreme Court issued several directives and suggestions:

• NCLT/NCLAT Infrastructure: Fill vacancies on a war footing, constitute dedicated IBC benches, utilize retired judges, and upgrade infrastructure nationwide.
• Committee for Systemic Reforms: Constitute a committee to suggest commercially viable systemic reforms for the real estate sector.
• RERA Strengthening: Ensure RERA authorities are adequately staffed, equipped, and empowered, with legal experts/consumer advocates as members, and conduct thorough project diligence.
• Real Estate Insolvency Guidelines: IBBI, in consultation with RERA, to frame specific guidelines for real estate insolvency, including project-wise CIRP timelines and allottee safeguards.
• Project-Specific Resolution: Real estate insolvency should generally proceed project-specific, not for the entire corporate debtor, and mechanisms for handover of completed units should be devised.
• Revival Fund: Consider establishing a revival fund (e.g., under NARCL or expanding SWAMIH Fund) for bridge financing stressed projects, with comprehensive performance audits by CAG.
• Allottee Representation: Ensure meaningful representation of allottees in the CoC with safeguards against conflicts of interest.
• Early Identification of Speculators: NCLTs must record a prima facie finding on whether an applicant is a genuine homebuyer or speculative investor at the admission stage of Section 7 petitions.
• Digitalization: Prioritize e-filing, video-conferencing, and dedicated case management for IBC matters.
• Transparency and Protection: Register new housing transactions with local revenue authorities upon 20% payment, and for contracts with significant deviations or buyback clauses for allottees over 50, require an affidavit certifying understanding of risks.
• Escrow Accounts: For nascent projects, proceeds from allottees must be placed in escrow and disbursed based on RERA-sanctioned SOPs.

The Supreme Court's ultimate goal is to restore faith in India's regulatory and insolvency frameworks, deter speculative misuse of the IBC, and ensure that the "dream home" of India's citizens does not turn into a lifelong nightmare. This involves balancing the interests of all stakeholders, particularly protecting genuine homebuyers who represent the backbone of India’s urban future. By reinforcing the distinction between genuine homebuyers and speculative investors, strengthening regulatory bodies like RERA, and streamlining the insolvency process for real estate, the Court seeks to insulate the market from artificial inflation, cleanse the sector, and contribute to its stability and growth, thereby fulfilling the constitutional promise of the Right to Shelter under Article 21.

Case Name and Neutral Citation

• Case Name: Mansi Brar Fernandes v. Shubha Sharma & Ors. (with connected appeals: Shubha Sharma v. Mansi Brar Fernandes & Ors.; Ashlesh Gupta & Anr. v. Mansi Brar Fernandes & Ors.; Sunita Agarwal v. Ankit Goyat & Anr.)
• Neutral Citation: 2025 INSC 1110

Coram (Judges)

• Justice J.B. Pardiwala
• Justice R. Mahadevan

Judgment Date

• Date: 12 September 2025

Caselaws and Citations Referred

• Swiss Ribbons v. Union of India(2019) 4 SCC 17
• Pioneer Urban Land and Infrastructure Ltd v. Union of India(2019) 8 SCC 416
• Binani Industries Ltd v. Bank of Baroda(2018) 150 SCL 703
• Manish Kumar v. Union of India(2021) 5 SCC 1
• Upendra Choudhury v. Bulandshahar Development Authority and others(2022) 11 SCC 449
• Samatha v. State of A.P.(1997) 8 SCC 191
• Chameli Singh v. State of U.P.(1996) 2 SCC 549
• U.P. Avas Evam Vikas Parishad v. Friends Coop. Housing Society Ltd.1995 Supp (3) SCC 456
• Shantistar Builders v. Narayan Khimalal Totame(1990) 1 SCC 520
• Anita Kushwaha v. Pushap Sudan(2016) 8 SCC 509
• Madhubhai Amathalal Gandhi v. Union of IndiaAIR 1961 SC 21
• Duni Chand Rataria v. Bhuwalka Brothers Ltd.AIR 1955 SC 182
• Jute Investment Co. Ltd v. CIT(1980) 1 SCC 117
• Rameshwar Lal v. Municipal Council Tank and others(1996) 6 SCC 100
• High Court Bar Association, Allahabad v. State of U.P. and othersMANU/SC/0149/2024
• Jang Singh v. BrijlalAIR 1966 SC 1631
• State of Punjab v. Shamlal MurariAIR 1976 SC 1177
• A.R. Antulay v. R.S. NayakMANU/SC/0002/1988
• Alexander Rodger v. The Comptoir D’escompte De ParisLaw Reports Vol. III 1869-71 page 465

Statutes / Laws Referred

• Insolvency and Bankruptcy Code, 2016 (IBC)
• • Section 7
  • Section 5(8)(f)
  • Sections 43 to 50
  • Section 65
  • Section 14
• Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 / Amendment Act, 2020
• Real Estate (Regulation and Development) Act, 2016 (RERA)
• • Section 2(d)
• Negotiable Instruments Act, 1881
• • Section 138
• Indian Evidence Act
• • Section 65B
• Consumer Protection Act
• Constitution of India
• • Article 21 (Right to Life and Shelter)
  • Directive Principles of State Policy
  • Fundamental Duties