Homebuyers under BuyBack Scheme: Financial Creditors under IBC?
– Saloni Khant, Executive | corplaw@vinodkothari.com
Real estate developers often raise funds by offering flats under buy-back or assured return schemes, sometimes with a mandatory repurchase clause, or sometimes at the builder’s discretion. On the other hand, there may be people who genuinely want to acquire a home and live in it. In the former case, when the builder fails to repay the money or allot the flats, can such a lender don the garb of a homebuyer?
In the ruling of Mansi Brar Fernandes v. Shubha Sharma and Anr, the Supreme Court held that such investors lured by assured profits cannot be permitted to trigger CIRP as real estate allottees. Permitting such investors to invoke the insolvency process would undermine revival, destabilise projects, and prejudice genuine homebuyers. It was further held that investors seeking assured returns are essentially acting as speculative investors rather than genuine homebuyers; allowing them to initiate CIRP as allottees could enable recovery actions disguised as insolvency proceedings, thereby disrupting project completion and harming bona fide homebuyers.
But are such investors altogether debarred from seeking any remedy under the IBC against the builder? Will they not be considered as financial creditors in the capacity of depositors?
This article explores the positions of homebuyers with different commercial intentions under IBC and analyses whether real estate investors under buyback or assured return schemes may invoke CIRP against builders in the capacity of depositors.
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