Mansi Brar Fernandes v. Shubha Sharma: - Speculative Investors v. Genuine Investors as Home Buyers in IBC.

Mansi Brar Fernandes v. Shubha Sharma: - Speculative Investors Under IBC?

Right to housing is not merely a contractual entitlement but a facet of the fundamental right to life under Article 21. Genuine homebuyers represent the backbone of India’s urban future, and their protection lies at the intersection of constitutional obligation and economic policy

Citation: 2025 INSC 1110, decided on September 12, 2025   

Issue: This landmark ruling addressed the distinction between speculative investors and genuine homebuyers under the Insolvency and Bankruptcy Code, 2016, ("IBC") and their role in initiating insolvency proceedings under Section 7 of the IBC.  

Background: The case involved two Financial Creditors—Mansi Brar Fernandes and Sunita Agarwal—who had entered into Memoranda of Understanding (MOUs) with corporate debtors. In Mansi Brar's case, she paid Rs. 35,00,000 for provisional allotment of apartments for a 12-month period, with clauses mandating the corporate debtor to buy back apartments at the end of the term for Rs. 1 crore and refund the amount paid together with premium or handover the possession of the Flat. Similarly, Sunita Agarwal invested Rs. 25,00,000 and was promised 25% per annum returns after 24 months, with a compulsory buy-back of the apartment by the corporate debtor. 

Key Holdings:

1. Speculative Investors Cannot Initiate CIRP: The Supreme Court held that speculative investors cannot be allowed to misuse IBC to trigger the Corporate Insolvency Resolution Process as a recovery mechanism. The Court upheld the NCLAT's finding that the Financial Creditors were speculative investors driven by profit motives, not genuine homebuyers interested in possession of units.   

2. Indicators for Identifying Speculative Investors: To determine if an investor is a speculative investor as per the IBC an inquiry ought to be made in the facts of the case. The inquiry must be contextual and guided by the intent of the parties. Indicative factors include: (i) the nature and terms of the contract; (ii) the number of units purchased; (iii) presence of assured returns or buyback clauses; (iv) the stage of completion of the project at the time of investment; and (v) existence of alternative arrangements in lieu of possession. Possession of a dwelling unit remains the sine qua non of a genuine homebuyer’s intent. The Hon'ble SC noted that Schemes of assured returns, compulsory buybacks, or excessive exit options are in truth financial derivatives masquerading as housing contracts. These arrangements enable developers, on the one hand, to mislead gullible individuals, and seasoned investors, on the other, to ‘jump ship’ when the market turns or to hold developers to ransom by invoking the IBC as a coercive recovery mechanism, thereby creating a situation of ‘heads I win, tails you lose’.

3. Right to Shelter Under Article 21: The Court reiterated that the right to shelter of a homebuyer is enshrined as a fundamental right under Article 21 (Right to Life) of the Constitution of India, 1950. The Court underscored that the purchase of a home cannot be regarded merely as a commercial transaction. The State bears the responsibility of ensuring a framework that protects homebuyers from fraud and exploitation.  

4. Applicability Limited to Initiation Stage: The Court levied an important caveat—the identification of speculative investors is relevant only at the stage of initiation of the CIRP and shall not affect admission of claims once CIRP has commenced. 

5. Reiterated certain settled principles:

• RERA remains the primary forum for redressal of homebuyers’ grievances. 
• The IBC is a forum of last resort, intended to secure revival and completion of viable      projects, not to serve as a debt recovery mechanism. 
• Consumer forums should confine themselves to adjudicating individua service deficiencies, thereby avoiding conflicting or overlapping orders across multiple fora

6. Who is Speculative?

“Speculation” has been defined in P. Ramanatha Iyer’s Law Lexicon (6th edition) as “a risky investment of money for the sake of and in expectation of unusually large profits”. A “speculator” is “one who practices speculation in trade or business”. Two elements emerge: (i) expectation of unusually high profits; and (ii) activity in the nature of business or trade. SC clarified that the distinction between speculative investors and genuine homebuyers is relevant only at the stage of initiation of CIRP. Such allottees are not barred from filing claims for the principal amount invested, or from pursuing remedies before other fora in accordance with law

Directions for Structural Reforms:

With an aim to fortify safeguards for bona fide homebuyers and secure stability of the real estate sector, the Court issued comprehensive directions:

1. Filling up vacancies in NCLT/NCLAT on a priority basis 
2. NCLT to record a prima facie finding on an applicant being a genuine homebuyer or speculative investor at the stage of admission of Section 7 IBC applications 
3. As a rule, resolution of real estate insolvency is to proceed in a project-wise manner, unless circumstances necessitate otherwise  
4. Regulations to ensure representation of real estate allottees in CoC 
5. Deposits from allottees of projects at the initial stage to be put in an escrow account and disbursed in a phase-wise manner as per progress of the project 
6. Union government to file a compliance report on measures adopted to improve NCLT/NCLAT infrastructure 
7. Constitution of a committee for suggesting systemic reforms in the real estate sector 
8. State to ensure adequate infrastructure, resources and experts for RERA authorities 

This decision has generated significant commentary for protecting genuine homebuyers while preventing misuse of IBC by profit-seeking investors. SC noted that to admit speculative claims into insolvency proceedings would dilute the intelligible differentia underlying the legislative scheme, destabilize the residential real estate sector, and erode the social purpose embedded in housing as a fundamental right. Both the NCLAT orders were affirmed.