VISHAL CHELANI & ORS. versus DEBASHIS NANDA

VISHAL CHELANI & ORS. versus DEBASHIS NANDA

The Explanation to Section 5(8)(f) of the IBC brings amounts raised from allottees under real estate projects within the definition of financial debt; therefore allottees, including those who obtained RERA decrees for refund, are financial creditors and cannot be treated as a different subclass for purposes of the resolution plan. The Resolution Professional's distinction was artificial, inequitable and violative of Article 14; Section 238 IBC gives primacy to the IBC over RERA in this context. Consequently the impugned order was set aside and the appellants were declared financial creditors entitled to be treated along with other home buyers for the resolution plan.

Parties
Appellants: Vishal Chelani & Ors.; Respondent: Debashis Nanda
Jurisdiction
India
Judgment Date
06 October 2023
Procedural Posture
Civil Appeal / Appeal From NCLAT Order Dated 28.02.2023 in Company Appeal (at) (insolvency) No. 991 of 2022
Outcome
Appeal allowed; impugned order set aside
Legal Topics
Definition of Financial Creditor Under Section 5(8)(f) Explanation, Treatment of Home Buyers in Insolvency Resolution Plan, Section 18 RERA and Return of Amount, Section 238 IBC Overriding Effect, Article 14 Equality Challenge
Insolvency and Bankruptcy Code Real Estate (rera) Constitutional Law Definition of Financial Creditor Under Section 5(8)(f) Explanation Treatment of Home Buyers in Insolvency Resolution Plan Section 18 RERA and Return of Amount Section 238 IBC Overriding Effect Article 14 Equality Challenge

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Parties

Vishal Chelani & Ors.

Appellants

Debashis Nanda

Respondent

Procedural Posture

Civil Appeal / Appeal From NCLAT Order Dated 28.02.2023 in Company Appeal (at) (insolvency) No. 991 of 2022

Legal Issues

  1. 1 Whether home buyers/allottees who obtained RERA decrees are 'financial creditors' under Section 5(8)(f) Explanation of the IBC
  2. 2 Whether the Resolution Professional can treat allottees who obtained RERA decrees differently from other home buyers for purposes of the resolution plan
  3. 3 Whether election of remedy under RERA or receipt of refund/distinct decree alters status as financial creditor

Ratio Decidendi

The Explanation to Section 5(8)(f) of the IBC brings amounts raised from allottees under real estate projects within the definition of financial debt; therefore allottees, including those who obtained RERA decrees for refund, are financial creditors and cannot be treated as a different subclass for purposes of the resolution plan. The Resolution Professional's distinction was artificial, inequitable and violative of Article 14; Section 238 IBC gives primacy to the IBC over RERA in this context. Consequently the impugned order was set aside and the appellants were declared financial creditors entitled to be treated along with other home buyers for the resolution plan.

Court Disposition

Appeal allowed; impugned order set aside

Orders

  • Impugned order set aside
  • Appellants declared to be financial creditors within the meaning of Section 5(8)(f) (Explanation) of the IBC