The NCLAT held that a speculative investor in real estate cannot be considered a Financial Creditor under Section 5(8)(f) of the Insolvency and Bankruptcy Code, 2016.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justices Ashok Bhushan (Chairperson) and Yogesh Khanna (Judicial Members) and Barun Mitra (technical Member) was hearing an appeal and observed that the appellant, who had purchased residential plots but was not an allottee or a home buyer, is a speculative investor and therefore could not be considered a Financial Creditor under Section 5(8)(f) of the Insolvency and Bankruptcy Code, 2016.
The appeal was filed under Section 61 of the Insolvency & Bankruptcy Code, 2016 against an order dated 20.10.2023. The Appellant had approached the Corporate Debtor for buying residential plots in a PUDA approved colony. An agreement was executed, but the Corporate Debtor failed to execute the sale deed or effect the registry of the plots, proposing instead to convert the outstanding amount into a loan.
The Appellant filed a petition under Section 7 of the I&B Code, 2016, claiming to be a Financial Creditor. The Adjudicating Authority (NCLT) held that the Appellant's debt did not qualify as a financial debt under the Code and that the Appellant was a speculative buyer, not an allotted.
The Appellant relied on a judgment that interpreted Section 5(8)(f) of the Code to include advances given by property buyers to real estate developers as a 'borrowing', but the NCLAT found that the judgment did not apply to the Appellant's case.
The NCLAT agreed with the NCLT's order, dismissing the appeal and stating that the Appellant could not be considered a Financial Creditor due to being a speculative investor.