{"id":593,"date":"2026-06-26T07:47:07","date_gmt":"2026-06-26T07:47:07","guid":{"rendered":"https:\/\/mudralegal.com\/blog\/?p=593"},"modified":"2026-06-26T07:52:43","modified_gmt":"2026-06-26T07:52:43","slug":"nclat-clarifies-a-homebuyer-does-not-lose-allottee-status-merely-because-the-builder-treats-the-booking-amount-as-a-loan","status":"publish","type":"post","link":"https:\/\/mudralegal.com\/blog\/nclat-clarifies-a-homebuyer-does-not-lose-allottee-status-merely-because-the-builder-treats-the-booking-amount-as-a-loan\/","title":{"rendered":"NCLAT Clarifies: A Homebuyer does not lose allottee status merely because the builder treats the booking amount as a loan"},"content":{"rendered":"\t\t
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Abhiyan Developers Pvt. Ltd. v. Shreepati Build Infra Investment Ltd. | A Landmark Ruling on Homebuyers’ Rights Under the Insolvency and Bankruptcy Code<\/span><\/h2>\n

<\/span><\/p>\n

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, in its judgment dated 10 January 2024<\/strong>, delivered an important ruling on the rights of homebuyers under the Insolvency and Bankruptcy Code, 2016 (IBC). The decision in Abhiyan Developers Private Limited v. Shreepati Build Infra Investment Limited<\/strong> settles a recurring legal issue: <\/span><\/p>


<\/strong><\/span><\/p>

Can a homebuyer become a financial creditor merely because the developer temporarily treats the booking amount as a loan?<\/strong><\/span><\/p>\n

<\/span><\/p>\n

The Tribunal answered this question in the negative, holding that the true nature of the transaction\u2014not the label assigned by the builder\u2014determines the legal relationship between the parties.<\/span><\/p>\n

<\/span><\/p>\n

The judgment also reinforces the mandatory requirement introduced by the 2019 amendment to the IBC that a single homebuyer cannot independently initiate insolvency proceedings against a real estate developer.<\/span><\/p>\n

<\/span><\/p>\n

Background of the Dispute<\/span><\/h2>\n

<\/span><\/p>\n

  • The dispute arose from a real estate project where the appellant had invested approximately \u20b93.5 crore<\/strong> for booking two residential flats.<\/span><\/li>
  • However, the project never commenced as expected.<\/span><\/li>
  • Facing prolonged delays, the developer issued a letter in 2015 informing the buyer that the booking amount would be temporarily transferred to a “Loan Account” until the necessary approvals for the project were obtained.<\/span><\/li>
  • The developer also assured the buyer that the booked flats would be allotted once the project was ready.<\/span><\/li>
  • Years later, the buyer initiated insolvency proceedings under Section 7 of the Insolvency and Bankruptcy Code, claiming to be a financial creditor<\/strong> rather than a homebuyer.<\/span><\/li>
  • This distinction became crucial because financial creditors can independently initiate insolvency proceedings, whereas homebuyers are subject to additional statutory requirements.<\/span><\/li><\/ul><\/p>\n

    <\/span><\/p>\n\n

    <\/span><\/p>\n\n

    <\/span><\/p>\n\n

    <\/span><\/p>\n\n

    <\/span><\/p>\n\n

    <\/span><\/p>\n

    The Core Legal Question<\/span><\/h2>\n

    <\/span><\/p>\n

    The Tribunal was required to decide two important issues:<\/span><\/p>\n

    <\/span><\/p>\n

    First<\/strong>, whether a homebuyer loses the status of an allottee simply because the builder temporarily converts the booking amount into a loan account.<\/span><\/p>\n

    <\/span><\/p>\n

    Second<\/strong>, whether a single homebuyer can continue insolvency proceedings after the 2019 amendment to the Insolvency and Bankruptcy Code introduced a minimum threshold requirement for real estate allottees.<\/span><\/p>\n

    <\/span><\/p>\n

    Was the Buyer Really a Financial Creditor?<\/span><\/h2>\n

    <\/span><\/p>\n

    The appellant argued that once the booking amount was shifted to a loan account, the original builder-buyer relationship came to an end.<\/span><\/p>\n

    <\/span><\/p>\n

    According to the appellant, the transaction had transformed into a loan arrangement, making the appellant a financial creditor similar to a bank or lending institution.<\/span><\/p>\n

    <\/span><\/p>\n

    If accepted, this argument would have allowed the appellant to independently initiate insolvency proceedings under Section 7 of the IBC.<\/span><\/p>\n

    <\/span><\/p>\n

    NCLAT Examines the Real Nature of the Transaction<\/span><\/h2>\n

    <\/span><\/p>\n

    The Tribunal carefully examined the builder’s letter and the surrounding circumstances.<\/span><\/p>\n

    <\/span><\/p>\n

    It found that the transfer of funds into a loan account was expressly described as temporary<\/strong> until the required project approvals were obtained.<\/span><\/p>\n

    <\/span><\/p>\n

    More importantly, the developer had never cancelled the allotment.<\/span><\/p>\n

    <\/span><\/p>\n

    Instead, the builder repeatedly assured the buyer that the booked flats would be delivered after completion of the project.<\/span><\/p>\n

    <\/span><\/p>\n

    Another significant factor considered by the Tribunal was that no loan interest was ever paid<\/strong> to the appellant.<\/span><\/p>\n

    <\/span><\/p>\n

    Ordinarily, a genuine loan arrangement involves payment of interest and repayment obligations.<\/span><\/p>\n

    <\/span><\/p>\n

    In this case, neither existed.<\/span><\/p>\n

    <\/span><\/p>\n

    The Tribunal therefore concluded that the so-called loan account was merely an accounting arrangement and did not alter the fundamental nature of the transaction.<\/span><\/p>\n

    <\/span><\/p>\n

    The relationship between the parties remained that of a promoter and an allottee.<\/span><\/p>\n

    <\/span><\/p>\n

    Original Purpose of the Transaction Determines Legal Status<\/span><\/h2>\n

    <\/span><\/p>\n

    One of the most important legal principles emerging from this judgment is that the original purpose of a transaction prevails over its subsequent description<\/strong>.<\/span><\/p>\n

    <\/span><\/p>\n

    The Tribunal held that a buyer who books a residential apartment does not cease to be an allottee merely because the promoter temporarily redesignates the deposited amount as a loan.<\/span><\/p>\n

    <\/span><\/p>\n

    The underlying objective of the transaction remained acquisition of residential flats.<\/span><\/p>\n

    <\/span><\/p>\n

    Therefore, the appellant continued to fall within the definition of an “allottee” under the Real Estate (Regulation and Development) Act, 2016.<\/span><\/p>\n

    <\/span><\/p>\n

    The Impact of the 2019 Amendment to the Insolvency Code<\/span><\/h2>\n

    <\/span><\/p>\n

    The second issue proved decisive.<\/span><\/p>\n

    <\/span><\/p>\n

    The Insolvency and Bankruptcy Code was amended in 2019 to prevent isolated insolvency proceedings by individual homebuyers.<\/span><\/p>\n

    <\/span><\/p>\n

    Under the amended Section 7, an insolvency application by homebuyers can only be filed jointly by:<\/span><\/p>\n

    <\/span><\/p>\n

      <\/p>\n

    • At least 100 allottees<\/strong>, or<\/span><\/li>\n

      <\/p>\n

    • 10% of the total allottees<\/strong> of the project, whichever is lower.<\/span><\/li>\n

      <\/p><\/ul>\n

      <\/span><\/p>\n

      The amendment also introduced a transitional provision requiring pending applications filed by individual homebuyers to comply with this new threshold within the prescribed period.<\/span><\/p>\n

      <\/span><\/p>\n

      Failure to satisfy this requirement results in the application being deemed withdrawn.<\/span><\/p>\n

      <\/span><\/p>\n

      Why the Appeal Failed<\/span><\/h2>\n

      <\/span><\/p>\n

      Since the Tribunal concluded that the appellant remained an allottee, the statutory threshold became applicable.<\/span><\/p>\n

      <\/span><\/p>\n

      The appellant had filed the insolvency application individually and did not join hands with the minimum number of homebuyers required under the amended law.<\/span><\/p>\n

      <\/span><\/p>\n

      Consequently, the insolvency application could not be maintained.<\/span><\/p>\n

      <\/span><\/p>\n

      The Tribunal agreed with the findings of the Adjudicating Authority and dismissed the appeal.<\/span><\/p>\n

      <\/span><\/p>\n

      Key Legal Principles Established<\/span><\/h2>\n

      <\/span><\/p>\n

      The judgment settles several important principles governing insolvency proceedings involving real estate projects.<\/span><\/p>\n

      <\/span><\/p>\n

      1. Substance Prevails Over Form<\/span><\/h3>\n

      <\/span><\/p>\n

      A temporary accounting treatment cannot alter the legal character of a transaction.<\/span><\/p>\n

      <\/span><\/p>\n

      If the original intention was purchase of a flat, the buyer continues to remain an allottee.<\/span><\/p>\n

      <\/span><\/p>\n

      2. Temporary Loan Arrangements Do Not Change Legal Rights<\/span><\/h3>\n

      <\/span><\/p>\n

      Merely calling the deposited money a “loan” does not transform a homebuyer into an independent financial creditor.<\/span><\/p>\n

      <\/span><\/p>\n

      The surrounding facts and contractual relationship remain decisive.<\/span><\/p>\n

      <\/span><\/p>\n

      3. Homebuyer Threshold Under IBC Is Mandatory<\/span><\/h3>\n

      <\/span><\/p>\n

      The minimum threshold introduced by the 2019 amendment is compulsory.<\/span><\/p>\n

      <\/span><\/p>\n

      Individual allottees cannot bypass this statutory requirement by attempting to classify themselves as financial creditors.<\/span><\/p>\n

      <\/span><\/p>\n

      4. Builder’s Internal Accounting Cannot Defeat Statutory Protection<\/span><\/h3>\n

      <\/span><\/p>\n

      Developers cannot unilaterally change the legal status of homebuyers through internal bookkeeping or unilateral correspondence.<\/span><\/p>\n

      <\/span><\/p>\n

      The rights of allottees continue to be governed by the original transaction.<\/span><\/p>\n

      <\/span><\/p>\n

      Relevant Statutory Provisions<\/span><\/h2>\n

      <\/span><\/p>\n

      The Tribunal examined several important provisions while deciding the appeal, including:<\/span><\/p>\n

      <\/span><\/p>\n

        <\/p>\n

      • Section 7 of the Insolvency and Bankruptcy Code, 2016<\/strong> governing initiation of the Corporate Insolvency Resolution Process.<\/span><\/li>\n

        <\/p>\n

      • First, Second and Third Provisos to Section 7<\/strong>, introducing the threshold requirement for homebuyers.<\/span><\/li>\n

        <\/p>\n

      • Sections 5(7) and 5(8)<\/strong> defining financial creditor and financial debt.<\/span><\/li>\n

        <\/p>\n

      • Section 2(d) of the Real Estate (Regulation and Development) Act, 2016<\/strong>, defining an allottee.<\/span><\/li>\n

        <\/p><\/ul>\n

        <\/span><\/p>\n

        Why This Judgment Matters<\/span><\/h2>\n

        <\/span><\/p>\n

        The ruling has significant implications for both homebuyers and real estate developers.<\/span><\/p>\n

        <\/span><\/p>\n

        For homebuyers, it confirms that developers cannot alter their legal status simply by issuing unilateral communications or changing accounting entries.<\/span><\/p>\n

        <\/span><\/p>\n

        At the same time, the judgment serves as an important reminder that insolvency proceedings initiated by homebuyers must comply with the statutory threshold prescribed under the Insolvency and Bankruptcy Code.<\/span><\/p>\n

        <\/span><\/p>\n

        For developers, the decision reinforces that the courts will examine the true commercial substance of transactions rather than relying on labels assigned by the parties.<\/span><\/p>\n

        <\/span><\/p>\n

        Conclusion<\/span><\/h2>\n

        <\/span><\/p>\n

        The decision in Abhiyan Developers Private Limited v. Shreepati Build Infra Investment Limited<\/strong> strengthens legal certainty in real estate insolvency disputes.<\/span><\/p>\n

        <\/span><\/p>\n

        By holding that the original nature of a builder-buyer transaction cannot be changed through a temporary accounting arrangement, the NCLAT has protected the statutory rights of homebuyers under RERA and the Insolvency and Bankruptcy Code.<\/span><\/p>\n

        <\/span><\/p>\n

        Equally important, the judgment reiterates that the collective filing requirement introduced by the 2019 amendment is mandatory and cannot be circumvented through creative legal classifications. <\/span>The ruling serves as an important precedent for future insolvency disputes involving delayed real estate projects and clarifies the legal distinction between an allottee and a financial creditor under Indian insolvency law.<\/span><\/p>\n

        <\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

        Abhiyan Developers Pvt. Ltd. v. Shreepati Build Infra Investment Ltd. | A Landmark Ruling on Homebuyers’ Rights Under the Insolvency […]<\/p>\n","protected":false},"author":1,"featured_media":598,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"_joinchat":[],"footnotes":""},"categories":[1],"tags":[],"class_list":["post-593","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"rttpg_featured_image_url":{"full":["https:\/\/mudralegal.com\/blog\/wp-content\/uploads\/2026\/06\/Add-a-heading-27.png",678,325,false],"landscape":["https:\/\/mudralegal.com\/blog\/wp-content\/uploads\/2026\/06\/Add-a-heading-27.png",678,325,false],"portraits":["https:\/\/mudralegal.com\/blog\/wp-content\/uploads\/2026\/06\/Add-a-heading-27.png",678,325,false],"thumbnail":["https:\/\/mudralegal.com\/blog\/wp-content\/uploads\/2026\/06\/Add-a-heading-27-150x150.png",150,150,true],"medium":["https:\/\/mudralegal.com\/blog\/wp-content\/uploads\/2026\/06\/Add-a-heading-27-300x144.png",300,144,true],"large":["https:\/\/mudralegal.com\/blog\/wp-content\/uploads\/2026\/06\/Add-a-heading-27.png",678,325,false],"1536x1536":["https:\/\/mudralegal.com\/blog\/wp-content\/uploads\/2026\/06\/Add-a-heading-27.png",678,325,false],"2048x2048":["https:\/\/mudralegal.com\/blog\/wp-content\/uploads\/2026\/06\/Add-a-heading-27.png",678,325,false]},"rttpg_author":{"display_name":"Mudralegal","author_link":"https:\/\/mudralegal.com\/blog\/author\/mudralegal\/"},"rttpg_comment":0,"rttpg_category":"Uncategorized<\/a>","rttpg_excerpt":"Abhiyan Developers Pvt. 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