Introduction

The Hon’ble National Company Law Tribunal, Mumbai, in the matter of Akme Sarvodaya Dreamventures LLP and Ors. v. Megha Agrawal Company Appeal No. 10 of 2024 in Company Petition No. (IB) 3683 of 2018 [1] (NCLT Mumbai, order dated 20 April 2026), has clarified that a statutory charge created in favour of a buyer who has paid money towards the purchase of property and is in anticipation of delivery would constitute a “security interest” under Section 3(31) of the Insolvency and Bankruptcy Code, 2016 (“IBC”), even where such buyer is not reflected as a charge-holder in the records of the Registrar of Companies (“ROC”), CERSAI, or any Information Utility.

The significance of the Tribunal’s view lies in its recognition that a charge need not always arise from a contractual security document or formal registration. A charge may also arise by operation of law, and where the statute itself creates such charge, the absence of registration in repositories cannot defeat the underlying substantive right.

The reasoning for the above is pursuant to the Tribunal’s view that a statutory charge arises by operation of Section 55(6)(b) of the Transfer of Property Act, 1882 (“TOPA”).

The Statutory Foundation: Section 55(6)(b) of TOPA

Section 55(6)(b) of TOPA [2] provides that a buyer of immovable property is entitled, unless he has improperly declined delivery, to a charge on the property, as against the seller and all persons claiming under him, for the amount of any purchase money properly paid in anticipation of delivery, and for interest on such amount. This is not a contractual right. It arises by operation of law the moment any part of the purchase money is paid.

Section 100 of the TOPA [3] further provides that where immovable property is made security for payment of money, and the transaction does not amount to a mortgage, the person has a charge on the property and the principles applicable to a simple mortgage apply to such charge.

The Hon’ble Supreme Court of India, in Delhi Development Authority v. Skipper Constructions Co. (P) Ltd., (2000) 10 SCC 130 [4], clarified that the buyer’s charge under Section 55(6)(b) is a statutory charge, distinct from a contractual charge, and enforceable not only against the seller but also against all persons claiming under him. Importantly, the Hon’ble Supreme Court further held that where the charged property is converted into another form, the charge follows the substituted security, applying the same principle as in the case of mortgages.

Further, in Videocon Properties Ltd. v. Dr. Bhalchandra Laboratories, (2004) 3 SCC 711 [5], the Hon’ble Supreme Court reinforced that the statutory charge, attaches to the property, for the buyer’s benefit, the moment any purchase money is paid, and is lost only in the event of the buyer’s own default or improper refusal to accept delivery. The buyer is entitled to enforce the charge even against third parties and trace it into substituted securities.

From “Charge” to “Secured Creditor” in IBC: Judicial recognition

Section 3(31) of the IBC [4] defines “security interest” broadly as a right, title, interest, or claim to property, created in favour of, or provided for, a secured creditor by a transaction which secures payment or performance of an obligation, and explicitly includes “mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment.”

Section 3(30) defines a “secured creditor” as a creditor in whose favour such security interest is created. The inclusion of “charge” within this definition is deliberate and unqualified. No distinction is drawn between a charge created by contract, by registration, or by statute.

The practical difficulty lies in establishing proof of the same. Regulation 21 of the IBBI (Liquidation Process) Regulations, 2016 [7] permits a secured creditor to prove the existence of its security interest through:

  • Information Utility records, a certificate of registration of charge from the Registrar of Companies, or
  • proof of registration with CERSAI.

A statutory charge arising under Section 55(6)(b) of the TOPA will usually not be reflected in the repositories contemplated under Regulation 21, since such charge comes into existence by operation of law and not by any separate act of registration. Regulation 21, being a subordinate legislation, cannot be construed in a manner that narrows the substantive scope of Section 3(31) of the IBC, which expressly includes a “charge” within the definition of security interest. Regulation 21 prescribes recognised modes of proof of security interest; it does not lay down exhaustive conditions for the existence of such security interest.

The Hon’ble Supreme Court has already recognised that statutory charges create “secured creditor” status under the IBC. In Greater Noida Industrial Development Authority v. Prabhjit Singh Soni, (2024) 6 SCC 767 [8], the Court held that Greater Noida Authority, which had a statutory charge over the assets of the corporate debtor by virtue of Section 13A of the U.P. Industrial Area Development Act, 1976, was a secured creditor. The Court set aside the approved resolution plan because it had failed to classify the said authority as a secured creditor, holding that this omission meant that the plan did not meet the requirements of Section 30(2) of the IBC.

The NCLAT applied the same reasoning in Kolkata Municipal Corporation v. Gajesh Labhchand Jain, Liquidator of Talwalkars Better Value Fitness Ltd., 2025 SCC OnLine NCLAT 1565 [9], holding that a statutory charge under the Kolkata Municipal Corporation Act made the corporation a secured creditor of the corporate debtor.

In Akme Sarvodaya Dreamventures LLP (supra) the buyers (Appellants therein) had challenged their classification as an unsecured creditor by the Liquidator when they had paid Rs. 17.5 crores as purchase consideration for immovable property under an agreement to sell to the Corporate Debtor. The Corporate Debtor was admitted into Corporate Insolvency Resolution Process under the provisions of IBC before conveying the property to the buyers/ appellants. The reasoning for the classification of the buyers as unsecured creditor was that “ no security interest could be found in Information Utility records, ROC filings, or CERSAI”.

The Tribunal reversed the classification of ‘unsecured creditor’ by virtue of Section 55(6)(b) of the TOPA with Section 3(31) of the IBC, and relying on Skipper Constructions, Videocon Properties, and the Greater Noida line of authorities, and held that, “a statutory charge is created in favour of the buyer, the moment purchase money is paid, and such buyer is entitled to be treated as a secured creditor for the amount paid towards purchase of the property and cannot be relegated to the status of an unsecured creditor merely because such charge is not reflected with the concerned registries”. The secured status was, however, limited to the amount actually paid and evidenced on record, and not for any claim of interest which is not provided for under the contract documents.

The Emerging Principle and Its Limits

The principle emerging from these decisions are clear. Where a statute creates a charge by operation of law, and the law treats such charge, the same as a mortgage, that charge falls within the scope of “security interest” under Section 3(31) of the IBC, with the result that the charge-holder is a secured creditor under Section 3(30). This position is not contingent on registration in terms of Regulation 21. The right flows from the statute, while Regulation 21 merely provides recognised modes of proof and cannot be read as limiting the existence of substantive security interests created by law.

Accordingly, charges arising by operation of law must be recognised in insolvency proceedings, and creditors holding such charges must be classified as secured creditors to the extent of the amounts duly paid

A similar position would, in principle, apply even during CIRP, since the status of a person as a secured creditor flows pursuant to the provisions of Section 55(6)(b) of the TOPA read with Sections 3(30) and 3(31) of the IBC. If a statutory charge constitutes a “security interest” under the IBC, the holder of such charge would, as a matter of principle, be entitled to assert its status as a secured creditor even in CIRP.

This is notwithstanding the fact that Regulation 21 applies only in liquidation and there is no corresponding provision under the CIRP Regulations. In this regard, the judgment of the Hon’ble Supreme Court in Greater Noida supports the proposition that a statutory charge can be recognised as conferring secured creditor status even at the CIRP stage.

Conclusion

The order in Akme Sarvodaya Dreamventures LLP (supra) marks an important development in the treatment of persons who have paid consideration towards immovable property but have not received conveyance of title before commencement of insolvency proceedings. The Tribunal has recognised that the buyer’s charge arising under Section 55(6)(b) of the TOPA is a statutory charge and, when read with Sections 3(30) and 3(31) of the IBC, confers the status of a secured creditor to the extent of the amounts paid. This recognition is of considerable significance in the context of the growing number of CIRP and liquidation proceedings involving real estate companies, where the rights of homebuyers, allottees, and other buyers are affected and jeopardised despite substantial payments having already been made.

The practical importance of the ruling lies in the fact that it dispels the conventional position that such buyers must be treated as unsecured creditors merely because no separate security document exists or no charge is reflected in the records of the ROC, CERSAI, or any Information Utility. The order recognises that where the law itself creates a charge, the absence of formal registration cannot defeat the underlying substantive right. In that sense, this order is a potentially game-changing development in the evolving insolvency jurisprudence concerning statutory charges and buyer’s protection, in so far as real estate insolvencies are concerned.

References

  1. https://ibclaw.in/akme-sarvodaya-dreamventures-llp-and-ors-vs-megha-agrawal-nclt-mumbai-bench/
  2. https://ibclaw.in/section-55-rights-and-liabilities-of-buyer-and-seller/
  3. https://ibclaw.in/section-100-charges/
  4. Delhi Development Authority v. Skipper Constructions Co. (P) Ltd., (2000) 10 SCC 130
  5. Videocon Properties Ltd. v. Dr. Bhalchandra Laboratories, (2004) 3 SCC 711
  6. https://ibclaw.in/section-3-definitions-under-insolvency-and-bankruptcy-code-2016-ibc-2016-part-i-preliminary/
  7. https://ibclaw.in/liquidation-process-regulation-21-of-ibbi-liquidation-process-regulations-2016-proving-security-interest/
  8. Greater Noida Industrial Development Authority v. Prabhjit Singh Soni, (2024) 6 SCC 767
  9. Kolkata Municipal Corporation v. Gajesh Labhchand Jain, Liquidator of Talwalkars Better Value Fitness Ltd., 2025 SCC OnLine NCLAT 1565

Authors:

Petrushka Deas Dasgupta, Partner

Krishna Baruah, Principal Associate

Devdatta Uchil, Associate

Disclaimer:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.