Real estate allottees as financial creditors can trigger insolvency where booking payments remain unpaid and default is shown.

Amounts raised from allottees in a real estate project were treated as financial debt because they had the commercial effect of borrowing under the Insolvency and Bankruptcy Code, 2016. On proof of unit booking, disbursal of consideration, and non-refund despite the lapse of time, the applicants were recognised as financial creditors and the corporate debtor's default in repayment was established. The Section 7 application was complete, including the consent and disclosures of the proposed interim resolution professional, and the statutory conditions for admission under Section 7(5)(a) were satisfied. The application was admitted and corporate insolvency resolution process was initiated.

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Issues: Whether the applicants, being allottees under a real estate project, were financial creditors entitled to invoke Section 7 of the Insolvency and Bankruptcy Code, 2016, and whether the application disclosed a default warranting admission of the corporate insolvency resolution process.

Analysis: The amount raised from allottees under a real estate project falls within the inclusive definition of financial debt because it is deemed to have the commercial effect of borrowing. Once the applicants established booking of units, disbursal of consideration and non-refund of the amounts despite lapse of time, they satisfied the status of financial creditors. The application in Form I was found complete, the proposed interim resolution professional had furnished the required consent and disclosures, and the material on record showed that the corporate debtor had defaulted in repayment of the financial debt beyond the statutory threshold. On these findings, the statutory conditions for admission under Section 7(5)(a) were met.

Conclusion: The applicants were held to be financial creditors, and the application under Section 7 was admitted for commencement of corporate insolvency resolution process.

Final Conclusion: The proceeding resulted in admission of the insolvency petition, appointment of an interim resolution professional, and declaration of moratorium against the corporate debtor.

Ratio Decidendi: Amounts raised from allottees in a real estate project constitute financial debt, and upon proof of default, a complete Section 7 application by such allottees is admissible for initiation of corporate insolvency resolution process.

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