Financial debt under IBC excluded landowner collaborators in a development project, leaving no basis for a Section 7 insolvency petition.

Amounts raised from an allottee in a real estate project are deemed to have the commercial effect of borrowing under Section 5(8)(f) IBC, but that protection was applied to homebuyers rather than landowners under a development collaboration arrangement. On the stated facts, the applicants retained legal possession, supervisory rights, approval control, escrow participation, and received project area as consideration, so they were treated as promoters or co-venturers, not allottees under RERA. Their claim therefore did not amount to a financial debt under Section 5(8)(f), and a Section 7 petition would not be maintainable on that basis.

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Issues: Whether the applicants' claim arising from a collaboration agreement for development of commercial colony land constitutes a financial debt under Section 5(8)(f) of the Insolvency and Bankruptcy Code, 2016, so as to sustain a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The claim was examined in the context of the explanation to Section 5(8)(f), under which amounts raised from an allottee in a real estate project are deemed to have the commercial effect of borrowing. The agreement showed that the applicants retained legal possession, had supervisory rights over construction, controlled approvals, shared escrow arrangements, and received consideration in the form of project area rather than as homebuyers paying sale consideration. The definition of allottee under Section 2(d) of the Real Estate (Regulation and Development) Act, 2016 was read along with the statutory meaning of real estate project under Section 2(zn) of that Act. On that basis, landowners participating in such a development arrangement were treated as promoters or co-venturers, not allottees. The amendment to Section 5(8)(f) was held to protect homebuyers, not landowners in a development collaboration.

Conclusion: The applicants were not allottees and the amount claimed did not constitute a financial debt under Section 5(8)(f) of the Insolvency and Bankruptcy Code, 2016. The petition under Section 7 was therefore not maintainable.

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