Financial debt in real estate allotments exists, but insolvency fails without proved default by the corporate debtor.

Amounts raised from an allottee in a real estate project have the commercial effect of borrowing and may constitute financial debt under the Insolvency and Bankruptcy Code, so the petitioner was treated as a financial creditor. However, the agreement required payment of the balance consideration within one year, and the petitioner failed to pay within that period. On those facts, the respondent's cancellation of the allotment followed the petitioner's non-performance, and no default by the respondent in repayment of financial debt was proved. Because the foundational requirement of financial default was absent, the insolvency petition was not maintainable and no relief could be granted.

---

---

Issues: (i) Whether the petitioner was a financial creditor of the respondent; (ii) Whether the respondent defaulted in payment of financial debt; and (iii) Whether the petition was maintainable and the petitioner was entitled to relief.

Issue (i): Whether the petitioner was a financial creditor of the respondent.

Analysis: The agreement for purchase of flats in the respondent's residential development fell within the concept of a real estate project. Amounts raised from an allottee in such a project are treated as having the commercial effect of borrowing. A person to whom such debt is owed qualifies as a financial creditor under the Insolvency and Bankruptcy Code. The petitioner's position was therefore examined under the Code, and the nature of consumer status was held to be unnecessary for this determination.

Conclusion: The petitioner was a financial creditor, and this issue was answered in favour of the petitioner.

Issue (ii): Whether the respondent defaulted in payment of financial debt.

Analysis: The agreement required the petitioner to pay the balance consideration within one year, irrespective of construction progress or later clearances. The petitioner did not pay the full agreed amount within the stipulated period. In consequence, the respondent's later cancellation of allotment and termination of the agreement were treated as arising from the petitioner's non-performance. On these facts, the respondent was not held to have defaulted in repayment of any financial debt to the petitioner.

Conclusion: The respondent did not default in payment of financial debt, and this issue was answered against the petitioner.

Issue (iii): Whether the petition was maintainable and the petitioner was entitled to relief.

Analysis: Since no financial default by the respondent was established, the foundational requirement for initiation of corporate insolvency resolution process was absent. The petition therefore could not succeed, and no relief under the proceeding was warranted.

Conclusion: The petition was not maintainable on the proved facts, and no relief was granted to the petitioner.

Final Conclusion: The insolvency application failed because the respondent was not shown to be in default of a financial debt owed to the petitioner, notwithstanding the petitioner's status as a financial creditor.

Ratio Decidendi: Amounts raised from an allottee in a real estate project constitute financial debt having the commercial effect of borrowing, but insolvency proceedings cannot be initiated unless default by the corporate debtor is established on the facts.

---