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Issues: (i) Whether the claim based on the consent decree and allotment of built-up area constituted a financial debt under the Insolvency and Bankruptcy Code, 2016. (ii) Whether there was a default sufficient to trigger proceedings under section 7 of the Insolvency and Bankruptcy Code, 2016.
Issue (i): Whether the claim based on the consent decree and allotment of built-up area constituted a financial debt under the Insolvency and Bankruptcy Code, 2016.
Analysis: The statutory definition of financial debt requires disbursal against consideration for the time value of money, and the inclusive part of section 5(8)(f) extends it to amounts raised under transactions having the commercial effect of borrowing. The explanation deems amounts raised from an allottee under a real estate project to be such borrowing. On the facts, the allotment of built-up area arose from a consent decree and settlement terms, not from any amount raised from the applicant as an allottee in a real estate project. The arrangement was treated as compensation for use of money and not as a disbursal by the applicant for funding the project.
Conclusion: The claim did not amount to a financial debt and this issue was decided against the appellant.
Issue (ii): Whether there was a default sufficient to trigger proceedings under section 7 of the Insolvency and Bankruptcy Code, 2016.
Analysis: Default under section 3(12) requires non-payment of a debt that has become due and payable. The materials showed that execution of the consent decree had been held premature and the time for performance under the settlement had not arrived. In that situation, even assuming the existence of some debt, the non-allotment alleged by the applicant did not establish a default under the Code.
Conclusion: No default was made out and this issue was decided against the appellant.
Final Conclusion: The appeal failed because the applicant did not establish either a financial debt or a legally cognisable default under the insolvency framework.
Ratio Decidendi: For section 7 of the Insolvency and Bankruptcy Code, 2016 to be invoked, the claimant must show a financial debt disbursed for time value of money and a default of a debt that has become due and payable; a settlement-based right to receive built-up area, without money being raised from the claimant as an allottee in a real estate project, does not satisfy that test.
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