Real estate allottee as financial creditor: unpaid commercial space dues supported admission of the insolvency petition.

Money paid by an allottee for commercial space in a real estate project is treated as having the commercial effect of borrowing, so the allottee qualifies as a financial creditor and the payment constitutes financial debt under the Insolvency and Bankruptcy Code. On the facts, the agreement, supplementary arrangement, payment records and the corporate debtor's admissions showed that possession had not been delivered and part of the dues remained unpaid; objections based on a memorandum of understanding did not displace the admitted liability. With debt, default and a complete section 7 application established, the insolvency petition was admitted and CIRP, moratorium and appointment of an interim resolution professional followed.

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Issues: (i) Whether an allottee of commercial space under a real estate project is a financial creditor and the amount paid by such allottee constitutes financial debt under the Insolvency and Bankruptcy Code, 2016. (ii) Whether the corporate debtor committed default in repayment of the amount due, warranting admission of the application under section 7 of the Code.

Issue (i): Whether an allottee of commercial space under a real estate project is a financial creditor and the amount paid by such allottee constitutes financial debt under the Insolvency and Bankruptcy Code, 2016.

Analysis: The amount was raised from the applicant as consideration for allotment of commercial space in a real estate project. The statutory scheme treats amounts raised from allottees in a real estate project as having the commercial effect of borrowing, and the applicant therefore falls within the definition of a financial creditor. The reasoning is supported by the amended definition of financial debt and the settled position that real estate allottees can invoke the insolvency process as financial creditors.

Conclusion: The applicant was held to be a financial creditor, and the amount paid for the commercial space was held to constitute financial debt.

Issue (ii): Whether the corporate debtor committed default in repayment of the amount due, warranting admission of the application under section 7 of the Code.

Analysis: The agreement, supplementary arrangement, payment records and the corporate debtor's own admissions showed that possession had not been handed over and that part of the amount remained unpaid. The objections regarding the memorandum of understanding did not negate the admitted liability. Once debt and default were established and the application was otherwise complete, admission followed under the Code.

Conclusion: Default in repayment was established and the section 7 application was admitted.

Final Conclusion: The corporate insolvency resolution process was directed to commence against the corporate debtor, an interim resolution professional was appointed, and moratorium and related statutory consequences were ordered to follow.

Ratio Decidendi: An allottee under a real estate project is a financial creditor where the money paid has the commercial effect of borrowing, and once financial debt, default, and a complete section 7 application are established, admission of the insolvency petition must follow.

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