Allottee threshold under insolvency law applies to assured return claims linked to real estate allotments

A commercial space allottee in a real estate project remains an allottee for insolvency purposes even where the investment carries an assured return clause. The second proviso to Section 7(1) of the Insolvency and Bankruptcy Code, read with the allottee concept under the Real Estate (Regulation and Development) Act through Section 5(8)(f) of the Code, applies to such claims where the underlying relationship is still based on the allotment. A separate MOU or assured return characterisation cannot be used to bypass the statutory threshold for filing a Section 7 application. Where the application is not filed by the requisite number of allottees, it is not maintainable.

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Issues: Whether the Section 7 application filed by the appellants was maintainable in view of the amended threshold applicable to allottees in a real estate project, and whether persons invested under an assured return arrangement could avoid that threshold by characterising their claim as arising from a separate MOU.

Analysis: The applicable framework was the second proviso to Section 7(1) of the Insolvency and Bankruptcy Code, 2016, read with the definition of allottee under the Real Estate (Regulation and Development) Act, 2016 through Section 5(8)(f) of the Insolvency and Bankruptcy Code, 2016. On that basis, a commercial space allottee in a real estate project remains an allottee even if the investment carries an assured return clause. The asserted distinction between an allotment and an assured return arrangement was held to be artificial because the appellants continued to derive their status from the real estate allotment and therefore remained subject to the statutory threshold. Since the application was not filed by the requisite number of allottees, it failed the maintainability requirement.

Conclusion: The Section 7 application was not maintainable and the challenge to the impugned order failed.

Ratio Decidendi: A financial creditor who is also an allottee in a real estate project cannot bypass the collective filing threshold under the second proviso to Section 7(1) of the Insolvency and Bankruptcy Code, 2016 by relying on an assured return agreement if the claim remains rooted in the allotment relationship.

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