Home-buyer insolvency rights prevail where debtor records prove default, collusion fails, and rejected settlement cannot displace CIRP.
A home-buyer Section 7 application was held within limitation where the corporate debtor's audited balance sheet treated customer advances as current liabilities, and its balance confirmation acknowledged the dues; the later filing was not defeated by withdrawal of an earlier application, especially with COVID-19 exclusion applied. Allegations of collusion and dummy allotment were rejected because inter se shareholder disputes could not displace the home-buyers' statutory remedy, and the stalled project with long-delayed possession supported the claim. A promoter settlement proposal could not override the admitted insolvency process, since the CoC's rejection was neither arbitrary nor irrational.
Issues: (i) Whether the Section 7 application filed by the home-buyers was barred by limitation. (ii) Whether the Section 7 application was collusive or filed by dummy allottees. (iii) Whether the settlement proposal offered by the promoters could displace the admitted insolvency process.
Issue (i): Whether the Section 7 application filed by the home-buyers was barred by limitation.
Analysis: The audited balance sheet reflected advances from customers against flat bookings as current liabilities, and the balance confirmation letter issued by the corporate debtor acknowledged the outstanding dues. Read with the date of default computed from the allotment letters and the exclusion of the COVID-19 period, these materials established that the home-buyers had an enforceable debt claim within time. The withdrawal of the earlier application did not defeat the subsequent filing when the later application was otherwise within limitation.
Conclusion: The limitation defence failed and the Section 7 application was held to be within time.
Issue (ii): Whether the Section 7 application was collusive or filed by dummy allottees.
Analysis: The dispute between the two shareholder factions could not be used to impeach the home-buyers' statutory remedies, because the home-buyers were not parties to the memorandum of understanding or its alleged cancellation. The record showed that the project had stalled, possession had not been delivered for years, and the corporate debtor had itself acknowledged the dues. In these circumstances, the allegation of connivance was not substantiated, and the claim that the allottees were speculative or dummy purchasers was rejected.
Conclusion: The allegation of collusion and dummy allotment was rejected.
Issue (iii): Whether the settlement proposal offered by the promoters could displace the admitted insolvency process.
Analysis: The proposed settlement was considered and rejected by the Committee of Creditors, whose commercial judgment was found neither arbitrary nor irrational. The home-buyers had lost confidence in both shareholder groups because of prolonged delay and the stalled project, and they were entitled to proceed under the Insolvency and Bankruptcy Code rather than be compelled to accept a private settlement. The promoter proposal was viewed as an attempt to retain control over the project rather than a basis to undo the admitted default.
Conclusion: The settlement proposal did not warrant interference with the admission of insolvency proceedings.
Final Conclusion: The admission of the Section 7 petition was upheld, the challenge to limitation and collusion failed, and the insolvency resolution process was directed to continue in accordance with law.
Ratio Decidendi: A home-buyer Section 7 application is maintainable when debt and default are evidenced by the corporate debtor's records and acknowledgments, and inter se disputes among shareholders cannot defeat the creditors' statutory right to trigger insolvency; a rejected settlement proposal does not override the Committee of Creditors' commercial decision absent arbitrariness.
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