Section 7 insolvency threshold permits CIRP against an interlinked land-owning company despite a pending developer resolution plan.

Where homebuyers established the Section 7 threshold under the Insolvency and Bankruptcy Code, 2016, admission of CIRP against the land-owning company was sustainable because the adjudicating authority had only to verify debt, default and completeness of the application. The pending CIRP and later resolution plan process for the developer company did not bar initiation against the separate but interlinked land-owning company, especially after an earlier binding direction requiring lawful commencement of CIRP against that entity before consolidation could be considered. The admission order was therefore affirmed and both appeals failed.

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Issues: (i) Whether the initiation of CIRP against the land-owning company was sustainable in the facts of the case and in light of the earlier direction requiring consideration of CIRP of that company before consolidation with the developer company; (ii) Whether the pending approval of the successful resolution applicant's plan for the developer company barred initiation of CIRP against the land-owning company.

Issue (i): Whether the initiation of CIRP against the land-owning company was sustainable in the facts of the case and in light of the earlier direction requiring consideration of CIRP of that company before consolidation with the developer company?

Analysis: The earlier order had held that the land-owning company and the developer company had interwoven assets and common control, and that meaningful resolution of the housing project required the land asset to be brought within insolvency proceedings through lawful initiation of CIRP against the land-owning company, followed by consideration of consolidation. The homebuyers had established the statutory threshold under Section 7 of the Insolvency and Bankruptcy Code, 2016, and the adjudicating authority was only required to verify debt, default, and completeness of the application. In such circumstances, the pending CIRP of the developer company did not furnish a legal bar to admission of the Section 7 application against the land-owning company.

Conclusion: The initiation of CIRP against the land-owning company was upheld.

Issue (ii): Whether the pending approval of the successful resolution applicant's plan for the developer company barred initiation of CIRP against the land-owning company?

Analysis: The resolution plan for the developer company could not override the earlier binding judicial direction or substitute for the statutory requirement that the land-owning company first enter CIRP before any consolidated or joint resolution could be considered. The approval of the plan by the committee of creditors, and its pendency before the adjudicating authority, did not prevent admission of a fresh Section 7 proceeding where debt and default were shown. The proposed merger in the plan did not displace the statutory scheme and could not defeat creditor remedies available under the Code.

Conclusion: The pending resolution plan did not bar commencement of CIRP against the land-owning company.

Final Conclusion: The impugned order admitting the Section 7 application was affirmed, and both appeals failed.

Ratio Decidendi: Where debt, default, and maintainability under Section 7 of the Insolvency and Bankruptcy Code, 2016 are established, a pending resolution plan for a related company cannot prevent initiation of CIRP against a separate but interlinked corporate debtor, especially where an earlier binding order requires lawful commencement of CIRP against that entity before consolidation.

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