Maintainability of Section 7 claims by real estate allottees where consent terms classify them as financial creditors, remand ordered to determine threshold fulfilment.

Maintainability of insolvency initiation by allottees was addressed focusing on whether allottee-claimants are speculative investors and whether settlement/consent terms preclude Section 7-type claims. The consent terms had classified the allottees as financial creditors, undermining the corporate debtor's speculative investor contention, and breach of settlement did not bar the claim. The tribunal remanded the issue of whether the claimants meet the statutory threshold based on number of allotted units for fresh adjudication, permitting the corporate debtor to file additional material and allowing replies; consequential orders were directed if the threshold is found fulfilled and the impugned order was set aside on appeal.

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Issues: (i) Whether Respondent Nos.1 to 6 are speculative investors and therefore not financial creditors entitled to file a Section 7 application; (ii) Whether a Section 7 application can be filed on breach of earlier Consent Terms/settlement; (iii) Whether the Section 7(1) 2nd proviso threshold (100 allottees or 10% of allottees) is fulfilled by the applicants.

Issue (i): Whether Respondent Nos.1 to 6 are speculative investors and thus not financial creditors for the purpose of Section 7.

Analysis: The applicants pleaded registered sale agreements and full payment of consideration; the Corporate Debtor did not dispute applicant status in its reply; entries of leave and license were at instance of Corporate Debtor and arose from inability to deliver possession; the Tribunal relied on factual material showing registered agreements and payments and the earlier Consent Terms referring to the applicants as Financial Creditors.

Conclusion: The Court held that Respondent Nos.1 to 6 are not speculative investors and are Financial Creditors; this submission of the Appellant is rejected (decision in favour of Respondent Nos.1 to 6).

Issue (ii): Whether a Section 7 application can be instituted on account of breach of earlier Consent Terms/settlement.

Analysis: The admitted nature of the underlying debt, the entry into Consent Terms in earlier proceedings, and subsequent breach leading to non-payment were examined; precedents and Tribunal decisions were applied to distinguish cases where a settlement cannot be used to defeat a true debt/default; it was observed that where debt and default were original and settlement was later breached, a fresh Section 7 petition may be maintainable.

Conclusion: The Court held that breach of the Consent Terms does not bar filing a Section 7 application and that the Appellants contention to that effect is without merit (decision in favour of Respondent Nos.1 to 6).

Issue (iii): Whether the applicants satisfy the threshold under Section 7(1) 2nd proviso (jointly not less than 100 allottees or not less than 10% of total allottees) such that the Section 7 petition was maintainable.

Analysis: The statutory threshold is mandatory and requires a positive finding; the Adjudicating Authority concluded threshold met on basis that Corporate Debtor failed to produce proof of other allotments, but both parties produced additional materials on appeal (including RERA information and competing lists of allotments) which were not before the Adjudicating Authority; in view of conflicting and additional material, the Tribunal found that the Adjudicating Authority should determine the threshold afresh after considering all relevant evidence and hearing the parties.

Conclusion: The Court remanded the matter to the Adjudicating Authority to decide, after permitting additional evidence and hearing, whether the Section 7(1) 2nd proviso threshold is fulfilled by the applicants; no other issue was to be remitted (decision: remand for fresh consideration).

Final Conclusion: The appeal is allowed, the impugned admission order is set aside and the matter is remitted to the Adjudicating Authority for expeditious fresh determination solely on whether the applicants meet the statutory threshold under Section 7(1) 2nd proviso; other issues already decided in favour of the applicants need not be reconsidered.

Ratio Decidendi: A Section 7 petition by allottees under the 2nd proviso to Section 7(1) requires a positive finding that the applicants meet the statutory numerical threshold (100 allottees or 10% of total allottees); where material relevant to that determination was not before the Adjudicating Authority or conflicting evidence exists, the proper course is to remit for fresh consideration after permitting parties to place relevant evidence and be heard.

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