Real estate insolvency: joint Section 7 petition, filing-date allottee threshold, and incomplete project supported default findings.

A joint Section 7 insolvency petition by real estate allottees was maintainable against two closely connected corporate debtors where the project was treated as an integrated development and the documents showed common participation. The 100-allottee threshold under the second proviso to Section 7(1) was assessed on the filing date, and refiling changes made while defects were being cured did not vitiate the petition. Possession could not negate financial debt or default absent completion and the required occupancy-related formalities; as substantial construction and lawful completion certificates were lacking, default remained established and the insolvency admission was sustained.

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Issues: (i) whether a company petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by allottees of a real estate project could be maintained jointly against two corporate debtors; (ii) whether the minimum threshold of 100 allottees under the second proviso to Section 7(1) stood satisfied and whether changes made in the array of petitioners while refiling after defects were cured vitiated the petition; and (iii) whether the project stood completed with possession lawfully deliverable so as to negate financial debt and default.

Issue (i): whether a company petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by allottees of a real estate project could be maintained jointly against two corporate debtors.

Analysis: The project was found to be a single integrated real estate project in which both corporate entities were closely connected. The original allotment of the land stood in favour of one company, and the later arrangement conferred marketing rights on the other company. The materials showed interchangeability in communications, demand notices, possession letters and receipts, and the allotment documentation contemplated execution of tripartite sublease deeds only after completion. In these circumstances, the joint petition was not treated as impermissible merely because two corporate entities were proceeded against together.

Conclusion: The joint petition against both corporate debtors was maintainable.

Issue (ii): whether the minimum threshold of 100 allottees under the second proviso to Section 7(1) stood satisfied and whether changes made in the array of petitioners while refiling after defects were cured vitiated the petition.

Analysis: The relevant date for testing the statutory threshold was the date of filing of the petition, not the date of admission. No reliable documentary material established that the alleged settlements or withdrawals had occurred before filing. The petition, as originally instituted and then refiled after removal of defects, disclosed allottees of 103 units. Changes made while the petition remained unregistered and was being refiled after defect correction were permissible under the NCLT Rules and did not amount to an abuse of process.

Conclusion: The threshold requirement was satisfied and the refiling amendments did not invalidate the petition.

Issue (iii): whether the project stood completed with possession lawfully deliverable so as to negate financial debt and default.

Analysis: The allotment letter, lease terms and the building regulations required completion and an occupancy-related formal completion before possession could be handed over, and the tripartite sublease deeds were a precondition. The record, including the status and observer reports, showed that substantial construction remained incomplete, that basic amenities were missing on several floors, and that no valid completion or occupancy certificate for the full project had been issued. The letters relied upon by the appellants were treated as insufficient to establish lawful, fit-for-occupation possession. The allottee payments therefore remained linked to an undelivered built-up space, supporting the existence of financial debt and default.

Conclusion: The project was not complete and default was established.

Final Conclusion: The insolvency admission was held to be legally sustainable on all material grounds, and the challenge to the rejection of the settlement deposit offer also failed.

Ratio Decidendi: In a real estate insolvency, a joint Section 7 petition against closely connected corporate entities is maintainable where the project is integrated and the documents show common participation, the allottee threshold is tested on the filing date, and possession cannot defeat default unless completion and the legally required occupancy formalities are established.

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