2026 (2) TMI 192 - SC - IBC

Threshold for allottee claims in insolvency and delivery of possession in leasehold projects upheld where debt and default established

Threshold for allottee claims in insolvency and delivery of possession in leasehold projects turned on proof of financial debt and corresponding default; ... Threshold requirement for allottees under the second proviso to Section 7(1) - Existence of financial debt and corresponding default for initiation u/s 7 - Joint/group insolvency proceedings against related corporate debtors - Effect of registration under Rule 28 of the NCLT Rules, 2016 on amendment/substitution of parties in a returned petition - Requirement of tripartite sublease/occupancy certificate for lawful delivery of possession in leasehold real estate projects - Whether the threshold limit of 100 allottees prescribed by the second proviso to Section 7(1) of the Code stood fulfilled in the case on hand - HELD THAT:- ‘Handing over/Taking over of possession’ letters issued by Bhasin Ltd. in favour of allottees, recording delivery of possession of particular units, have been placed on record. However, we find that some of those letters pertain to the 1st floor of the building, with which the petitioning allottees in the company petition have no concern. Those letters, therefore, do not further the case of the appellants. A letter was issued in relation to a unit on the 7th floor in favour of one Sheetal Badhwar but the undertaking of that allottee records that the sublease deed with the UPSIDA was yet to be executed. Further, notional possession letters were also issued to allottees, which are of no significance whatsoever. These so-called letters of actual delivery of physical possession, in our considered opinion, have no legal import given the categorical stipulation by the UPSIDA in its allotment letter and also the lease deeds that physical possession should not be delivered to allottees without execution of the tripartite sublease deeds. Though we would have ordinarily restricted the scope of enquiry in this regard to documents prior to the date of admission of the company petition and which formed part of the record before the NCLT, we may note that the appellants secured an interim order from the NCLAT on 07.12.2023 by claiming that the construction was complete and that the units were ready to occupy. This interim order continued to operate for nearly two years thereafter. It was during the pendency of the proceedings that the NCLAT undertook the exercise of verifying this claim of the appellants and appointed an Observer to visit the premises and submit a report as to the situation actually obtaining. It was pursuant thereto that the Observer’s Report dated 15.05.2025 came to be filed before the NCLAT leading to the dismissal of the appeals on 29.10.2025. We are, therefore, of the opinion that this report also warrants examination. Viewed thus in totality, the contention of the appellants that the construction was completed in all respects and possession was delivered to some of the petitioning allottees is found to be without merit and factual foundation. Notwithstanding the letters and documents sought to be relied upon in that regard, the ground reality is otherwise. Neither has the construction been completed nor could possession of units be delivered to the allottees without fulfilling all necessary formalities in that regard after completion of the building in all respects. On the above analysis, we hold that the company petition instituted under Section 7 of the Code against both the corporate debtors by the allottees of 103 units was maintainable on all counts. The petitioning allottees duly established their financial debt and also the default in connection therewith, inasmuch as the units for which they had paid valuable consideration were not made ready and delivered to them till date. We, accordingly, find no error having been committed either by the NCLT in admitting the company petition or by the NCLAT in confirming the same in appeal. Hence, Civil Appeal are bereft of merit and deserve to be dismissed. Issues: (i) Whether the threshold of not less than one hundred allottees prescribed by the second proviso to Section 7(1) of the Insolvency and Bankruptcy Code, 2016 was satisfied in the company petition; (ii) Whether a single company petition could be maintained for initiating insolvency proceedings jointly against two separate corporate entities that are connected in the project; (iii) Whether an application filed after judgment was reserved offering to deposit a sum to settle certain allottee claims warranted acceptance and interference with the NCLAT's rejection of that application.Issue (i): Whether the threshold of one hundred allottees under the second proviso to Section 7(1) of the Code was met.Analysis: The ascertainment of the minimum number of allottees is to be made as on the date of presentation/filing of the petition. Amendments to the petition made while the petition was returned for curing defects are governed by the NCLT Rules and registration occurs only after such defects are cured; changes made prior to registration do not vitiate the petition. Evidence before the tribunals, including payment receipts and lack of documentary proof of pre-filing settlements, and fact-finding reports on completion, were considered in assessing whether petitioning allottees established financial debt and default.Conclusion: The threshold requirement of one hundred allottees was satisfied. This conclusion is against the appellants and in favour of the respondents.Issue (ii): Whether a single joint company petition against two corporate entities engaged in the same project was maintainable.Analysis: The relevant contractual documents, marketing/agency arrangements, interlinkages of management and common dealings with allottees, and prior decisions recognizing joint insolvency of closely connected companies inform the assessment of maintainability. NCLT/NCLAT practice permits a consolidated petition where companies are shown to be closely connected in the development and implementation of the project to protect value maximization and allottees' interests.Conclusion: A joint company petition against the two connected corporate entities was maintainable. This conclusion is against the appellants and in favour of the respondents.Issue (iii): Whether the post-reservation offer to deposit funds to settle certain allottee claims should have been accepted and whether the NCLAT erred in rejecting that offer.Analysis: The offer was premised on a factual premise that was not substantiated on the record and conflicted with the findings on threshold, existence of financial debt, default, and incompleteness of construction as supported by fact-finding reports. Acceptance of the offer could not be justified in the circumstances and after the reserved adjudication and evidence considered by the tribunals.Conclusion: The rejection of the post-reservation offer was justified. This conclusion is against the appellant who made the offer and in favour of the respondents.Final Conclusion: The appeals challenging admission of the company petition and the rejection of the post-reservation deposit offer lack merit and the impugned orders are to be sustained, resulting in dismissal of the appeals.Ratio Decidendi: The threshold of petitioning allottees under Section 7(1) of the Code is to be determined as on the date of filing; amendments made while a petition is returned for curing defects are permissible prior to registration under NCLT Rules; and a joint company petition is maintainable where corporate entities are closely connected in a real estate project so as to protect value maximization and allottees' interests.