Project-specific insolvency limits Section 7 default to due interest and confines CIRP to the concerned real estate project.

The Section 7 default had to be confined to unpaid quarterly interest, because the debenture trust deed had extended principal redemption to 30.06.2024 and the principal amount was not yet due when the application was filed; the larger principal claim was therefore incorrect. Debt and default were nevertheless proved through repeated non-payment, the demand notice, and information utility authentication, and payment during pendency did not erase the existing default. In a real estate financing arrangement where the debenture deed, security package, and monitoring rights were project-specific, project-wise insolvency was permissible, so CIRP could be restricted to the concerned project alone and not extend to unrelated projects of the corporate debtor.

---

---

Issues: Whether the default for Section 7 purposes was confined to the interest demand of Rs. 29,72,29,959/- or whether the entire debenture amount could be treated as in default; whether debt and default were proved; whether subsequent payment during pendency cured the default; whether project-wise insolvency is permissible in a real estate matter; whether the debenture trust deed and securities were project-specific; and whether CIRP had to be confined to the particular project.

Issue: Whether the default for Section 7 purposes was confined to the interest demand of Rs. 29,72,29,959/- or whether the entire debenture amount could be treated as in default

Analysis: The debenture trust deed extended the principal redemption date to 30.06.2024, so the principal amount was not due when the Section 7 application was filed. The default notice of 29.12.2023 demanded only overdue quarterly interest of Rs. 29,72,29,959/- and granted a cure period. The claim in Part IV of the Section 7 application wrongly included the principal amount of Rs. 146 crore, which had not yet become payable and had not been recalled by any subsequent notice.

Conclusion: The default could be treated only as the unpaid interest of Rs. 29,72,29,959/- and not the entire debenture amount; the larger claim was incorrect.

Issue: Whether debt and default were proved and whether subsequent payment during pendency cured the default

Analysis: The record showed repeated non-payment of quarterly coupon interest from 15.03.2022 onward, the demand notice of 29.12.2023, and authentication of the default amount through the information utility certificate. The payments made during pendency did not wipe out the established default and were insufficient to negate the insolvency trigger already in existence on the date of filing.

Conclusion: Debt and default were proved, and the subsequent payment did not cure the default.

Issue: Whether project-wise insolvency is permissible in a real estate matter

Analysis: The binding legal position recognises that real estate insolvency should ordinarily proceed on a project-specific basis to protect solvent projects and stakeholders of other projects. The statutory framework under the Insolvency and Bankruptcy Code and the CIRP Regulations permits project-wise resolution through the resolution process, and does not justify clubbing unrelated projects at the admission stage.

Conclusion: Project-wise insolvency, in the sense of confining CIRP to the concerned project in appropriate real estate cases, is permissible in law.

Issue: Whether the debenture trust deed and securities were project-specific

Analysis: The debenture trust deed identified a specific parcel of land, the project, escrow mechanisms, mortgage, hypothecation, and project monitoring rights. The debenture security, covenants, and no-objection requirements showed that the funds and security package were tied to the identified real estate project and its receivables, later registered as the project in question.

Conclusion: The debenture financing and securities were project-specific.

Issue: Whether CIRP had to be confined to the particular project

Analysis: Since the financing and security related to the identified project, and since project-wise resolution is the governing approach for real estate insolvency, the CIRP could not be allowed to engulf the corporate debtor's unrelated projects. The admission order therefore required modification to limit the insolvency process to the concerned project alone while preserving the insolvency commencement date.

Conclusion: CIRP was required to be confined to the concerned project and not extended to other projects.

Final Conclusion: The appeal succeeded to the extent that the insolvency process was restricted to the identified real estate project, while the admission of CIRP on proof of debt and default was otherwise sustained.

Ratio Decidendi: In a real estate financing arrangement where the debt, security and contractual rights are project-specific, CIRP may be confined to that project and should not extend to unrelated projects of the same corporate debtor; a Section 7 claim must also reflect only the debt that had actually become due and payable on the filing date.

---