advocatemmmohan

A. Insolvency and Bankruptcy Code, 2016 – Section 7 – Real Estate Allottees – Threshold Requirement – Date of Reckoning

(Paras 7–9, 21)

For purposes of the second proviso to Section 7(1) of the Insolvency and Bankruptcy Code, 2016, the threshold of 100 allottees or 10% (whichever is less) must be satisfied as on the date of filing of the application, not on the date of admission or hearing. Subsequent settlements or withdrawals do not dilute maintainability.

Relied on: Manish Kumar v. Union of India.

B. NCLT Rules – Refiling After Defect Cure – Amendment Permissible Prior to Registration

(Paras 22–24)

Under Rule 28 of the National Company Law Tribunal Rules, 2016:

A petition returned for defects may be rectified or amended.
Registration occurs only after curing defects.
Amendments made prior to registration are valid and do not amount to abuse of process.

Relied on: Surendra Trading Company v. Juggilal Kamlapat Jute Mills Co. Ltd..

C. Joint Insolvency Proceedings – Group Corporate Insolvency – Real Estate Projects

(Paras 11, 16–18, 26–27)

Where two corporate entities are intrinsically linked in development, marketing and implementation of a single real estate project, a joint Section 7 petition is maintainable.

Group insolvency is justified to:

Protect allottees,
Maximize asset value,
Prevent fragmentation of resolution.

Relied on:

Edelweiss Asset Reconstruction Company Ltd. v. Sachet Infrastructure Pvt. Ltd.
Mamatha v. AMB Infrabuild Pvt. Ltd.

D. Real Estate Projects – Completion Certificate – Occupancy – Delivery of Possession

(Paras 28–33, 35–36)

Possession cannot be said to be legally delivered where:

Final completion certificate is absent,
Tripartite sublease deeds are not executed,
Occupancy certificate under applicable building regulations is not issued,
Construction is incomplete on factual inspection.

Part-completion certificates and notional possession letters do not establish completion.

E. Financial Debt and Default – Allottees – Established

(Paras 7, 10, 37)

Payments made by allottees for allotted units constitute financial debt under Section 7 IBC. Failure to hand over legally valid possession amounts to default.

F. Offer to Settle After Reservation of Judgment – No Interference

(Paras 2, 20, 38)

An offer to deposit money after reservation of judgment, based on incorrect premise of reduced number of creditors, does not warrant interference.

ANALYSIS OF FACTS

1. The Project Structure

The project “Grand Venezia Commercial Tower” comprised:

Mall (up to 3rd floor)
Commercial office spaces (3rd–15th floors)
Hotel block

Land leased by UPSIDA to Bhasin Ltd (2006).

Grand Venezia Ltd:

Granted exclusive marketing rights (2009)
Later purchased units (2016)
Shared directors with Bhasin Ltd.

Thus, structural and operational integration was evident.

2. Allegations by Allottees

141 individuals filed Section 7 petition alleging:

No final completion certificate,
No occupancy certificate,
No tripartite sublease deeds,
Assured returns stopped since 2014,
No lawful possession delivered.

NCLT found:

103 units represented,
Threshold satisfied,
Debt and default established.

3. Corporate Debtors’ Defence

They contended:

Project completed,
Part-completion certificate issued,
Some possession letters issued,
Settlements with certain allottees.

However:

No documentary proof of settlements prior to filing.
Observer’s Report (2025) revealed incomplete construction.
UPSIDA confirmed no occupancy certificate and no tripartite deeds.

4. Ground Reality (Observer’s Report)

The Court examined:

Floors 9–15: No construction.
Floors 3–8: Bare-shell, no amenities.
No fire safety installations.
No occupancy compliance.

This demolished the completion claim.

ANALYSIS OF LAW

I. Section 7 Threshold – Date of Filing

The Court reaffirmed:

Threshold compliance is determined on the filing date.

Subsequent:

Withdrawals,
Settlements,
Refunds,

do not affect maintainability.

This ensures:

Certainty,
Stability in insolvency process,
Prevention of manipulation post-filing.

II. Refiling and Amendment Under NCLT Rules

Critical clarification:

A petition returned for defects is not “registered.”

Until registration:

Amendments permissible,
Party substitution allowed,
No abuse of process.

This preserves procedural flexibility.

III. Group Insolvency in Real Estate

The Court endorsed evolving doctrine of group insolvency:

Where:

Interlinked management,
Integrated development,
Shared obligations,
Single economic project,

joint CIRP is justified.

The Court adopted a substance-over-form approach.

Corporate separateness cannot defeat economic reality.

IV. What Constitutes “Completion”?

The Court drew distinction between:

Structural construction,
vs.
Legal completion.

Legal completion requires:

Completion certificate.
Occupancy certificate.
Compliance with building regulations.
Execution of required tripartite deeds.

Without these:

Possession letters are legally meaningless.

V. Financial Debt and Default

Allottees’ payments = financial debt.

Failure to deliver lawful possession = default.

IBC remedy triggered.

VI. Late Settlement Offer

The offer of ₹15.62 crores was rejected because:

Based on flawed assumption of reduced creditors.
Filed after reservation of judgment.
CIRP already validly admitted.

IBC is not a post-admission negotiation forum.

RATIO DECIDENDI

The controlling principles emerging from this decision are:

In real estate insolvency cases, the Section 7 threshold must be satisfied on the date of filing, and subsequent settlements do not defeat maintainability.
Amendments to a petition returned for defects are permissible prior to its registration under Rule 28 of the NCLT Rules.
A joint insolvency petition is maintainable against multiple corporate entities where they are intrinsically linked in the execution and implementation of a single real estate project.
Part-completion certificates and notional possession letters do not constitute legal delivery of possession in absence of occupancy certification and mandatory sublease execution.
Failure to deliver legally compliant possession constitutes default under Section 7 of the IBC.

ADVOCATEMMMOHAN

Tuesday, February 17, 2026