The 2018 amendment added an Explanation to Section 5(8)(f) of the Code, under which an amount raised from an allottee under a real estate project is deemed to have the commercial effect of a borrowing. Allottees are therefore financial creditors. The Supreme Court upheld the amendment in Pioneer Urban Land and Infrastructure Ltd. v. Union of India (2019).
Since the 2020 amendment, an application under Section 7 by allottees must be filed jointly by not less than one hundred allottees of the same project, or not less than ten per cent of the total allottees, whichever is less. The Supreme Court upheld this threshold in Manish Kumar v. Union of India (2021).
Allottees are represented in the Committee of Creditors through an authorised representative. In a stalled project, an organised association that acts early, files claims with proper records and engages with the resolution professional often has a decisive say in the outcome of the CIRP.
This note is for general information on the law as stated in the decisions cited and is not legal advice on any specific matter.