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2020 (2) TMI 1409 - AT - Insolvency and BankruptcyInitiation of Corporate Insolvency Resolution Process for resolution - approval of any plan of a third party (Resolution Applicant) is not required - HELD THAT - In terms of the I B Code and the decisions of the Hon ble Supreme Court the Resolution Plan must maximise the assets of the Corporate Debtor and balance the stakeholders (secured and unsecured creditors- Financial Creditors/ Operational Creditors) - The Infrastructure which is constructed for the allottees by Corporate Debtor (Infrastructure Company) is an asset of the Corporate Debtor. The assets of the Corporate Debtor as per the Code cannot be distributed which are secured for Secured Creditors . On the contrary allottees (Homebuyers) who are Unsecured Creditors the assets of the Corporate Debtor which is the Infrastructure is to be transferred in their favour ( Unsecured Creditors ) and not to the Secured Creditors such as Financial Institutions/ Banks/ NBFCs - Normally the Banks/ Financial Institutions/ NBFCs also would not like to take the flats/ apartments in lieu of the money disbursed by them. On the other hand the unsecured creditors have a right over the assets of the Corporate Debtor i.e. flats/ apartment assets of the Company. In most cases the Committee of Creditors take haircut . The Resolution Applicants satisfy them most of the time with lesser amount than the amount as determined. In the case of allottees (Financial Creditors) there cannot be a haircut of assets/ flats/ apartment. In Corporate Insolvency Resolution Process against a real estate if allottees (Financial Creditors) or Financial Institutions/Banks (Other Financial Creditors) or Operational Creditors of one project initiated Corporate Insolvency Resolution Process against the Corporate Debtor (real estate company) it is confined to the particular project it cannot affect any other project(s) of the same real estate company (Corporate Debtor) in other places where separate plan(s) are approved by different authorities land and its owner may be different and mainly the allottees (financial creditors) financial institutions (financial creditors operational creditors are different for such separate project. Therefore all the asset of the company (Corporate Debtor) are not to be maximized. The asset of the company (Corporate Debtor real estate) of that particular project is to be maximized for balancing the creditors such as allottees financial institutions and operational creditors of that particular project. Corporate Insolvency Resolution Process should be project basis as per approved plan by the Competent Authority. Any other allottees (financial creditors) or financial institutions/ banks (other financial creditors) or operational creditors of other project cannot file a claim before the Interim Resolution Professional of other project and such claim cannot be entertained. Thus Corporate Insolvency Resolution Process against a real estate company (Corporate Debtor) is limited to a project as per approved plan by the Competent Authority and not other projects which are separate at other places for which separate plans approved. For example in this case the Winter Hill 77 Gurgaon Project of the Corporate Debtor has been place of Corporate Insolvency Resolution Process. If the same real estate company (Corporate Debtor herein) has any other project in another town such as Delhi or Kerala or Mumbai they cannot be clubbed together nor the asset of the Corporate Debtor (Company) for such other projects can be maximised - Further a Secured Creditor such as financial institutions/ banks cannot be provided with the asset (flat/apartment) by preference over the allottees (Unsecured Financial Creditors) for whom the project has been approved. Their claims are to be satisfied by providing the flat/apartment. While satisfying the allottees one or other allottee may agree to opt for another flat/apartment or one tower or other tower if not allotted to any other. In such case their agreements can be modified by the Interim Resolution Professional/ Resolution Professional with the counter signature of the Promoter and the allottees so that the allottees (financial creditors) who are on rent or paying interest to banks may like to get earlier possession and are relieved from paying rent or interest to banks. Thus as it is found very difficult to follow the process as in normal course is followed in a Corporate Insolvency Resolution Process we are of the view that a Reverse Corporate Insolvency Resolution Process can be followed in the cases of real estate infrastructure companies in the interest of the allottees and survival of the real estate companies and to ensure completion of projects which provides employment to large number of unorganized workmen. The Uppal Housing Pvt. Ltd. Intervenor (One of the Promoter) is directed to cooperate with the Interim Resolution Professional and disburse amount (apart from the amount already disbursed) from outside as Lender (financial creditor) not as Promoter to ensure that the project is completed with the time frame given by it. The disbursement of amount which has been made by Uppal Housing Pvt. Ltd. and the amount as will be generated from dues of the Allottees (Financial Creditors) during the Corporate Insolvency Resolution should be deposited in the account of the Company (Corporate Debtor) to keep the Company a going concern. The amount can be utilized only by issuance of cheque signed by the authorised person of the Company (Corporate Debtor) with counter signature by the Interim Resolution Professional. The Bank in which the Corporate Debtor (Company) has account the amount should be deposited only for the purpose of completion of the Winter Hill 77 Gurgaon Project. Banks will allow the cheques for encashment only with the counter signature of the Interim Resolution Professional - The flats/apartments should be completed in all aspect by 30th June 2020. All internal fit outs for electricity water connection should be completed by 30th July 2020. The Financial Institutions/ Banks should be paid simultaneously. The allottees are directed to deposit their balance amount and pay 90% without penal interest if not deposited by 15th March 2020. The Allottees in whose favour possession has been offered and clearance has been given by the competent authority are bound to pay the cost for registration and directed to deposit registration cost to get the flats/apartments registered after paying all the balance amount in terms of the agreement. All these processes should be completed by 30th August 2020. If it completed the Corporate Insolvency Resolution Process be closed after intimating it to the Adjudicating Authority (National Company Law Tribunal). The resolution cost including fee of the Interim Resolution Professional will be borne by the Promoter. Only after getting the certificate of completion from the Interim Resolution Professional/ Resolution Professional and approval of the Adjudicating Authority (National Company Law Tribunal) unsold flats/ apartments etc. be handed over to the Promoter/ Uppal Housing Pvt. Ltd. - However if the Promoter fail to comply with the undertaking and fails to invest as financial creditor or do not cooperate with the Interim Resolution Professional/ Resolution Professional the Adjudicating Authority (National Company Law Tribunal) will complete the Insolvency Resolution Process. The appeal stands disposed of.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) by Financial Creditors. 2. Problems in following certain processes for infrastructure companies. 3. Differentiation between Secured and Unsecured Creditors. 4. Role and rights of allottees (homebuyers) as Financial Creditors. 5. Implementation of Reverse Corporate Insolvency Resolution Process. 6. Specific directions for the completion of the project and resolution process. Issue-wise Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP) by Financial Creditors: Mrs. Rachna Singh and Mr. Ajay Singh, as Financial Creditors, initiated CIRP against ‘M/s Umang Realtech Pvt. Ltd.’ under Section 7 of the Insolvency and Bankruptcy Code, 2016. The National Company Law Tribunal (NCLT) admitted the application and directed the deposit of ?2 Lakhs with the Interim Resolution Professional (IRP) to meet expenses. 2. Problems in following certain processes for infrastructure companies: The Parliament amended Section 30(2) & (4) of the I&B Code to give weightage to Secured Creditors. The Supreme Court in "Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors." highlighted the need for differential treatment of different classes of creditors. The inclusion of a column for security in Form B for Operational Creditors acknowledges their secured status, which was previously omitted. 3. Differentiation between Secured and Unsecured Creditors: The Supreme Court in "Pioneer Urban Land and Infrastructure Limited & Anr. v. Union of India & Ors." upheld that allottees are Financial Creditors. The assets of the Corporate Debtor, particularly in real estate, should be transferred to allottees (Unsecured Creditors) rather than Secured Creditors like banks and financial institutions. 4. Role and rights of allottees (homebuyers) as Financial Creditors: Allottees, despite lacking expertise in assessing the viability of a Corporate Debtor, have been provided voting rights for the approval of the plan. The judgment noted the difficulty for allottees to assess the commercial aspects of the Corporate Debtor, as highlighted in "Innoventive Industries Limited v. ICICI Bank and Anr." and "Swiss Ribbons Pvt. Ltd. & Anr. v. Union of India & Ors." 5. Implementation of Reverse Corporate Insolvency Resolution Process: The judgment introduced the concept of a Reverse Corporate Insolvency Resolution Process to ensure project completion without third-party resolution plans. Uppal Housing Pvt. Ltd., as a promoter, agreed to act as a Financial Creditor to ensure the project’s success. The Flat Buyers Association and allottees accepted this proposal, leading to the completion of several flats and registration of sale deeds. 6. Specific directions for the completion of the project and resolution process: Uppal Housing Pvt. Ltd. was directed to cooperate with the IRP and disburse additional funds as a lender. The project, Winter Hill – 77 Gurgaon, should be completed by 30th June 2020, with internal fit-outs by 30th July 2020. Financial Institutions should be paid simultaneously. Allottees were directed to deposit their balance amounts without penal interest by 15th March 2020. Common areas should be completed by 30th August 2020, and a Residents Welfare Association should be formed. The CIRP should be closed upon completion and approval by the NCLT, with any unsold flats handed over to the promoter. If the promoter fails to comply, the NCLT will complete the Insolvency Resolution Process. Observations and Findings: The CIRP against a real estate company is limited to the specific project and does not affect other projects. Secured creditors cannot be given preference over allottees. The judgment emphasized that the CIRP should be project-based, and claims from other projects cannot be entertained. The process ensures that the interests of all stakeholders, including Financial Institutions and Operational Creditors, are balanced while prioritizing the completion of the project for the allottees.
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