2021 (3) TMI 169 - AT - Insolvency and Bankruptcy

Seeking extension of time period of CIRP - COVID-19 pandemic situation - HELD THAT - The outbreak of COVID-19 declared as pandemic globally and resulting in imposition of nationwide lockdown with effect from 25th March, 2020 and having the disastrous effects of disrupting all economic activities with probably the worst adverse impact on Infrastructure Projects/ Real Estate Projects compounded by migration of labour, restrictions in place for the safety of human lives besides economic hardship unleashed by the unforeseen circumstances, impact whereof still subsists, it would be in the interest of all stake holders to mitigate the hardship created by the unprecedented situation in the wake of outbreak of COVID-19 resulting in imposition of lockdown and halting/ slowing down economic activities/ construction activities. It is indisputable that cash flow and liquidity has suffered a setback and the credit market is making desperate effort to bounce back and stand back on its feet. This warrants a magnanimous approach as the Reverse Corporate Insolvency Resolution Process, showing encouraging results and safeguarding the interests of all stake holders must be given one more chance of proving result oriented. We make it clear that though we are convinced about delay having been occasioned on the part of Promoter in adhering to the directions, as regards, infusion of ₹ 13.88 crores in Corporate Debtor within 30 days from the date of judgment viz. by 5th of March, 2020, we stop short of holding that the Reverse Corporate Insolvency Resolution Process contemplated in terms of the judgment dated 5th of February, 2020 has aborted due to non-compliance on this score, the single instance of default on the eve of outbreak of COVID-19 pandemic and imposition of lockdown being viewed only as an aberration. This is not with a view to condone the default but only to promote the ends of justice as giving further lease of life to the visionary step taken in pursuance of an experiment in the form of Reverse Corporate Insolvency Resolution Process must not give way to a single instance of default which happened just on the eve of imposition of lockdown due to outbreak of COVID-19 pandemic. While allowing the Application seeking extension in the context of timelines provided in the judgment to the extent indicated, direct extension of timelines as indicated in the proposed extended timelines filed on behalf of the Applicant vide Diary No.24606 dated 12th of January, 2021 (also reproduced at paragraph 16 above of this judgment), with further provision that the time allowed to allottees who were directed to deposit balance amount and pay 90% by 15th March, 2020 shall stand extended to 15th of June, 2021. All directions, except for the extended timelines, remaining intact, it is reiterated that if the Applicant-Promoter fails to comply with the undertaking and fails to invest as Financial Creditor or does not cooperate with the Resolution Professional, the amount invested by him as Financial Creditor in terms of the judgment shall stand forfeited and the Adjudicating Authority, National Company Law Tribunal will complete the Insolvency Resolution Process. Application disposed off.

Summary

Issues Involved: Reverse Corporate Insolvency Resolution Process, COVID-19 pandemic impact, extension of timelines, compliance with previous orders, financial contributions by stakeholders.

Issue-wise Detailed Analysis:

1. Reverse Corporate Insolvency Resolution Process (RCIRP):
The judgment highlights the introduction of the RCIRP concept by the Appellate Tribunal in the case of "Flat Buyers Association Winter Hills 77, Gurgaon vs. Umang Realtech Private Limited". This process involves allottees/home buyers as stakeholders and allows promoters to act as financial creditors to complete real estate projects. The IRP was directed to collate claims and seek approval from allottees for investment by the promoter as an outsider financial creditor. This approach aimed to resolve insolvency without relying on third-party resolution plans and was deemed successful in previous cases.

2. Compliance with Previous Orders:
The judgment reviews the compliance with the directions issued in the order dated 5th February 2020. The promoter, Rajesh Goyal, was directed to cooperate with the IRP and disburse funds as a lender, not as a promoter. Specific timelines were set for the completion of flats, internal fit-outs, and common areas, as well as for the refund of amounts to allottees seeking refunds. However, it was noted that these directions were not fully complied with, as indicated by Indiabulls Commercial Credit Private Limited in a tabular form, showing non-compliance with investment and construction timelines.

3. Impact of COVID-19 Pandemic:
The judgment acknowledges the unprecedented impact of the COVID-19 pandemic, which led to nationwide lockdowns, financial crises, and disruption of construction activities. This situation necessitated a reconsideration of the timelines set in the previous order. The promoter sought an extension of 11 months beyond the original timelines due to these altered circumstances.

4. Extension of Timelines:
The Tribunal considered the submissions from various stakeholders, including financial creditors, home buyers, and the IRP. The IRP suggested a phased approach to complete and handover specific towers, while financial creditors like IIFL Home Finance Limited indicated their willingness to extend further loans. The Tribunal decided to extend the timelines as proposed by the promoter, considering the impact of the pandemic and the need to safeguard the interests of all stakeholders.

5. Financial Contributions by Stakeholders:
The judgment discusses the financial contributions required from various stakeholders. The promoter was directed to infuse additional funds, and financial creditors like IIFL Home Finance Limited were asked to release funds as per their commitments. The home buyers were also required to deposit the balance amounts by the extended timelines.

Conclusion:
The Tribunal allowed the application seeking an extension of timelines, providing a revised schedule for the completion of the project. It emphasized the need for cooperation among all stakeholders to ensure the project's completion and mitigate the hardships caused by the pandemic. The Tribunal reiterated that non-compliance with the extended timelines would result in the forfeiture of the promoter's investments and the completion of the insolvency resolution process by the Adjudicating Authority.

Final Directions:
The Tribunal extended the timelines as proposed, with specific dates for the completion of various project milestones and financial contributions. It directed the Resolution Professional to report compliance and allowed home buyers to approach the Tribunal with any grievances. The application for extension was disposed of accordingly.