2022 (6) TMI 720 - AT - Insolvency and Bankruptcy

Initiation of CIRP - All the projects of Corporate Debtor (Real Estate developer i.e Supertech Ltd.) or specified project to be proceeded against - It was submited that, in event the construction of the projects are allowed to proceed as ongoing project, the promoters of the Corporate Debtor are willing to extend all cooperation to the IRP for carrying out the ongoing projects. It is submitted that CIRP need not to be allowed to continue for all the 20 projects rather it may be undertaken on projects basis HELD THAT - From the status report submitted by the IRP, it is clear that IRP in his Report has listed 20 projects of the Corporate Debtor which also included Eco Village II Project for which the finance was given by the Union Bank of India who has filed the Application under Section 7 of the Code for initiation of the CIRP. By the admission of the Application under Section 7 of the Code by the Adjudicating Authority, CIRP has commenced against the Corporate Debtor and when CIRP has commenced against the Corporate Debtor, all projects which had been undertaken and under construction comes under CIRP. As per the IRP Status Report, IRP has taken a stock of situation by visiting the sites which are under construction. CIRP has been initiated against the Corporate Debtor. CIRP has commenced against all the projects of the Corporate Debtor. CIRP encompasses all the assets of the Corporate Debtor including all Bank Accounts. The IRP has already been appointed and has taken steps by informing all concerned including Banks to add the name of IRP for operation of the Account - the consequence of CIRP is that all assets of the Corporate Debtor come in the control and management of the IRP. All bank accounts are to be operated with the counter signature of the IRP. No amount from any account can be withdrawn without the counter signature and permission of the IRP. IRP under the IBC has responsibility to run the Corporate Debtor as a going concern. Further when Promoters are ready to extend all cooperation with all its staffs and employees to the IRP, we see no reason for not to direct the IRP to proceed with construction of all the projects under the overall supervision and control of the IRP. In CIRP Process, Project-Wise Resolution to be started as a test to find out the success of such Resolution. Keeping an eye regarding construction and completion of the projects, it is opined that an Interim Order dated 12th April, 2022 staying the constitution of CoC be modified to the extent that CoC be constituted for the Eco Village II Project only with all Financial Creditors including Financial Creditors/Banks/Home Buyers. The Interim Order dated 12th April, 2022 continuing as on date is modified to the extent that IRP may constitute the CoC with regard to the Project Eco Village II only - After constitution of CoC of Eco Village II Project, the IRP shall proceed to complete the construction of the project with the assistance of the ex-management, its employees and workmen - application disposed off.

Summary

Issues Involved:

1. Admission of Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Corporate Insolvency Resolution Process (CIRP) initiation against M/s. Supertech Limited.
3. Intervention Applications by Home Buyers and Financial Creditors.
4. Proposal for Settlement cum Resolution Plan.
5. Application of 'Reverse CIRP' for Real Estate Projects.
6. Constitution of Committee of Creditors (CoC).
7. Continuation of construction projects under IRP supervision.
8. Financial arrangements and management of funds during CIRP.
9. Interim Directions and further Status Reports.

Detailed Analysis:

1. Admission of Application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The appeal was filed against the Order dated 25th March 2022, passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi, Court –VI), which admitted the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (The Code) filed by Union Bank of India. The application sought the initiation of the Corporate Insolvency Resolution Process (CIRP) against M/s. Supertech Limited due to default in repayment of credit facilities amounting to Rs. 431,92,53,302/- as on 31st January 2021.

2. Corporate Insolvency Resolution Process (CIRP) initiation against M/s. Supertech Limited:
The Corporate Debtor, a Real Estate Company, defaulted on its loan repayment, leading to the account being declared as 'Non-Performing Assets' (NPA) on 20th June 2018. The Adjudicating Authority admitted the Section 7 Application and directed for the initiation of CIRP, appointing Mr. Hitesh Goel as the Interim Resolution Professional (IRP).

3. Intervention Applications by Home Buyers and Financial Creditors:
Various Intervention Applications were filed by home buyers, the Association of Home Buyers, and IDBI Bank. These applications were divided into two groups: one group opposing the continuation of CIRP and the other supporting it. Some home buyers requested that CIRP be restricted to specific projects like Eco Village II.

4. Proposal for Settlement cum Resolution Plan:
The Appellant submitted a Settlement cum Resolution Proposal, offering to make upfront payments and complete the stalled projects with the help of strategic partners and additional funding. The proposal aimed to discharge liabilities to Financial Creditors, Home Buyers, and Operational Creditors.

5. Application of 'Reverse CIRP' for Real Estate Projects:
The Appellant cited a previous judgment where 'Reverse CIRP' was applied to real estate projects. The Tribunal considered whether a similar approach could be adopted in this case to ensure the completion of ongoing projects and protect the interests of home buyers.

6. Constitution of Committee of Creditors (CoC):
The Tribunal initially stayed the constitution of CoC but later modified the order to allow the formation of CoC specifically for the Eco Village II Project. The CoC would include all Financial Creditors, including banks and home buyers, to facilitate the resolution process for this project.

7. Continuation of construction projects under IRP supervision:
The Tribunal directed that other projects apart from Eco Village II should continue as ongoing projects under the supervision of the IRP. The IRP was instructed to collaborate with the ex-management, employees, and workmen to ensure the completion of these projects.

8. Financial arrangements and management of funds during CIRP:
The Tribunal emphasized the need for detailed accounts of inflow and outflow of funds for each project, adhering to RERA guidelines. 70% of the amount received should be utilized for construction purposes, with further directions to be issued regarding the remaining 30% after receiving status reports.

9. Interim Directions and further Status Reports:
The Tribunal issued several interim directions, including the constitution of CoC for Eco Village II, continuation of other projects, and submission of a further status report within six weeks. The parties were given the liberty to file applications for any further directions or clarifications.

Conclusion:
The Tribunal's judgment aimed to balance the interests of financial creditors, home buyers, and the ongoing construction projects by adopting a project-wise resolution approach under the supervision of the IRP. The interim directions provided a framework for managing the CIRP process while ensuring the continuation and completion of real estate projects.