Promoter Undergoing CIRP Can Be Permitted To Complete Project For Benefit Of Homebuyer: NCLAT

Brief Facts

The case is regarding Supertech Township Projects Ltd, a real estate company that was incorporated in the year 2010, for the development of a residential project named Golf Country at Yamuna Expressway, Greater Noida. To initiate and finance the project, the company secured a term loan amounting to Rs 140 crores form Punjab and Sindh Bank in 2012-13 and additional financial assistance of Rs 100 Crores each was extended by Bank of Maharashtra and Oriental Bank of Commerce (now Punjab National Bank).

However, due to financial distress and non-repayment of dues, the account of Supertech Township Projects, Ltd. was classified as a Non-performing Asset (NPA). Subsequently the financial creditors issued notice under Section 13(4) of the SARFAESI Act on and despite a One Time Settlement offered by the corporate debtor, the lenders failed to reach a resolution plan. In the month of July, 2023, Punjab and Sindh bank filed an application under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, seeking initiation of Corporate Insolvency Resolution Process (CIRP) due to an outstanding default amount. In response to the application, the National Company Law Tribunal, New Delhi admitted the application and appointed the Interim Resolution Professional (IRP).

The corporate debtor challenged this order before the National Company Law Appellate Tribunal (NCLAT), arguing that it was discussion for a settlement. The NCLAT granted a stay on further CIRP proceedings. But despite the corporate debtor trying three times to introduce a settlement proposal, all of them got rejected. Even the Yamuna Expressway Industrial Development Authority (YEIDA) impleaded itself in the proceedings with a debt amounting to Rs 741.20 crores. Even the Homebuyer association were not satisfied with the decision of the corporate debtor and thus leading to the following decision.

NCLAT Judgement

The National Company Law Appellate Tribunal, (NCLAT), Principal Bench, New Delhi dismissed the appeal filed by the suspended directors of the Supertech Township Projects Ltd. The tribunal upheld the order of the Tribunal stating that there was a presence of existing debt and default and the same was also affirmed by the corporate debtor. Despite securing three different investors, all the three proposals were unanimously rejected by the lenders and further Yamuna Expressway Industrial Development Authority (YEIDA) impleaded itself in the proceedings with a debt amounting to Rs 741.20 crores.

The counsel for the appellant also relied on the case of Anand Murti vs. Soni Infratech Pvt. Ltd. & Anr (Civil Appeal Nos.7534 of 2021) passed by the Apex Court, wherein the court stated that it would be in the interest of homebuyers that promoter is permitted to complete the project as undertaken by him even though Section 7 application has been admitted against him.

The same was rejected by the tribunal stating that the same can not be applicable in this case as the lenders and the homebuyers were divided.

In the end the tribunal concluded by stating that CIRP should be initiated and the resolution of the corporate debtor must proceed strictly as per the Insolvency and Bankruptcy Code (IBC), 2016.

Click Here To Read/Download The Order