Union Bank initiates CIRP against Supertech for default in repayment

The National Company Law Tribunal, New Delhi, Court -VI, admitted the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by Union Bank of India against M/s. Supertech Limited due to default in repayment of credit facilities. The Tribunal directed the initiation of Corporate Insolvency Resolution Process (CIRP) and appointed an Interim Resolution Professional. Various Intervention Applications were filed by home buyers and financial creditors, with the Tribunal issuing interim directions to manage the CIRP process and ensure completion of ongoing construction projects.

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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.

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