2023 (1) TMI 192 - AT - Insolvency and Bankruptcy

Tribunal Upholds NCLT's Section 7 Order, Considers Section 10A Impact

Dharmesh S Jain, [Suspended Director] Versus SREI Equipment Finance Limited, Dilipkumar Natvarlal Jagad Interim Resolution Professional of the Corporate Debtor And Deepak Sudhir Keluskar, Ankush Namdev Kamble, Ravi Singhal, Hemant Goyal, Kachru Kalu Jagtap Versus SREI Equipment Finance Limited, Dilipkumar Natvarlal Jagad Interim Resolution Professional of the Corporate Debtor, Nirmal Lifestyle (Kalyan) Private Limited

The Tribunal upheld the NCLT's order admitting the Section 7 application filed by SREI Equipment Finance Limited, finding the default amount exceeding ... Initiation of CIRP - FINANCIAL CREDITORS - Home buyers - NCLT admitted the application - Appellant has submitted that they are ready to deposit an amount of amount - HELD THAT:- There is no material brought on record except to the letter of the Swamih Investment Fund dated 03.06.2021, which provided for approval of fund subject to several conditions. The Financial Creditor submits that one of the condition was that NOC of Financial Creditor was required to be obtained, whereas no NOC have been obtained from Financial Creditor for the said fund. Although, the Appellant has submitted that they are ready to deposit an amount of Rs.1,12,50,000/-, which was the amount of default admitted by the Adjudicating Authority, but we are of the view that by mere depositing the said amount, the CIRP cannot be set aside. We are quite conscious that in the real estate Projects, it is the Homebuyers, who are the major sufferer. Most of the Homebuyers belong to middle income group, who for funding their homes also takes loan from financial institutions and suffer due to non-handover of possession by the builders - present is a case where order initiating CIRP need no interference. Consequently, the CoC has to be constituted to find out the ways and means to complete the Project, so that interest of the Homebuyers be firstly fulfilled. The CIRP of the Corporate Debtor needs to be proceeded with. The CoC may be constituted immediately and CoC may take a call regarding finding out ways and means to complete the Projects. With the approval of CoC, the IRP may take steps to obtain interim finances to complete the Project, if any. It is also open for the CoC to take a decision to invite Resolution Plan in staggered manner, confined to Project wise/ building wise, as may be feasible and convenient, so that unfinished Project may be completed and Homebuyers be handed over the possession without paying any additional cost. The order impugned dated 16.06.2022 passed by the Adjudicating Authority, admitting Section 7 Application is upheld - appeal allowed. Issues Involved:1. Admissibility of the Section 7 Application under the Insolvency and Bankruptcy Code, 2016.2. Validity of the loan agreement and associated documents.3. Impact of Section 10A on the default amounts.4. Rights and interests of the homebuyers.5. Feasibility of completing the real estate projects under Corporate Insolvency Resolution Process (CIRP).Issue-wise Detailed Analysis:1. Admissibility of the Section 7 Application:The Appeals were filed against the order dated 16.06.2022 by the National Company Law Tribunal (NCLT), Mumbai Bench-IV, which admitted the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by the Financial Creditor, SREI Equipment Finance Limited. The Adjudicating Authority found that the default amount exceeded the threshold of Rs.1 crore, thereby admitting the application.2. Validity of the Loan Agreement and Associated Documents:The Corporate Debtor argued that the loan agreement was based on 'insufficiently stamped documents.' The agreement, executed in West Bengal, bore a stamp of Rs.100/- but was to be enforced in Maharashtra, where higher stamp duty was required. Despite this, the Adjudicating Authority found the application complete in all respects and admitted it.3. Impact of Section 10A on the Default Amounts:The Adjudicating Authority noted that defaults occurring after 05.03.2020 were hit by Section 10A, and thus, only the default amount of Rs.1,12,73,387/- was considered. The Financial Creditor argued that no payments were made post the Section 10A period, leading to accumulated dues of Rs.1,930 crores.4. Rights and Interests of the Homebuyers:Homebuyers argued that the order prejudicially affected their rights as they wanted the projects completed and possession of their homes. They cited the judgment in Flat Buyers Association vs. Umang Realtech Pvt. Ltd., advocating for a 'reverse insolvency resolution process' confined to the specific project. The Tribunal acknowledged the homebuyers' sufferings and emphasized the need to complete the projects to protect their interests.5. Feasibility of Completing the Real Estate Projects under CIRP:The Tribunal noted that the Corporate Debtor had not presented any convincing plan to complete the projects or meet financial obligations. The Tribunal directed the constitution of the Committee of Creditors (CoC) to explore ways to complete the projects, including obtaining interim finances or inviting resolution plans on a project-wise or building-wise basis.Conclusion:The Tribunal upheld the NCLT's order admitting the Section 7 application. It directed the Interim Resolution Professional (IRP) to constitute the CoC within one week and explore feasible methods to complete the projects, ensuring the interests of the homebuyers are prioritized. The period during which the constitution of the CoC was stayed was excluded from the CIRP period. The Appeals were disposed of with parties bearing their own costs.