NCLAT Upholds Initiation of Insolvency Proceedings Against Supertech Realtors
Tribunal Dismisses Appeal for Reverse CIRP, Directs Resolution Under IBC Norms
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has upheld the initiation of Corporate Insolvency Resolution Process (CIRP) against Supertech Realtors Private Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016. The judgment comes in the wake of an appeal filed by Mr. Ram Kishore Arora, Suspended Director of Supertech Realtors, seeking reversal of the CIRP in favor of a settlement proposal.
The case involves a real estate project named 'Supernova' which faced financial distress following a default on a loan of Rs. 150 crore sanctioned by the Bank of Maharashtra. The financial distress led to the account being declared as a Non-Performing Asset (NPA) in 2018. Despite repeated attempts by the Corporate Debtor to settle through One-Time Settlement (OTS) proposals, the Consortium of Banks, led by Union Bank of India, ultimately rejected the revised OTS proposal, prompting the continuation of insolvency proceedings.
The Tribunal, chaired by Justice Ashok Bhushan, noted that the debt and default by Supertech Realtors were established and undisputed. It further observed that the OTS proposal involving M/s Parmesh Construction Company Ltd. as a Co-Developer was not accepted by the Consortium Banks. In response to arguments favoring reverse CIRP, the Tribunal emphasized that resolution processes must adhere to the IBC framework, which mandates competitive bidding and selection of resolution applicants.
The judgment referenced earlier cases where reverse CIRP was successfully applied, but clarified that such mechanisms require consensus among stakeholders, which was absent in this case due to divided interests among homebuyers and rejection of the OTS by financial creditors. The Tribunal reiterated the statutory limits on its jurisdiction, underscoring the necessity of proceeding with CIRP under established IBC norms rather than opting for unconventional methods.
The Tribunal dismissed the appeal and directed the Interim Resolution Professional (IRP) to proceed with the constitution of the Committee of Creditors (CoC) and manage the resolution process in accordance with law. This decision is expected to have wide implications for real estate insolvencies, reinforcing the adherence to IBC protocols even in complex real estate projects.
Bottom Line:
Admission of Section 7 application and initiation of CIRP upheld against the Corporate Debtor. Reverse CIRP was not considered appropriate due to the non-acceptance of the revised OTS proposal by the Consortium of Banks and lack of unanimous support from homebuyers.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 7, 12A, and CIRP Regulations, 2016
