NCLAT Upholds Adani Goodhomes Bid With 93% Haircut For Radius Estate

The National Company Law Appellate Tribunal ('NCLAT'), New Delhi comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) upholds the Resolution Plan submitted by Adani Goodhomes for the real estate company Radius Estate as part of its Corporate Insolvency Resolution Process ('CIRP').

Background Facts:

The Order was issued in response to an appeal by Beacon Trusteeship Ltd. and ICICI Prudential Venture Capital Fund against the National Company Law Tribunal (NCLT), Mumbai's Order dated 02.01.2022 rejecting their objections to the Resolution Plan and Order dated 09.01.2023 approving the Resolution Plan submitted by Adani Goodhomes.

Radius Estates and Developers Pvt. Ltd. partnered with MIG (Bandra) Realtors and Builders Pvt. Ltd. to redevelop land in Bandra (East), Mumbai. This project included constructing residential flats to rehabilitate members of the Middle-Income Group Co-operative Housing Society, along with a free-sale component.

However, construction ceased in January 2020, prompting Beacon Trusteeship Ltd. to file a petition under Section 7 of the IBC initiating CIRP against Radius Estates which were commenced via NCLT Order dated 30.04.2021.

At the start of the moratorium, Radius Estates had sold 224 units and had 146 units left to sell, with the project remaining incomplete. Only nine of the 15 proposed buildings were partially constructed, and the other six had not begun.

In response to the resolution professional's invitation for plans, Adani Goodhomes Pvt. Ltd. and Ashdan Developers Pvt. Ltd. submitted proposals. The Committee of Creditors ('CoC') approved Adani Goodhomes' plan with an 83.93% voting share, and it subsequently received NCLT approval.

Observations of NCLAT:

Adani Goodhomes, a subsidiary of Adani Infrastructure and Developers Pvt. Ltd. and part of the Adani Group, offered around ₹76 crore to Radius Estates' creditors, who had loans totaling approximately ₹1,700 crore, resulting in a 96% haircut for the creditors. Additionally, Adani Goodhomes committed to completing the residential project in Mumbai at no extra cost to the homeowners.

The dissenting financial creditors alleged that NCLT approved a resolution plan which was in contravention to IBC. Further, the resolution plan seemed to have hurriedly completed the insolvency process and Adani put a strict timeline for approval of the resolution plan to put pressure on the CoC.

They also claimed that there were other material irregularities committed by the resolution professional in the entire process and the process was sped up to approve the resolution plan submitted by Adani. The plan proposes to give flats to home buyers without them paying any escalation price while 93% haircut pay out is given to the financial creditors. The same is discriminatory, the creditors alleged.

The bench held:

“It is relevant to notice that in the present case, the CoC has approved the resolution plan, which directed the haircut to the financial creditors and decided to handover the units to homebuyers, after completion of the construction, which construction cost was undertaken to be spent by the SRA (Adani Goodhomes). It was the 'commercial wisdom” of the CoC, which approved the pay-out to different Creditors.”

It rejected the claims of violation of Section 30(2) of IBC and held that payment which the dissenting financial creditors are entitled to receive as per the provision of the IBC have already been offered to them.

In conclusion, the NCLAT found no hurry or procedural violation by the resolution professional in conducting the insolvency process and approving the resolution plan.

Case Title: Beacon Trusteeship Ltd vs. Jayesh Sanghrajka & Ors and connected petitions

Case No: Company Appeal (AT) (Insolvency) No. 1494 – 1495 of 2022

Counsel for Appellants: Mr. Abhijeet Sinha Sr. Advocate with Ms. Sneha Jai Singh, Ms. Vaishnavi Rao, Mr. Divyam Sharma, Mr. Manan Shah and Mr. Akash Chatterjee, Advocates.

Counsel for Respondents: Mr. Trishmpati Sen, Ms. Riddhi Sancheti, Mr. Ashish Parwani, Mr. Dikshat Mehra, Mr. Chintan Gandhi, Mr. Anurag Anand and Mr. Mukul Kulhari, Advocates for R-1/RP. Mr. R. Sudhinder, Mr. Ranjit Shetty, Mr. Sandeep Singhi, Mr, Luckyraj Indorkar, Ms. Aastha Trivedi, Mr. Arjun Amin and Ms. Ekta Bhasin, Advocates. Mr. Rahul Kriplani, Ms. Suhasini Sen, Mr. Aditya Pratap Singh Chauhan, Mr. Kinnar Shah, Ms. Nitya Shah, Ms. Supraja V. and Ms. Surbhi, Advocates for R-4 & R-7. Mr. Dhruv Mehta, Sr. Advocate with Mr. Denzil Arambhan, Mr. Pranaya Goyal, Mr. Dharav Shah, Ms. Amisha Patel, Mr. Dhawal Desai and Mr. Shubham Saini, Advocates for R-2.

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