Supreme Court Keeps CIRP In Abeyance And Permitted Promoter To Complete The Housing Project

Suspended Director of Corporate Debtor filed an appeal before Supreme Court under Section 62 of the Insolvency and Bankruptcy Code, 2016 against the order dated 22.11.2021 of NCLAT wherein it had rejected the Suspended Director request to complete the project and directed the Resolution Professional to continue the CIRP of the Corporate Debtor.

Brief Background

NCLT vide its order dated 22.11.2019 initiated the CIRP against Corporate Debtor. An appeal was filed before NCLAT and vide order dated 19.12.2019 NCLAT stayed the constitution of the committee of creditors.

Subsequently, a settlement was entered between the original applicant and the suspended director and the same was filed before NCLAT however NCLAT vide order dated 26.02.2020 directed the IRP to continue the CIRP as settlement plan of only deals with the applicant and does not encompass all the allottees of the project.

An appeal was file before Supreme Court wherein it permitted the appellant to approach NCLAT for modification of order dated 26.02.2020 and to present a settlement which deals with all the allottees. The appellant filed a modification application before NCLAT but same was rejected and therefore, Appellant filed the present appeal before the Supreme Court.

Contentions of Promoter of Corporate Debtor

It was contended on behalf of the Appellant that a stakeholders meeting dated 23.10.2021 was held and a settlement was arrived between the appellant and all homebuyers almost on all counts in the said meeting. It was also contended that appellant filed an undertaking on affidavit thereby undertaking to complete the project within stipulated time but all of this was ignored by NCLAT.

Contentions Of Homebuyers

It was contended on behalf of homebuyers that the appellant is not interested in completing the project and the present appeal is nothing but to delay the completion of project. It was further contended that only the CIRP can ensure the completion of project.

Decision/Observation Of Supreme Court

The Supreme Court noted that in meeting dated 23.10.2021 most of the issues stood resolved but the NCLAT failed to take the same into consideration while passing the impugned order.

Supreme Court further took into consideration an additional affidavit dated 27.12.2021 filed by the promoter of corporate debtor before Supreme Court wherein he undertook to complete the project in stipulated time and to return the money along with 6% PA interest to seven homebuyers who are objecting to settlement plan.

Supreme Court further noted that there are only 7 out of 452 homebuyers who are objecting to settlement plan and therefore, it will be interest of homebuyers to permit the promoter to complete the construction of the project.

"22. Taking into consideration the salient features of the undertaking given on affidavit by the Promoter, Shri Kashi Nath Shukla and the fact that there are only seven out of the 452 home­buyers, who opposed the Settlement Plan, we find that it will rather be in the interest of the home­buyers that the appellant/promoter is permitted to complete the project as undertaken by him. It is pertinent to note that he has agreed that the cost of the flat will not be escalated…"

The bench further observed that there is every possibility that if the CIRP is permitted, homebuyers will have to play an escalation Cost whereas the promoter is undertaking to honor the existing BBA without any escalation. Therefore, Supreme Court disposed of the appeal by permitting the promoter to complete the project within stipulated time period in terms of the additional affidavit and the same shall be treated as the undertaking to the Supreme Court.

It further directed the IRP to submit quarterly reports before the NCLAT regarding the progress of the housing project.

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