Supertech Insolvency : Supreme Court Approves 'Project Wise Resolution' Plan

The Supreme Court has declined to grant any interim relief in respect of order passed by the National Company Law Appellate Tribunal (“NCLAT”) directing ‘project wise insolvency resolution process’ of Supertech Ltd.’s Eco Village-II project. The Bench has observed that constituting Committee of Creditors (CoC) for all the projects of Supertech Limited would affect the ongoing projects and cause hardship to the homebuyers.

The Bench comprising of Justice Dinesh Maheshwari and Justice Sanjay Kumar, while adjudicating an appeal filed in Indiabulls Asset Reconstruction Company Limited v Ram Kishore Arora & Ors., has directed that during the pendency of the appeal, any process beyond voting on the Resolution Plan should not be undertaken without specific orders of the Supreme Court in respect to the Corporate Insolvency Resolution Process (CIRP) of Eco Village-II project.

BACKGROUND FACTS

Supertech Ltd. (“Corporate Debtor”) is a real estate company engaged in the construction of various projects in Delhi-National Capital Region. The Corporate Debtor had availed credit facilities from Union Bank of India for the development of “Eco Village-II” Project. On 25.03.2022, the Corporate Debtor was admitted into Corporate Insolvency Resolution Process (“CIRP”) by the National Company Law Tribunal (“NCLT”). The order of NCLT was challenged before the National Company Law Appellate Tribunal (“NCLAT”).

On 10.06.2022, the NCLAT passed an interim order converting the CIRP into ‘project wise CIRP’ and thereby confining the CIRP to the Eco Village-II project alone. The Committee of Creditors was formed only with respect to Eco Village-II and the said Project was to be completed with assistance of ex-management. With regards the other projects of the Corporate Debtor, NCLAT ordered them to be continued as ongoing projects.

The Financial Creditors challenged the NCLAT order before the Supreme Court. It was contended that the NCLAT is neither empowered to allow project-wise CIRP under IBC, nor empowered to accept a resolution plan presented by the Promoter without giving opportunity to the CoC to study the commercial viability of the plan.

SUPREME COURT VERDICT

The Bench opined that the course to be adopted must carry lower risk of injustice, even if ultimately in the appeals, the Court may find otherwise or choose any other course. On the issue of balance of convenience, the Bench observed that if CoC is directed to be constituted for all the projects of the Corporate Debtor, then the same would affect the ongoing projects and cause hardship to the home buyers.

“The result of the directions of the impugned order dated 10.06.2022 is that except Eco Village-II project, all other projects of the corporate debtor are to be kept as ongoing projects and the construction of all other projects is to be continued under the supervision of the IRP with the ex-management, its employees and workmen. Infusion of funds by the promoter in different projects is to be treated as interim finance, regarding which total account is to be maintained by IRP. If at the present stage, on the submissions of the appellants, CoC is ordered to be constituted for the corporate debtor as a whole in displacement of the directions of the Appellate Tribunal, it is likely to affect those ongoing projects and thereby cause immense hardship to the home buyers while throwing every project into a state of uncertainty. On the other hand, as indicated before us, the other projects are being continued by the IRP and efforts are being made for infusion of funds with the active assistance of the ex-management but without creating any additional right in the ex-management”, the Bench opined.

Accordingly, the Bench declined to alter the directions passed by the NCLAT in order dated 10.06.2022 with respect to Eco Village-II, but has directed that any process beyond voting on the Resolution Plan should not be undertaken without specific orders of the Supreme Court.

“In our view, greater inconvenience is likely to be caused by passing any interim order of constitution of CoC in relation to the corporate debtor as a whole; and may cause irreparable injury to the home buyers. In this view of the matter, we are not inclined to alter the directions in the order impugned as regards the projects other than Eco Village-II” the Bench held.

Case Title: Indiabulls Asset Reconstruction Company Limited v Ram Kishore Arora & Ors.

Citation : 2023 LiveLaw (SC) 436

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