UCO Bank Vs Debashish Nanda (NCLAT Delhi)
The case concerns the ruling of the NCLAT, Principal Bench, in UCO Bank v. Debashish Nanda, RP Bulland Buildtech Pvt. Ltd., where the Tribunal held that home loans disbursed by UCO Bank to individual buyers do not constitute a financial debt owed by the real-estate developer, Bulland Buildtech Pvt. Ltd. The decision dismissed UCO Bank’s request to be recognised as a Financial Creditor in the CIRP of the developer.
Bulland Buildtech Pvt. Ltd. developed a residential project called “Bulland Elevates.” Several homebuyers entered Tripartite Agreements with UCO Bank and the developer, under which UCO Bank sanctioned home loans to 45 unit holders from 2013 onwards. The amounts were disbursed to the developer on the buyers’ instructions. CIRP commenced on 22 March 2021. UCO Bank filed a Form-C claim for ₹18.82 crore, relying on sanction letters and Tripartite Agreements. The IRP rejected the claim. UCO Bank sought directions from NCLT to admit its claim, but the NCLT refused, noting that the CoC had already approved a resolution plan.
The key issue in appeal was whether UCO Bank’s Form-C claim constituted a financial debt owed by the Corporate Debtor and whether the RP was obliged to admit the Bank as a Financial Creditor.
UCO Bank argued that: (i) the Tripartite Agreements enabled direct disbursal to the developer; (ii) charges were registered with CERSAI; (iii) security interest existed over units; (iv) DRT decrees had been passed against the borrowers and the company; (v) the amount disbursed made UCO Bank a Financial Creditor under Section 5(8) of the IBC; and (vi) the developer was contractually obligated to indemnify the Bank, bringing the claim within Section 5(8)(i).
The RP and the Successful Resolution Applicant argued that: (i) the loans were sanctioned to homebuyers, not the developer; (ii) the developer did not apply for or avail financial assistance from the Bank; (iii) allottees were the actual Financial Creditors under Section 5(8)(f), as amounts were raised from them; (iv) several units claimed by the Bank were allotted to others or remained vacant; (v) the Bank’s DRT decrees were irrelevant; and (vi) the resolution plan was framed on admitted claims and the Bank’s claim was never admitted.
The Court upheld the NCLT order. It held that the Tripartite Agreement contained no clause obligating the developer to repay the loan in case of borrower default. Examining clauses, including Clause 9, Clause 12, and Clause 41, the Court observed that obligations related exclusively to the borrower. Clause 41 merely reiterated agreement terms and did not impose an indemnity on the developer. Since the developer never undertook repayment responsibility, the Bank had no “right to payment” from the Corporate Debtor. Thus, no financial debt existed between the Bank and the developer.
The Court held that the transaction did not amount to a financial debt under the IBC. The DRT decrees were not relied upon in the Bank’s claim and were therefore irrelevant. The Tribunal referred to the Supreme Court decision in Global Credit Capital Ltd. v. Sach Marketing Pvt. Ltd., reiterating that the true nature of the transaction must be examined, and found no repayment obligation on the developer.
The judgment compared earlier rulings. In Axis Bank v. Value Infracon, it was held that liability to repay home loans rests with individual buyers, and tripartite agreements do not alter this. By contrast, in Canara Bank v. Vivek Kumar, the NCLAT held that a builder became liable because the Tripartite Agreement contained a specific clause requiring the builder to refund the bank’s advance.
The ruling clarifies that unless a Tripartite Agreement expressly places primary repayment responsibility on a builder, banks cannot claim Financial Creditor status in IBC proceedings. The decision underscores the need for lenders to include clear repayment or indemnity clauses to ensure enforceability against developers.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
