Beacon Trusteeship Limited Vs Radius Estates and Developers Private Limited (NCLT Mumbai)
NCLT Mumbai approved the resolution plan submitted by the resolution applicant Adani Goodhomes Private Limited as the plan was in accord with the Code and the application regulations framed thereunder.
Facts- This is an Application filed u/s. 30(6) (hereinafter referred to as the ‘Code’) read with Regulation 39(4) Of The Insolvency And Bankruptcy Board Of India (‘Insolvency Resolution Process Of Corporate Persons’) Regulations, 2016 (‘CIRP Regulations’) by the Resolution Professional seeking approval of the Resolution Plan submitted by the Resolution Applicant, M/s. Adani Goodhomes Private Limited, which was approved by 83.93% voting share of the member of the Committee of Creditors (hereinafter referred to as ‘COC’).
Conclusion- We also note with approval the detailed Compliance Certificate dated 10.1.2022 of the RP in Form H (under Regulation 39(4) of the CIRP Regulations 2016) that has been placed on record in the captioned Application, the Certificate demonstrates that, the Plan is in accord with the Code and the applicable regulations framed thereunder.
The Interlocutory Application No. 573 of 2022 is allowed, subject to the observations and findings by this Bench in I.A. 1379 of 2022 and I.A 3411 of 2022. The Resolution Plan submitted by the RA, Adani Goodhomes Private Limited., is hereby approved. It shall become effective from the date of this Order and shall form part of this Order. It shall be binding on the RA, Corporate Debtor, its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of payment of dues arising under any law for the time being in force is due.
FULL TEXT OF THE NCLT MUMBAI JUDGMENT/ORDER
1. This is an Application filed under Section 30(6) (hereinafter referred to as the ‘Code’) read with Regulation 39(4) Of The Insolvency And Bankruptcy Board Of India (‘Insolvency Resolution Process Of Corporate Persons’) Regulations, 2016 (‘CIRP Regulations’) by the Resolution Professional seeking approval of the Resolution Plan submitted by the Resolution Applicant, M/s. Adani Goodhomes Private Limited, which was approved by 93% voting share of the member of the Committee of Creditors (hereinafter referred to as ‘COC’)
2. The Facts Leading To The Application Are As Under:
Before proceeding to the evaluation of the Plan, as to its compliance with Section 30(2) of IBC, it is necessary to set out the factual matrix of the insolvency resolution (CIRP).
2.1 The Corporate Debtor entered a joint venture as co-developer with the MIG (Bandra) Realtors and Builders Private Limited (hereinafter referred as “DB”), in respect of the redevelopment of a plot of land situated at Bandra (East) Mumbai. This redevelopment has been defined as “the Project”. The Project envisaged the construction of residential flats/units for: (i) rehabilitation of the members of the Middle-Income Group Co-operative Housing Society; and (ii) as part of the free-sale component, as explained hereunder.
2.2 The aforesaid plot of land is owned by the Maharashtra Housing and Area Development Authority (“MHADA”). The said land has been leased by MHADA to Middle Income Group Co-operative Housing Society (hereinafter referred as “the Society”).
2.3 By a “Development Agreement” dated 31.10.2010, executed between the Society and DB, the Society had granted development rights in respect of the land and structures on the said plot in favour of DB. The Development Agreement was thereafter modified from time to time. Under the terms of the Development Agreement, DB was required to construct and provide certain premises, together with amenities, and common areas, for the members of the Society and was entitled to sell and deal with the other flats as more particularly set out in the Development Agreement.
2.4 The Corporate Debtor entered into an agreement with DB on 31.03.2016 (hereinafter referred as “Redevelopment Agreement”). As per the terms of the Redevelopment Agreement, both the parties were required to contribute to the cost of the development and would also be jointly entitled to the free sale component, that would result from the development. The Society was not a party to the Redevelopment Agreement. The Society members vacated their premises in the year 2015.
2.5 In the meantime, the Corporate Debtor and DB had begun the process of selling the flats from their respective entitlements and collecting monies from potential flat purchasers in exercise of their respective rights under the Development Agreement and the Redevelopment Agreement.
2.6 Because of certain issues affecting the Corporate Debtor, construction of the project came to a halt around January 2020. There were also defaults in payment of rent to the members of the Society.
2.7 Under the circumstances, the Society, vide letter dated 8.5.2020, alleging various defaults of the Development Agreement on the part of DB, terminated the Development Agreement. DB challenged the purported termination by filing a Petition under Section 9 of the Arbitration and Conciliation Act, 1996 bearing Commercial Arbitration Petition No. LD-VC-80/2020 before the Hon’ble Bombay High Court. The Hon’ble Bombay High Court vide order dated 26.05.2020, directed the parties to maintain the status quo and also referred the disputes to the Arbitrator appointed.
2.8 The Company Petition, being CP/1390/IB/(MB)/2020, filed under Section 7 of IBC by Beacon Trusteeship Ltd. against the Corporate Debtor was admitted by this Tribunal and the CIRP of the Corporate Debtor began on 30.04.2021.
2.9 As on the date of admission of the Corporate Debtor into CIRP, the Corporate Debtor had sold 224 units and was left with 146 units available for sale at the time. The Project was incomplete. Out of the 15 buildings, which were supposed to be constructed, only 9 buildings were partially constructed, and construction of the remaining buildings had not even commenced.
2.10 The Arbitrator appointed by the Hon’ble Bombay High Court in respect of the disputes between the Society and DB passed an interim Order dated 5.5.2021 (“Interim Award“) granting a conditional stay in respect of the purported termination, which was made subject to compliance of certain terms and conditions to be strictly complied by DB. These terms and conditions, inter alia, included payment of monies towards transit rent, corpus fund, compensation to the members of the Society by DB.
2.11 The violation of the said conditions would lead to the stay of termination being vacated, effectively leading DB and consequently the Corporate Debtor to lose the development rights under the Development Agreement and Redevelopment Agreement respectively.
2.12 The Society is neither a member of the COC, nor is it a participant in the CIRP of the Corporate Debtor. Thus, the COC could not exercise any form of control over the Society’s actions. More importantly, the Corporate Debtor had no direct privity with the Society.
2.13 It is also pertinent to note that the Redevelopment Agreement enabled DB to enforce “step-in rights” against the Corporate Debtor in case of an event of default. DB had, at the time, sought invocation of its step-in rights.
2.14 It is clear from what is stated above, that the Corporate Debtor had no direct privacy with the Society, nor does it have any entitlement to the land on which the Project is being undertaken. The Corporate Debtor’s rights in the Project emanates from the Redevelopment Agreement. In case of termination of the Development Agreement between the Society and DB, the Corporate Debtor will have recourse only against DB. It is clear from the abovementioned facts that, the Corporate Debtor was about to lose the Project altogether, thereby resulting in the creditors of the Corporate ebtors to lose their security, and the home buyers to lose the flats purchased by them.
2.15 For the purpose of survival of the Corporate Debtor, it was necessary to keep the Project going (i.e. for construction to resume), in order to avoid the termination of the Development Agreement by the Society and to convince DB not to invoke its step-in rights against the Corporate Debtor.
2.16 Considering the position of the Society and DB, qua the Project, it was imperative to chalk out a plan of action, with their consent and confidence, so that the Project could be saved and implemented either by the Corporate Debtor or by way of its resolution. In absence of the availability of the redevelopment project and the right to redevelop the land, no Resolution Plan or Resolution Process was possible and the Corporate Debtor was bound to face liquidation.
2.17 The Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor was initiated by this Bench, by an Order dated 30.04.2021, under Section 7 of the Insolvency and Bankruptcy Code 2016 (Admission Order) and Mr. S. Gopalakrishnan, was appointed as the Interim Resolution Professional.The IRP constituted Committee of Creditors. The COC in its 1st Meeting held on 02.07.2021 appointed ( the present Applicant) as the Resolution Professional (RP). The members of the COC filed an Interim Application No.1688 of 2021 (“IA“) before the NCLT praying for appointment of the Applicant to act as the RP of the Corporate Debtor, the same was allowed by this Bench vide an Order dated 25.08.2021. The Chairperson further informed the members of the COC that the Public Announcement was made in the Free Press Journal (English Newspaper) and Nav Shakti (Marathi Newspaper) (Mumbai Edition) on 08.05.2021, pursuant to Section 15 of the IBC, 2016 read with Regulation 6 of the CIRP Regulations and also published the same on the website of IBBI and specially developed website for dissemination of CIRP related data of the Corporate Debtor (http://radiustenbkc.com/). The Applicant submitted the claims as on June 21, 2021, i.e., the date on which the Hon’ble NCLAT vacated the stay on constitution of COC, which are as follows:
