Orris Infrastructure Pvt. Ltd. Vs Rakesh Kumar Gupta & Ors. (Supreme Court of India)
IBC: Fraudulent Initiation Does Not Automatically End Insolvency Proceedings
Remove the Collusive Applicant, Examine Whether CIRP Should Continue
The Supreme Court has held that the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016, has power to recall admission of an insolvency application founded on fraud and collusion.
However, that finding does not inevitably require termination of the entire Corporate Insolvency Resolution Process. Once insolvency proceedings have commenced, independent creditors and other stakeholders acquire interests in the collective process. The Authority must separately consider whether continuing CIRP would serve those interests with integrity and transparency.
The judgment therefore requires two distinct decisions: addressing the fraudulent initiation and determining the future of the insolvency process.
Greenopolis Project and Aggrieved Homebuyers
Orris Infrastructure owned approximately 47.218 acres in Sector 89, Gurgaon. Under a development agreement dated 2 November 2011, Three C Shelters Pvt. Ltd., the corporate debtor, was to construct the Greenopolis project comprising 1,862 flats.
The constructed flats were to be shared in the ratio of 65:35 between the developer and Orris.
Apartment buyer agreements contemplated completion within 36 months, with a six-month grace period. Continued delays led homebuyers to form the Greenopolis Welfare Association and pursue remedies before the Haryana RERA authorities and the consumer forum.
