Tulip Kanth

New Delhi, April 28, 2022: Considering the possibility that the cost to be paid by the home-­buyers will be much higher if the Corporate Insolvency Resolution Process (CIRP) is permitted, the Supreme Court has allowed the promoter of Soni Infratech Private Limited (Corporate Debtor) to complete the housing project as per the deliberations that took place in the Minutes of the Meeting dated October 23, 2021 and in accordance with the promoter’s affidavit and undertaking dated December 27, 2021.

The Division Bench of Justice L.Nageswara Rao and Justice B.R.Gavai was hearing an appeal challenging the order passed by the National Company Law Appellate Tribunal, Principal Bench, New Delhi thereby rejecting the Modification Application filed by the appellant herein, who is the Suspended Director of the Corporate Debtor. 

The factual scenario of this case was such that the second respondent herein had booked a flat in the housing project launched by the Corporate Debtor but later, he cancelled the booking and demanded refund of the amount of Rs 32,27,591 from the Corporate Debtor. On failure of the appellant in refunding the amount, the second respondent filed an application under Section 7 of the IBC against the Corporate Debtor for initiation of CIRP before the National Company Law Tribunal, New Delhi. The NCLT admitted the said application and the IRP was directed to initiate the CIRP of the Corporate Debtor.

When the appellant being aggrieved by this order filed an appeal before the NCLAT then an interim order was passed directing the IRP not to constitute CoC. Consequently, by virtue of an order, the appellant herein submitted the proposed settlement terms and the IRP submitted that most of the Allottees decided to have possession of the flats. In the meantime, the appellant settled the matter with the second respondent. Despite this, the NCLAT directed the IRP to carry forward the CIRP. The said order was passed on the ground that the settlement arrived at by the appellant was only with the second respondent and the settlement plan did not encompass all the Allottees.

On this Court’s order, when the appellant filed the modification application, the NCLAT rejected the same and hence, this appeal was filed.

The Division Bench was of the opinion that in accordance with the directions issued by the NCLAT, a meeting was convened on October 23, 2021 wherein some home-­buyers requested for further modification of some contentious points of the ‘Modified Resolution Plan’ and most of the concerns as expressed on behalf of the home­ buyers were taken care of by the statement made on behalf of the Promoters.

It was primarily noted that even though a meeting of various stakeholders was conducted on October 23, 2021 in pursuance to the directions issued by the NCLAT in which meeting most of the issues stood resolved but the NCLAT failed to take into consideration the minutes of the said meeting and the Revised Status Report.

Not only this but the Promoter, Shri Kashi Nath Shukla had also filed an undertaking to return the money with interest at the rate of 6% per annum of seven applicants who were objecting to the Settlement Plan submitted by the appellant. 

Thus,taking into consideration the facts and circumstances of the present case, the Division Bench said, “…we find that it will be in the interest of the home-­buyers if the appellant/promoter is permitted to complete the housing project.”

The Bench also put forth the conditions mentioned in the affidavit which were that the project will be completed stage­wise within a period of 6 months to 15 months (+/­ 3 months) in a phased manner, the promoter has arranged an amount of Rs 10 crores to start the project immediately without any delay, the cost of the flat will not be escalated and that the promoter is agreeable to honour the BBA signed by the previous management. It was also mentioned therein that SBI Cap Ventures Ltd. has already shown interest for further loan of Rs 100 crore and the promoter has given his consent to make a team of 5 persons, 2 from home­buyer’s side and 2 from the management side and that the entire process will be monitored by the IRP.

Considering the salient features of the undertaking given on affidavit by the Promoter, Shri Kashi Nath Shukla and the fact that there were only seven out of the 452 home-­buyers, who opposed the Settlement Plan, the Bench found that it would rather be in the interest of the home-­buyers that the appellant/promoter is permitted to complete the project as undertaken by him.

The Bench also noted that there is every possibility that if the CIRP is permitted, the cost that the home-­buyers will have to pay, would be much higher, inasmuch as the offer made by the resolution applicants could be after taking into consideration the price of escalation, etc. As against this, the Promoter had filed a specific undertaking specifying therein that the cost of the flat would not be escalated and that he would honour the BBA signed by the previous management.

Thus, allowing the appeal and quashing the order of the NCLAT, the Top Court permitted the appellant/promoter to complete the project.

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