Saturday, July 2, 2022

Supertech: National Company Law Tribunal initiates insolvency proceedings

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The National Company Law Tribunal has initiated insolvency proceedings against Supertech Limited for defaulting on payment of loan amount of Rs 431.92 crore to its creditor Union Bank of India.

The NCLT admitted the application of Union Bank of India against debtor Supertech Limited. Supertech had not paid its debt since July 2019.  

Supertech is among India’s leading real estate developers, running its business in the National Capital Region for the past 32 years.

The coram of P.S.N. Prasad, Member (Judicial) and Rahul Bhatnagar, Member (Technical) vide order dated 25.03.2022, prima facie determined that the Union Bank of India is entitled to receive its outstanding financial debt owed by Supertech, since Supertech is found to have committed default with respect to non-payment of financial debt to Union Bank of India. 

P.S.N. Prasad, Member (Judicial) and Rahul Bhatnagar, Member (Technical) vide order dated 25.03.2022 accepted the Union Bank application filed under section 7 (5)(A) of Insolvency and Bankruptcy Code, 2016.

The aforesaid bench declared moratorium in terms of Section 14 of Insolvency and Bankruptcy code,2016.

Certain prohibitions have been imposed on Supertech such as suits pending against Corporate Debtor/any fresh suits filed against Corporate Debtor to be kept in abeyance, transferring/alienating/ disposing any of its assets by Corporate Debtor, etc. 

Other direction that was passed by NCLT Bench, New Delhi that moratorium provisions shall not be applicable to such transactions which are notified by Central Government/ supply of essential goods or services to Corporate Debtor as may be specified, such are not to remain suspended/interrupted during imposition of moratorium period. 

In addition to it,  provisions of moratorium shall not be applicable to the surety in a contract of guarantee to the corporate Debtor in view of section 14(3)(b) of Code, held by NCLT Bench, at New Delhi.

There are also certain Directions for Interim Resolution Professional with regard to his functioning as laid down under Sections 15, 17, 18,19,20 and 21 of Code. 

The  NCLT order passed on Friday, makes it clear for all personnel connected to Supertech Limited, its promoters or any other person linked with management of Corporate Debtor contains legal obligation under Section 19 of Code to assist and cooperate the IRP in managing day-to-day affairs of Supertech.

Union Bank of India had approached the National Company Law Tribunal, Principal Bench at New Delhi by preferring an application under Section 7 of IBC Code,2016 seeking commencement of Corporate Insolvency Resolution Process (CIRP) for alleged default of Rs 431,92,53,302.

The facts averred in the Union Bank of India’s application alleging misconduct of Supertech are as follows :-

M/s Supertech Limited (Corporate Debtor) approached various Financial Institutions in 2013 including Financial Creditor to avail a credit facility of Rs 350 crore from a consortium of banks. The exposure of financial creditor i.e. the Lead Bank was Rs 150 crore. The main objective to avail the said loan amount was to part finance the development of Corporate Debtor’s Project namely Eco Village. The estimate projected cost was Rs 1106.45 crore. 

Thereafter, vide sanction letter  dated  19.10.2013  and  revised letter dated 16.12.2013, Supertech was granted credit facility of Rs 150 crore for development of Eco Village II Project. 

Supertech had submitted title deeds of property for creating an equitable mortgage on said property vide memorandum of deposit of title deeds dated 30.12.2013, in pursuance of loan agreement executed between Union Bank of India and M/s Supertech Limited.  

Supertech again approached the Financial Creditor and Bank of Baroda (formerly known as Vijaya Bank) for part financing the construction of Phase-II of this Project. Union Bank of India and Bank of Baroda agreed to extend the second credit facility for Rs 200 crore to the Respondent out of which the total exposure of the Financial Creditor was Rs 100 crore. The  credit  facilities  were granted to Supertech by Union Bank of India, vide sanction letter  dated  21.11.2015  which  was  revalidated  vide sanction  letter  dated  11.08.2016. M/s Supertech, along with Union Bank of India and Bank of Baroda entered into a Construction Facility Agreement dated 07.09.2016. In order to secure the credit facility from the Union Bank of India and Bank of Baroda, the Corporate Debtor delivered the Title Deeds of the Subject Property for creation of mortgage on pari-passu basis.

Contentions on behalf of Supertech Limited  

  • Application filed by Financial Creditor through an officer was not an authorized person.
  • Filing of Form 1 by Union Bank of India was not in accordance under Section 7 and Section 215 of IBC.
  • NPA Classification is contrary to guidelines of RBI.
  • There was restriction placed upon vide such inter creditor agreement on the lenders, restricting them to file any action for winding up, liquidation, bankruptcy or insolvency.

Further, on behalf of Supertech Limited, the counsel made submission that they made one-time settlement proposal which was not accepted by Financial Creditor.

That it is mandatory for the applicant to furnish name of Interim Resolution Professional in view of sub section 3(b)(7) of IBC Code,2016 , that is why Hitesh Goel was appointed as IRP by applicant Union Bank of India. 

Other prominent insolvency cases

  1. Jaypee Infratech

Jaypee Infratech went into an insolvency process last on August 2017, on a plea by an IDBI Bank-led consortium. The state-owned NBCC got approval from NCLT to acquire debt ridden Jaypee through insolvency process and to complete  20,000 flats (approx.) in three and half years.

In the first round of insolvency proceedings in 2019, Rs 7,350-crore bid of Lakshadweep, which was a part of Suraksha Group, was rejected by lenders.

The CoC rejected the bids of Suraksha Realty and NBCC in the the second round held in May-June 2019.

The matter reached the National Company Law Appellate Tribunal (NCLAT) and then the apex court.

On November 6, 2019, the Supreme Court directed completion of Jaypee Infratech’s insolvency process within 90 days and the revised resolution plan to be invited only from NBCC and Suraksha Realty.

  1. 3C Projects  

Insolvency proceedings against 3C projects commenced by NCLT In. In this case, NCLT came to the finding that there was default on the part of builder who failed to provide homes to homebuyers within 33 months even after receiving Rs 1.41 crore. 

  1. Spaze Tower Pvt Ltd 

This case pertains to 40 buyers who booked commercial space in Gurgaon, wherein builder assured to repay the investment at Rs 55 or Rs 65 per sq foot per month till office units get leased out. Arrears of assured returns and money owed by a builder to a buyer with whom an agreement is in place to make regular payments qualify as ‘financial debt’, the National Company Law Appellate Tribunal (NCLAT) has said in its order.

  1. MGF Developments

In December 2021, post-settlement among buyers and company, insolvency proceedings against MGF Developments were withdrawn. Vide NCLT Order, the builder had to pay entire Interest Bearing Maintenance Security amount with interest to buyers. A plea was filed by residents association of Villas Condominium, for breaching clauses of the agreement. 

  1. Lavasa 

Darwin Platform Infrastructure Limited won Rs 1,864 crore bid to acquire Lavasa Corporation, through insolvency process approved by debt-ridden firm’s lenders, in December 2021. It went to NCLT in 2018. Upon application of Hindustan Construction Company, CIRP was initiated. 

  1. Ariisto Developers

In June 2021, Prestige Estates Projects acquired bankrupt Ariisto Developers Pvt. Ltd under IBC Code. An upfront payment of Rs 370 crore was made to lenders. 

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