In a landmark judgement delivered earlier this month, the National Company Law Appellate Tribunal has allowed Group Insolvency of six real estate companies in order to arrive at a consolidated Resolution Plan for the total development of a township project undertaken by them in Haryana. The Companies referred to group insolvency are Sachet Infrastructure Pvt. Ltd, Magad Realtors Pvt. Ltd, Mehak Realtech Pvt. Ltd, Sameeksha Estate Pvt. Ltd and Jamvant Estates Pvt. Ltd who would now undergo insolvency resolution process along with Adel Landmarks Limited.
The judgment was passed by a three-member Bench of Chairperson, Justice SJ Mukhopadhaya, Member (Judicial) Justice AIS Cheema and Member (Technical) Kanthi Narahari in a batch of appeals preferred by Edelweiss Asset Reconstruction Company Limited against an order passed by the Adjudicating Authority i.e. National Company Law Tribunal, Special Bench, New Delhi. An insolvency plea against Adel Landmarks Limited who was the Principal Borrower was initiated by the Adjudicating Authority in December 2018.
During its pendency, Edelweiss Asset Reconstruction Company Limited, in whose favour Corporate Guarantee was given, filed an insolvency application under Section 7 IBC against nine Corporate Guarantors ie. Sachet Infrastructure Pvt. Ltd, Superlative Infrastructure Pvt. Ltd., Magad Realtors Pvt. Ltd, Mehak Realtech Pvt. Ltd, Sameeksha Estate Pvt Ltd, Manogayan Estates Pvt. Ltd, Bhisham Infrastructure Pvt. Ltd, Neeleshwar Mines & Minerals (India) Pvt. Ltd and Jamvant Estates Pvt. Ltd.
All the applications against the nine Corporate Guarantors/Corporate Debtors were dismissed by the Adjudicating Authority on the ground that since the holder of the Corporate Guarantee i.e Edelweiss Asset Reconstruction Company had triggered corporate insolvency resolution process against the Principal Borrower i.e. Adel Landmarks Limited, its insolvency applications against other Corporate Debtors/Corporate Guarantors for the same set of claim were not maintainable.
Before the Appellate Tribunal, Edelweiss Asset Reconstruction Company argued that the corporate insolvency resolution process could not have proceeded only against Adel Landmarks Limited as it had decided to develop an area of land for construction of flats and shops for certain allottees in consortium with nine other Corporate Debtors, For a successful insolvency resolution, the lands of all the nine Corporate Debtors had to be consolidated for the purpose of construction of the housing projects, it was stated.
Agreeing with Edelweiss Asset Reconstruction Company, Resolution Professional of Adel Landmarks Limited also submitted that given the facts of the case, the resolution process would not succeed if the whole project was not taken over by the Resolution Professional for a consolidated Resolution Plan. A similar plea was taken by all the nine Corporate Debtors.
After perusing the documents on record, the Appellate Tribunal concluded that the Corporate Debtors were ‘Corporate Guarantor’ and also ‘Co-Borrowers’. The Appellate Tribunal further noted that as per the township plan, the project would be developed on the land of five corporate debtors i.e Sachet Infrastructure Pvt. Ltd, Magad Realtors Pvt. Ltd, Mehak Realtech Pvt. Ltd, Sameeksha Estate Pvt. Ltd and Jamvant Estates Pvt. Ltd.
It thus concluded, “We find that it is a case of joint consortium of different ‘Corporate Debtors’ and thereby a group insolvency is required to develop the township on the land of ‘Sachet Infrastructure Pvt. Ltd.’; ‘Magad Realtors Pvt. Ltd.’; ‘Mehak Realtech Pvt. Ltd.’; ‘Sameeksha Estate Pvt. Ltd.’ and ‘Jamvant Estates Pvt. Ltd.’ and others along with ‘Corporate Insolvency Resolution Process’ as initiated against ‘Adel Landmarks Limited’ who is the sole Developer.. .. we hold that group ‘Corporate Insolvency Resolution Process’ proceeding is required to be initiated against five ‘Corporate Debtors’ namely— ‘Sachet Infrastructure Pvt. Ltd.’;
‘Magad Realtors Pvt. Ltd.’; ‘Mehak Realtech Pvt. Ltd.’; ‘Sameeksha Estate Pvt. Ltd.’ and ‘Jamvant Estates Pvt. Ltd.’ apart from the ‘Corporate Insolvency Resolution Process’ which has already been initiated against ‘Adel Landmarks Limited’- (‘Principal Borrower’).” The other four companies out of the nine Corporate Guarantors were left outside the purview of group insolvency as their land or name was not mentioned in the relevant town planning licence. It nonetheless stated that a simultaneous corporate insolvency resolution process could be initiated against them and remitted the matter to the Adjudicating Authority.
The Appellate Tribunal thus set aside the order passed by the Adjudicating Authority and remit the case to the Adjudicating Authority with direction to admit the applications under Section 7 filed by ‘Edelweiss Asset Reconstruction Company Limited' against the five abovementioned companies and to appoint the Resolution Professional of Adel Landmarks Limited as common Resolution Professional to ensure joint corporate insolvency resolution process. Edelweiss Asset Reconstruction Company was represented by Senior Advocate Arun Kathpalia with Advocates Vaijayant Paliwal, Misha and Nikhil Mathur.
The Resolution Professional was represented by Advocates Sumant Batra, Sanjay Bhatt, and Kiran Sharma. The Respondents were represented by Advocates Manisha Chaudhary, Deepti Bhardwaj, Himanshu Handa, Mansumyer Singh.
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