The National Company Law Tribunal, Chennai Bench comprising of Justice S. Ramathilagam and Mr. Anil Kumar B (Technical Member) in the Case of N Kumar v. Tata Capital Housing Finance Ltd. held that the project wise Corporate Insolvency Resolution Process (CIRP) of a real estate company is outside the purview of Insolvency and Bankruptcy Code, 2016 (IBC/Code).
CIRP of Sheltrex Developers Pvt. Ltd (Sheltrex) was initiated by NCLT Chennai vide its order dated vide its order dated 10.12.2019 and Mr. N Kumar was appointed as the Interim Resolution Professional and later confirmed as Resolution Professional.
Sheltrex had launched two real estate projects namely Appur Village, Oragadam, Chennai consisting of 296 homes and Nammavedu at Coimbatore consisting of 110 homes. The Resolution Professional of Sheltrex filed an application under Section 60(5) of IBC seeking permission to constitute project-based Committee of Creditors and conduct project wise CIRP of Sheltrex.
Contentions Of Resolution Professional
It was contended by Resolution Professional that the only business of Sheltrex is promoting real estate project and in particular affordable housing. Each project of Sheltrex have different type of creditors which are not related to each other.
The Resolution Professional further relied upon the judgement of NCLAT in the case of Flat Buyers Association versus Umang Realtech Pvt. ltd. which allowed the project-based insolvency of a real estate company.
Contention of Financial Creditor
Tata Capital Housing Finance Ltd opposed the relief prayed by the Resolution Professional and it was contended by Tata Capital that it holds 17% voting rights in COC and the application filed by the RP is not maintainable as neither the IBC, 2016 nor any regulations stipulate the project wise CIRP.
It was further contended by Tata Capital that CIRP regulations mandates a resolution plan for the entire business of the Corporate Debtor and not project wise and therefore, the application of the Resolution Professional is against the provisions of IBC.
Decision/Analysis By NCLT
NCLT observed that there is no concept of limited CIRP or CIRP for specific projects anywhere in the IBC, 2016 or regulations made thereunder. NCLT further noted that the Supreme Court in the case of Pioneer Urban Land and Infrastructure Ltd. versus Union of India held that IBC is a beneficial legislation which can be trigged to put the whole corporate Debtor back on its feet.
NCLT held that the judgment of Umang Realtech is not applicable to the present case as the mechanism adopted by NCLAT was too peculiar to the facts and circumstances of that case and cannot be used as a precedent in the present scenario.
NCLT dismissed the application filed by Resolution Professional and held that the reliefs sought by Resolution Professional is outside the purview of IBC, 2016 and thus not maintainable.
Case title: N Kumar v. Tata Capital Housing Finance Ltd
Counsel for Applicant: Avinash Krishnan Ravi, Jerin Asher Sojan, Vikram Veerasamy
Counsel for Respondent: Abitha Banu