NCLT Delhi Holds Suspended Directors Liable For Running Fraudulently

The National Company Law Tribunal ("NCLT"), New Delhi Bench, comprising of Shri Dharminder Singh (Judicial Member) and Dr. Binod Kumar Sinha (Technical Member), while adjudicating a petition filed in M/s Concord Infrastructure Pvt. Ltd. v M/s Shubhkamna Buildtech Pvt. Ltd., has approved the resolution plan submitted by Mr. Sunder Kumar Singhal and Mr. Sunil Kumar Agarwal for M/s Shubhkamna Buildtech Pvt. Ltd. The Bench has also held the Suspended Directors of Subhkamna Buildtech liable for running the business in a fraudulent manner and has directed them to contribute Rs. 106.19 Crores, which would be distributed to the Financial Creditors proportionately. Background Facts M/s Shubhkamna Buildtech Pvt. Ltd. ("Corporate Debtor") is a company engaged in the business of real estate construction and development, which was in process of developing projects on plot of land admeasuring 22565.77 sq. mts. bearing Plot No. GH-05/B situated at Sector 137, NOIDA and Sector 01, Greater NOIDA. The Corporate Debtor had entered into Purchase Agreements with buyers for purchase of flats and commercial areas in its two projects namely Shubhkamna Advert Techomes (Sector 137 NOIDA) and Shubhkamna City (Sector 1, Greater NOIDA West). M/s Concord Infrastructure Pvt. Ltd. ("Operational Creditor") had filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor. The Adjudicating Authority vide an order dated 26.11.2018 had initiated CIRP against the Corporate Debtor. During the CIRP, the Homebuyers and allottees of the Corporate Debtor's Projects had submitted their claim amounting to Rs. 536,70,62,437/-. Mr. Sunder Kumar Singhal & Mr. Sunil Kumar Agarwal ("Successful Resolution Applicants"), who are Chartered Accountant and have huge experience in execution of residential, commercial and industrial real estate projects had submitted a resolution plan for the Corporate Debtor, which was approved by Committee of Creditors (CoC) with 87.57% affirmative vote. Consequently, the Resolution Professional filed an application before the Adjudicating Authority for approval of the Successful Resolution Plan. Further, an application under Section 66 of the IBC was also filed by the Resolution Professional to bring in light the fraudulent transactions done by the Suspended Directors of Corporate Debtor. The Resolution Professional had sought a direction to make the Suspended Directors contribute Rs. 106.19 and their sham fraudulent transactions be reported to IBBI for making a complaint to Special Court under Section 236 of IBC. Decision Of The NCLT The Bench while adjudicating the application for approval of Plan, took note of the objections filed to the Resolution Plan by various stakeholders and observed that very limited judicial review powers are available to the Adjudicating Authority under Section 31 of the IBC. The Bench approved the Resolution Plan submitted by the Successful Resolution Applicant. Under the approved Resolution Plan, the possession will be offered to the Techomes and City residential homebuyers for the units partially completed within a period of 18 months from the Implementation Date or RERA Approval, whichever is later. Further, the possession will be offered to the Techomes and City residential for the units whose construction is not started within a period of 36 month from the Implementation Date or RERA Approval, whichever is later. The lease rentals and lease premium accrued and remain outstanding during the CIRP Period in terms of agreements with such operational creditors shall be paid as CIRP Cost. The Bench also observed that approval of the resolution plan by the CoC, wherein the homebuyers as a class assented to the plan, any individual homebuyer, group of homebuyers or association of homebuyers cannot maintain any challenge to the resolution plan. The Successful Resolution Applicant cannot be allowed to seek modification in the plan with respect to addition of escalation clause in the Resolution Plan.The Bench also declined to entertain belated claims while observing that no belated claims can be entertained when the Resolution Plan has already been approved by the CoC and is pending before the Adjudicating Authority for approval. After the approval of resolution plan by COC, if the Resolution Professional is directed to entertain new claims, then the CIRP would be jeopardized and the Resolution Process may become more difficult. Action Against Suspended Directors The Bench held the suspended Board of Directors of the Corporate Debtor liable under Section 66 of the IBC, for running the business of the Corporate Debtor in a fraudulent and wrongful manner and having siphoned off the funds of the company to the tune of Rs. 106.19 Crores. The Bench has directed the suspended Board of...

NCLT Delhi Holds Suspended Directors Liable For Running Fraudulently

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