MUMBAI: The National Company Law Tribunal (NCLT) has dismissed the applications of a housing society seeking to exclude its land from the Corporate Insolvency Resolution Process (CIRP) of realty developer Housing Development and Infrastructure Ltd. (HDIL).
Tagore Park CHSL, the housing society in Mumbai’s Malad suburb, had sought various reliefs, including the exclusion of its land from the CIRP proceedings and a direction to the Resolution Professional (RP) to cooperate in initiating proceedings under the Maharashtra Ownership Flats Act (MOFA), 1963 for deemed conveyance of the land.
The NCLT noted that the insolvency proceedings against HDIL commenced on August 20, 2019, and the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 prohibits any such exclusion. The tribunal observed that the development agreement executed between the housing society and the developer in November 2014 stated that HDIL held the development rights.
The ruling assumes significance in the backdrop of ongoing surge in redevelopment projects in Mumbai, highlighting the importance of proper due diligence that needs to be undertaken while selecting the project developer.
In this case, the RP opposed the applications on several grounds, including the imposition of a moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016, which prohibits the transfer, encumbrance, alienation, or disposal of the corporate debtor’s assets. He argued that the development rights of the property in question were vested in HDIL, making it an asset of the corporate debtor that cannot be excluded from the CIRP.
The tribunal also addressed the issue raised by the RP regarding the disputed title of the land. It opined that the development rights were with HDIL, and any disputes over the title of the property were beyond the jurisdiction of the NCLT and should be adjudicated by a civil court.
Regarding the invitation for Expression of Interest (EoI) for HDIL, published by the RP on December 1, 2023, which included the Tagore Park property, the tribunal found that the RP acted within the scope of the CIRP and the directions of the Committee of Creditors (CoC). The EoI process was rerun as per the orders of the tribunal dated October 9, 2023, and November 20, 2023.
The NCLT further referenced an earlier order dated January 15, 2024, where the RP assured that the rights of the society would be protected under MOFA and the Real Estate (Regulation and Development) Act, 2016 (RERA). The tribunal directed the RP to ensure that the CoC is informed of the society’s rights and that these are protected under any approved resolution plan.
HDIL has admitted liabilities of over Rs 8,138 crores. This includes dues towards secured financial creditors of about Rs 6,835 crore and about Rs 920 crore towards unsecured financial creditors. The company also owes about Rs 620 crore to homeowners.
A total of 7,567 companies across sectors were brought into administration until March end, according to the latest data from IBBI. Of these companies admitted for resolution, 1,589, or 21%, have been from the real estate sector since the inception of the IBC in 2016.
The data indicates that of the total companies admitted under the CIRP, those that witnessed revival or acquisition from a new bidder, about 15% were from the real estate sector.
