The NCLAT has laid down a Reverse Corporate Insolvency Process’ for real estate companies, which is in the interest of both the allottees, the companies/Corporate Debtors (CDs) and ensures the completion of real estate projects. It stated that for real estate companies it was not possible to maximise the assets of the CD and to balance the interests of secured and unsecured creditors – financial/operational creditors, for the reason that the infrastructure (flat/apartment) that is constructed for the allottees by the CD is its asset. This asset cannot be distributed as it may be secured in favour of financial institutions, banks, NBFCs. On the other hand, the same asset is to be transferred to the allottees who are unsecured creditors. Banks usually do not accept flats in lieu of monies disbursed by them. While in a normal CIRP the CoC takes a haircut, in the case of allottees (financial creditors) there cannot be a haircut of flats/apartments. In this situation, a ‘Reverse Corporate Insolvency Resolution Process’ would be appropriate wherein the resolution can reach finality without approval of a third party resolution plan.
In the instant case, one of the Promoters of the CD – Uppal Housing Pvt Ltd/ Intervenor agreed to remain outside the CIRP but would play the role of a lender (financial creditor) to ensure the CIRP is successful and the allottees take possession of their flats during the CIRP without any third-party intervention. One of the financial institutions agreed to cooperate on condition that that it would get 30% of the amount paid by allottees at the time of registration of the flat/apartment. Thus, it would be possible to complete the project and hand-over the flats/apartments to the allottees within a time period laid down by the NCLAT.
In such a situation the Appellate Tribunal clarified that:
In this ‘Reverse Corporate Insolvency Resolution Process’ the interest of the allottees is protected and the survival of real estate companies and completion of projects is ensured.
 Company Appeal (AT) (Insolvency) No. 926 of 2019, decided on 4 February 2020, coram : S.J. Mukhopadhaya J. and Bansi Lal Bhat J.
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