This is a peculiar case in which the Flat Buyers Association of Winter Hills -77, Gurgaon, and now the original applicants Mrs. Rachna Singh and Mr. Ajay Singh (Allottees) though want the Corporate Insolvency Resolution Process (CIRP) for resolution but do not want the approval of any plan of a third party (Resolution Applicant). Rachna Singh and Mr. Ajay Singh (Allottees) – Financial Creditors moved an application under section 7 of the Code for initiation of the Corporate Insolvency Resolution Process (CIRP) of M/s Umang Realtech Pvt. Ltd. (Corporate Debtor), a real estate company constructing flats or apartments for allottees.

The Adjudicating Authority by the impugned order dated 20th August 2019 admitted the application. In accordance with the Code, after initiation of the Corporate Insolvency Resolution Process (CIRP), it is the duty of the IRP or RP to keep the company a going concern. In the case of a real estate infrastructure company to keep the company going concerned, the flats or apartments are to be completed.

One of the Promoters i.e Uppal Housing Pvt. Ltd./ Intervenor agreed to remain outside the Corporate Insolvency Resolution Process (CIRP) but intended to play the role of a Lender (Financial Creditor) to ensure that the Corporate Insolvency Resolution Process (CIRP) reaches success and the allottees take possession of their flats or apartments during the Corporate Insolvency Resolution Process (CIRP) without any third-party intervention. The Flat Buyers Association of Winter Hill – 77 Gurgaon also accepted the aforesaid proposal. It is informed that JM Financial Credit Solutions Ltd one of the financial institutions has also agreed to cooperate in terms of agreement with the condition that they will get thirty percent of the amount paid by the allottees at the time of the registration of the flat or apartment. Uppal Housing Pvt. Ltd. invested a certain amount as an outsider Financial Creditor and as Promoter cooperating with the Interim Resolution Professional, having expertise in real estate projects.

The other development is that Rachna Singh and Ajay Singh (Allottees), who moved an application under Section 7 of the Code, joined hands with the Appellant – Flat Buyers Association Winter Hill -77, Gurgaon and became its members. During the last few months, the Corporate Insolvency Resolution Process (CIRP) has progressed and a number of allottees including Rachna Singh and Ajay Singh have already taken possession of their respective flats, and sale deed or deeds have been registered in their favor.

Issues

The issue was whether the Corporate Insolvency Resolution Process (CIRP) proceedings initiated by a flat buyer in relation to one project of a real estate company will affect the other group projects of the company.

Judgment

In Corporate Insolvency Resolution Process (CIRP) against a real estate, if allottees (Financial Creditors) or Financial Institutions or Banks (Other Financial Creditors) or Operational Creditors of one project initiated Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor (real estate company), it is confined to the particular project, it cannot affect any other project or projects of the same real estate company (Corporate Debtor) in other places where the separate plan or plans are sanctioned by different authorities, land and its owner may be different and mainly the allottees (financial creditors), financial institutions (financial creditors, operational creditors are different for such separate project.

Therefore, all the assets of the company (Corporate Debtor) are not to be maximized. The asset of the company (Corporate Debtor – real estate) of that particular project is to be maximized for balancing the creditors such as allottees, financial institutions, and operational creditors of that particular project. CIRP should be a project basis, according to the approved plan by the Competent Authority. Any other allottees (financial creditors) or financial institutions/ banks (other financial creditors) or operational creditors of other projects cannot file a claim before the Interim Resolution Professional (IRP) of other projects and such claims cannot be entertained.

National Company Law Appellate Tribunal (NCLAT) held that Corporate Insolvency Resolution Process (CIRP) against a real estate company (Corporate Debtor) is limited to a project in accordance with the approved plan by the Competent Authority and not other projects which are separate at other places for which separate plans approved. For example – in this case, the Winter Hill – 77 Gurgaon Project of the ‘Corporate Debtor’ has been a place of the Corporate Insolvency Resolution Process (CIRP). If the same real estate company (Corporate Debtor herein) has any other project in another town such as Mumbai or Kerala or Delhi, they cannot be clubbed together nor the asset of the Corporate Debtor (Company) for such other projects can be maximized.