NCLAT admits SBI plea against Lavasa Resolution
Mumbai, Nov 23, 2023
Synopsis
This is the second bank objection to the loan default resolution of Lavasa Corporation, billed as the first private hill town project to be built since Independence. It comes almost two years after creditors approved the plan overwhelmingly in December 2021 and months after the NCLT gave its nod in July this year.
The insolvency process for the bankrupt Lavasa Corporation took a new turn with the principal bench of the National Company Law Appellate Tribunal (NCLAT) allowing a State Bank of India (SBI) petition seeking to set aside a lower court's approval for the resolution plan submitted by Darwin Platform Infrastructure (DPIL).
This is the second bank objection to the loan default resolution of Lavasa Corporation, billed as the first private hill town project to be built since Independence. It comes almost two years after creditors approved the plan overwhelmingly in December 2021 and months after the NCLT gave its nod in July this year.
In its application, the SBI had sought to set aside the NCLT order and contended that DPIL did not adhere to the waterfall mechanism of the Insolvency and Bankruptcy Code (IBC) which does not treat government dues as secured creditors. Former attorney general of India KK Venugopal represented the SBI, seeking condonation of delay in filing the appeal.
The SBI did not reply to ET's emailed queries regarding the development.
In its July order, the NCLT had relied on the Supreme Court's ruling in the Rainbow Papers case, which gave state tax authorities parity with secured financial creditors, contrary to the IBC waterfall mechanism. Late last month, the apex court also dismissed review petitions challenging its Rainbow Papers order.
In a short order earlier this week the NCLAT gave the SBI and DPIL two weeks to file a reply. The case will now be heard on January 10, 2024.
Responding to a query by ET, DPIL said SBI's petition was a delaying tactic rather than a legitimate concern.
"SBI's legal action lacks jurisdiction and raises questions about the sincerity of their motives. SBI's withdrawal petition raises doubts about the transparency and fairness of the resolution proceedings, creating unnecessary hurdles in the timely resolution of the much-awaited Lavasa Smart City," it said.
Documents accessed by ET showed that resolution professional Shailesh Verma also opposed the SBI's plea because it was filed beyond the 15-day limit set for an appeal by the IBC. Verma did not reply to an email seeking comment.
The SBI appeal comes less than a month after lead lender Union Bank of India had sought withdrawal of the NCLT approval, alleging connivance between Verma and the winning bidder to undervalue the real estate assets of Lavasa Corporation, resulting in a loss to the creditors of the company.
"This petition was dismissed by the NCLT earlier this month but the court has allowed Union Bank to file a fresh plea in NCLAT which the bank is likely to pursue," a person aware of the bank's plan said on condition of anonymity.
Union Bank of India did not reply to ET's queries.
"There is no stay on DPIL taking control of Lavasa but it requires an infusion of ?100 crore to take care of the costs, another ?100 crore upfront or equity payment and also intimation to all regulators and shareholders. The fact that DPIL has not done it raises a lot of doubts," said a second person familiar with the case.
DPIL's final plan submitted in December 2021 had envisaged a total payout of ?1,814 crore over eight years to lenders and included delivery of fully constructed houses to 837 home buyers, at a haircut of about 79% to financial creditors.
Four months since the July NCLT order, DPIL has not moved to implement its plan, leading to doubts over its intentions.
[The Economic Times]
