NCLT dismisses homebuyers' petition to reject Lavasa insolvency resolution plan

The National Company Law Tribunal (NCLT) has dismissed a petition filed by around 368 homebuyers who had purchased properties from Lavasa Corporation.

The petition had alleged misconduct in the corporate insolvency resolution process (CIRP) of the company and mistreatment of the homebuyers as a class of creditors.

The homebuyers, in their petition, had sought the tribunal’s intervention to declare the resolution plan submitted by Darwin Platform Infrastructure in violation of the Insolvency and Bankruptcy Code (IBC) and prayed to reject the revival plan, which was earlier approved by the lenders of the company.

When the company was admitted into insolvency, it owed more than Rs 6,200 crore to its financial creditors and more than Rs 400 crore to 840 homebuyers.

On August 30, 2018, when the company was admitted for the insolvency process for revival, Hindustan Construction Company (HCC) in its exchange filing said that the project was severely impacted by a notification issued by the ministry of environment and forest (MoEF) that directed the company to stop work for jurisdictional reasons and not for environmental infractions.

Set up in 2000 by the Ajit Gulabchand-led HCC, Lavasa was developing the country’s first privately developed city spread over 20,000 acres in the Mulshi and Velhe areas in Maharasthra’s Pune district, around 180 km from Mumbai. However, the project has been entangled in various issues, including environmental violations and land acquisition.

After Lavasa and its subsidiaries defaulted on debt obligations, the lenders sought debt resolution through the NCLT in August 2018 under the Insolvency and Bankruptcy Code, 2016.

Lavasa was held jointly by HCC with a 68.7% stake, Avantha Group 17.18%, Venkateshwara Hatcheries 7.81% and Vithal Maniar 6.29%.

During the course of the resolution process, the committee of creditors (CoC) approved the resolution plan dated November 20, 2021 as proposed by Darwin Platform Infrastructure, the successful resolution applicant, with a 96.41% voting share in their meeting on November 23, 2021. The said resolution plan is pending for approval before the NCLT Mumbai bench.

According to the homebuyers’ plea, the homebuyers were promised to be paid the liquidation value in case they voted against the plan, but the liquidation value attributable to the homebuyers was never calculated or disclosed.

Homebuyers submitted that the liquidation value derived and presented to the CoC is notional and does not represent the fair value and that the resolution professional completely neglected his duty to calculate the liquidation value for each homebuyer before putting the plan to vote.

"In order to deal with the question that fell for consideration, it is pertinent to note that homebuyers, essentially, constitute a different class of creditors distinct from the other financial creditors. Individual homebuyers may have divergent views, but ultimately, they vote as a class, and individuals therein cannot claim to be ‘dissenting financial creditors’ if they vote against the resolution plan," Justice PN Deshmukh and technical member Shyam Babu Gautam said in the ruling.

The NCLT Mumbai bench is of the view that this is a belated stage for the homebuyers to raise allegations against the authorised representative, especially after the CoC has voted in favour of the resolution plan with an overwhelming majority of 96.14% voting share.

Moreover, the authorised representative has already voted in favour of the plan and a change in this decision would not influence the results in a substantial manner given that the homebuyers hold a 7.45% voting share in the CoC.