RP seeks relaxation from provisions of Code in Reverse CIRP mechanism

Case Summary :

An application made by RP to waive or provide relaxation for complying certain provisions of the Insolvency and Bankruptcy Code, 2016 as the Corporate Debtor was admitted under Reverse CIRP mechanism.

Facts of the Case :

1. Application for CIRP of the Corporate Debtor was filed by AU Small Finance Bank Limited under Section 7 of the Code and the same was admitted by the AA vide order dated 25.11.2020.

2. Application was admitted under reverse CIRP mechanism. AA gave directions for performance of duties of RP in order to smoothen the functioning of reverse CIRP process and has given utmost liberty to the Applicant in order to revive the construction at site and finish the project at the earliest in order to gain the maximum benefits for all the stakeholders.

1. 3. RP states that he has been facing dilemma as to whether the following provisions of the Code are to be performed or not in the present case of reverse CIRP being adopted in relation to real estate projects.
   
   1. a. Section 25(2)(c), (g), (h) & (i) of the Act o/2016 and Regulation 27 of the Regulations of 2016 – Valuation of Assets of the Corporator for the purpose of evaluation of Resolution Plan
      
   2. b. Section 29 of the Code and Regulation 36(1) of Regulations of 2016- Submission of Information Memorandum (IM) to CoC
      
   3. c. Section 31 of the Code and Regulations 36A, 36B, 37, 38 and 39 – Resolution Plan

4. Also some operational creditors have submitted their claims in respect of goods supplied and services provided for the project Coral Radha Krishna, however on inquiry to continue with the work, they have stated that they would only work in future if their existing claims are cleared in advance.

Observation :

1. The Hon’ble NCLT’s views in respect of
   1. 1. Valuation of Assets of the Corporator for the purpose of evaluation of Resolution Plan – not required as there would be no occasion for the Project going into liquidation.
   2. 2. Submission of Information Memorandum (IM) to CoC –
      1. a. Prepared only for one project of CD is not feasible and would be meaningless.
         b. Since the CIRP is project specific, there is no need for a Resolution Plan.
   3. 3. Resolution Plan:
      1. a. directed the RP to complete the project on priority basis through
         1. i Existing promoters acting in the capacity of independent financiers and not promoters or
            ii Financial Creditor or
            iii 3rd party private lender
      2. to ensure that CIRP reaches success.
   4. 4. Treatment of the existing operational creditor who demands for clearance in advance- According to Section 53 of the Code.

Judgement :

1. The Hon’ble NCLT waived or given relaxation in complying with certain provisions of the Code so as to achieve the objective of
   1. 1. Completing the project
   2. 2. Repaying the loan of Financial Creditor
      3. Handover the possession of flats to respective allottees and Home Buyers
      4. make efforts to sell the flats which are not booked