Parul Kaul (name changed) booked two flats in Lotus Panache in Noida in 2013 – one for herself and the other for her parents. She paid almost 95 percent of the total cost of the flats but is yet to get possession.
However, Kaul is hopeful now. After corporate insolvency proceedings were initiated against 3C Company, the developer, approval of a resolution plan is almost at hand. And in the two years since the resolution professional was appointed, he and a group of home buyers have ensured the construction of seven towers.
Project launch and current status
The project spread over 30 acres was launched on May 11, 2010. Initially, there were 30 towers and later one more was added, becoming another point of contention between the buyers and the developer.
Construction was to be completed by August 2013 but the developer failed to do so.
A total of 4,256 units were expected to be delivered within three years but only six of the 31 towers were completed and registered – tower numbers 8, 9, 10, 11, 12, and 12A.
Towers 11, 12 and 12 A, each with 96 apartments, were delivered in 2014, and towers 8, 9 and 10, with 156 flats each, in 2015. All these towers were sold in 2010 and are currently fully occupied.
The apartment sizes start at 988 square feet and go up to 2,587 sq. ft. The price in 2010 ranged from Rs 3,057 to Rs 3,835 per sq. ft.
Just before the insolvency process started, the builder completed towers 4, 5, 6 and 30 but they haven’t been registered because occupancy certificates from the Noida Authority are pending. This means the developer completed 10 towers.
Homebuyers pooled in the outstanding amounts and managed to complete or are in the process of completing six towers under the supervision of the resolution professional - towers 14, 15, 16, 27, 28 and 29.
The remaining towers will be built by the resolution applicant once the National Company Law Tribunal approves the plan.
What the buyers did
The buyers first approached the consumer court and later filed insolvency resolution proceedings against the builder.
In 2015, the Lotus Panache Welfare Association filed a complaint with the National Consumer Disputes Redressal Commission (NCDRC).
A settlement was reached on March 25, 2017, but the promoters of the project allegedly failed to comply with the terms of the deal. Homebuyers who are part of the association said the terms and conditions are confidential. The settlement is said to pertain to aspects such as penalties to be paid by the builder and revised deadlines for completion of the project.
The association then filed an execution application with the NCDRC, which issued a recovery notice to the district collector of Gautam Buddh Nagar. This is still pending.
In 2019, the homebuyers approached the NCLT in their capacity as financial creditors, seeking liquidation of the company and a refund of their money. The tribunal appointed PS Soni as the resolution professional and during his tenure, two expressions of interest were received from builders Jaipuria and Purvanchal for the completion of 20 towers.
SMV Agencies, a part of the Jaipuria Group, was approved by 85 percent of the homebuyers.
Case progress and problems
The resolution plan of SMV Agencies was approved by the committee of creditors in 2020. As per the resolution plan, the pending construction would be completed within 24 months and SMV Agencies would pay the Noida Authority about Rs 21 crore to settle outstanding dues. This plan, though, is pending before the NCLT. The date of the next hearing is on September 12.
However, there is a stumbling block. Units in Lotus Panache cannot be registered unless the issue of the Noida Authority’s claimed dues of Rs 530 crore is resolved.
According to the resolution plan, SMV Agencies agreed to give Rs 21 crore to the Noida Authority, which would be the liquidation value of the project. But if the Noida Authority continues to demand Rs 550 crore as dues, then there’s no hope for homebuyers who may have already paid up to 90 percent of the cost of the apartments to the developer.
The Noida Authority had initially claimed that its land dues were about Rs 900 crore.
The 3C Company was floated by promoters Nirmal Singh, Supreet Singh, and Vidhur Bhardwaj.
The Lotus Panache project located in Sector 100 of Noida was being developed by Granite Gate Properties, a 3C Company group firm.
All promoters are out on bail. Bhardwaj, who often spoke to the media in the past, did not respond to messages from Moneycontrol seeking comment on the matter.
The homebuyers alleged that the promoters diverted the money collected for the Lotus Panache project to other projects.
According to a news report published in December 2018, the Economic Offences Wing of the Delhi Police arrested 3C Company directors Nirmal Singh, Supreet Singh, and Vidur Bhardwaj on charges of irregularities after a complaint filed by Lotus Panache homebuyers.
Sumeet Saxena booked a unit in Lotus Panache in 2010 and was initially pleased with the pace of construction. Since the superstructure was ready by then, most homebuyers had paid up almost 95 percent of the cost of the apartment.
“It was around this time that changes in the project plans were discovered, which were not disclosed to us earlier. An additional tower had been planned,” he said.
More than 500 homebuyers decided to take the legal route in 2015 by approaching the NCDRC, but the builder, despite making commitments before the consumer court, did nothing on the ground.
“By then, the project moved into insolvency,” Saxena said.
The buyers were initially overwhelmed by the insolvency process.
“We had a tough time with the first resolution professional, who was later replaced. The current RP has helped us complete seven towers (about 800 units) and two more would be completed soon through the pool-and-build arrangement that we came up with under which the units are being completed using the pending receivables from homebuyers,” Saxena said.
Saxena said the delay in the project altered his plans. He bought a read-to-move-in flat in another project. He continues to pay his equated monthly installment on the home loan and said the amount of interest he has paid “has had a huge impact on my disposable income.
Saxena advises those who want to buy their own place to go in for a ready-to-move-in apartment.
“That is the safest mantra now,” he said.
However, the Lotus Panache case is quite unlike other stalled projects.
“I see other projects that have gone into insolvency and feel that we are far ahead of them. We are now waiting for the resolution applicant (SMV Agencies) to be appointed by the NCLT. There is definitely hope for us homebuyers,” he added.
Chandra Prakash, the current resolution professional, agreed that a conclusion to the case is at hand.
“We are towards the fag end of the corporate insolvency resolution process and are hopeful that the recent Supreme Court order stating that Noida Authority is an operational creditor will help us. It may be another five to six months before the successful resolution applicant is appointed by the NCLT. A total of Rs 250 crore would be required going forward to complete the remaining 1,700 units,” he said.
Homebuyers whose apartments are being completed have agreed to pay the balance amount under the construction-linked plan as also an additional 8 percent as a returnable contribution towards the shortfall. The amount will be returned to them once the resolution applicant formally takes over the company and is in a position to monetise the assets available. Funds will also be generated through the sale of unsold inventory and parking slots.
The shortfall, if any, will have to be compensated via interim finance through financial institutions and will be paid back after the assets are monetised by the resolution applicant.
Experts said that usually, the initiation of insolvency resolution proceedings against a developer where hundreds of people are involved leads to disappointment and anxiety for the homebuyers. It is important, they said, that homebuyers accept and understand that the project has reached an insolvent state and they will have to collectively try and find a solution rather than continue to agitate and seek redressal of individual grievances.
“The homebuyers of Lotus Panache, to a large extent, have achieved that and have been able to not only find a resolution plan which meets their approval but facilitated the RP to continue the operations of the company as a going concern during the insolvency resolution process,” said Sahil Sethi, an advocate and one of the lawyers representing the resolution professional in the matter. “The key in projects undergoing insolvency resolution is the collective strength of homebuyers.”
2010: The project was launched.
2010-13: Money collected from homebuyers
2013: Construction of the project was to be completed by the promoter.
2013-15: Meetings between the homebuyers and promoters’ representatives.
2015: Complaint filed by Lotus Panache Welfare Association with NCDRC.
2017: Complaint disposed of in terms of settlement agreement dated March 25, 2017.
2018: Promoters fail to comply with terms of the settlement; execution application filed by LPWA before NCDRC.
2018: A recovery certificate was issued by NCDRC to the collector, Gautam Buddh Nagar.2019: Homebuyers take promoters to NCLT