Will NCLT’s approval of Ace Infracity resolution plan for 3C Homes set precedence?

Under the resolution plan, allottees will get possession of 512 residential plots of the Lotus City project, valued at Rs 211 crore after it is developed

In an order that will bring relief to over 500 plot owners of Lotus City that was launched by the beleaguered 3Cs Group along the Yamuna Expressway almost a decade ago, the National Company Law Tribunal (NCLT) has approved the resolution plan submitted by Ace Infracity Developers Private Ltd. The NCLT did not entertain the objections put forward by the Yamuna Expressway Industrial Development Authority (YEIDA), the land allotting body, and held that the amount of Rs 67 crore being brought in by the corporate debtor was sufficient for them to settle their dues.

Under the resolution plan, allottees will get possession of 512 residential plots of the Lotus City project, valued at Rs 211 crore after it is developed. The term of this plan is 24 months within which the plots would be developed and delivered.

Legal experts say that the order will not only bring relief to hundreds of families of this project but also clear the way for similar projects that are stuck due to disagreements with development authorities.

The NCLT bench observed the resolution plan submitted by Ace Infracity Developers has been approved by the committee of creditors (CoC) with 100 percent votes and it cannot "interfere with the commercial wisdom" of the lenders.

“As per our best estimate, the principal amount payable to YEIDA amounts to Rs 70.81 crore and lease rent of Rs 3.69 crore already paid …,” the order said.

YEIDA had objected to the resolution plan, stating, “The Resolution Plan in its current form results in the Resolution Applicant acquiring approximately 100 acres of land on payment of a mere pittance of Rs 67.12 crores towards outstanding dues and Rs 506 crore payable by the Corporate Debtor in terms of lease deed.”

Piyush Singh, founding partner of PSP Legal, who represented buyers before the Supreme Court, NCLT and the National Company Law Appellate Tribunal (NCLAT), said, "This judgment will not only bring relief to hundreds of families but also clear the path for more resolution plans which are stuck due to non-cooperation of authorities like NOIDA (New Okhla Industrial Development Authority), Greater Noida Authority, YEIDA, etc. The authorities should keep the interest of the allottees over the unnecessary and avoidable litigation."

“The NCLT has noted that Rs 67 crore that is being brought in as the principal amount by Ace is sufficient for YEIDA which had earlier raised a claim of around Rs 506 crore,” he added.

The order

A two-member bench of the NCLT in a June 14 order said the application "which is for approval of the Resolution Plan is allowed and the Resolution Plan of Rs 140.39 crore is hereby approved".

The tribunal said that the resolution plan submitted by Ace Infracity Developers is now "binding on the Corporate Debtor (Three C Homes) and other stakeholders" and shall come into force with immediate effect". In its 27-page long order, the NCLT said it is "satisfied that the Resolution Plan has made adequate provisions with respect to all the objections raised by" YEIDA.

"The Monitoring Committee shall continue till the closing date. The Resolution Applicant would take a RERA Re-registration for the completion of the work as defined above," it said.

Homebuyers’ take

According to the order, the term of this resolution plan is 24 months “from the effective date” within which the plots would be developed and delivered. Amit Tyagi, a core member of Lotus City Plots Buyers Association, told Moneycontrol that they had finally received justice.

“The incoming company will now have to fulfil all the liabilities of the old company. It will now have to provide for peaceful possession of the plots, provide for sewage facilities, level the land, roads, lights, club facilities and also seek for fresh approvals from the authority such as re-registration from (the state) RERA (Real Estate Regulatory Authority) for completion of the work,” he explained.

Buyers have already paid around 65 percent of the cost of the plots, he said. “Going forward, a monitoring committee that will have two homebuyers as representatives, two representatives of Ace and the resolution professional will also be set up whose task will be to ensure that the entire resolution plan is delivered on ground,” he added.

The back story

The corporate insolvency resolution process was initiated by the NCLT against Three C Homes Private Limited on September 6, 2019. Gaurav Katiyar was appointed interim resolution professional (IRP).

He had selected two eligible prospective resolution applicants for submission of bids, East India Udyog Ltd, which was in a joint venture with Ashiana Housing, and Ace Infracity Developers. Two others, ND Software, a partnership firm, and Harshvardhan Reddy, were found ineligible. The CoC in its fifth meeting in 2020 opted for Ace Infracity's bid.

On February 8, 2021, the NCLT had rejected the plea filed by the IRP seeking approval of the resolution plan, following opposition by some of the allottees.

This was challenged before the NCLAT by the homebuyers’ association. On July 8, 2021, NCLAT remanded the matter back to the NCLT and directed that benefits of homebuyers be reconciled in the approved resolution plan. It had also impleaded the YEIDA to determine the status of the dispute with the farmers from whom the land was acquired.

Lotus City Plot Buyers Welfare Association filed an appeal before the Supreme Court against the NCLAT order. The court remanded the case back to the tribunal.