Lotus City not to be liquidated, tribunal rules on plot buyers’ plea

NEW DELHI/NOIDA: The National Company Law Appellate Tribunal (NCLAT) has set aside a liquidation order against Lotus City, a housing project on the Yamuna Expressway, and directed the NCLT to consider the resolution plan afresh.
Lotus City, which 3C Homes Pvt Ltd was implementing, went into insolvency on September 6, 2019. The project was launched as far back as 2012. Throughout the corporate insolvency resolution process (CIRP), only one resolution applicant, Ace Infrastructure, filed a revival plan for Lotus City.
The committee of creditors approved it with a 62.9% vote share, which was considered 100% in favour of the resolution plan in line with the provisions of the Insolvency and Bankruptcy Code. However, the NCLT rejected the resolution plan and ordered a liquidation. It argued that the liquidation value of the project at Rs 480 crore was much higher than the Rs 95 crore required to complete it.
The NCLT, in its order, further argued that the resolution plan assumed that farmers would forego their claim of Rs 71.66 crore in exchange for an investment towards the development of their village, Salarpur.
Piyush Singh of PSP Legal filed an appeal on behalf of Lotus City Plot Buyers Welfare Association, an association of over 250 homebuyers, before NCLAT to set aside the NCLT order and admit the resolution plan should be admitted. The appellants argued before the two-member bench of Justice Jarat Kumar Jain, member judicial, and Ashok Kumar Mishra, member technical, that NCLT did not include the Rs 211 crore debt due to allottees, which would “stand satisfied” after giving possession of plots. The appellants also argued that the NCLT had not included Rs 50.5 crore the resolution applicant paid to the former management of the project.
It was argued by the appellant that “since the settlement was done after filing of approved resolution plan”, the amount should have been included in the cost of resolution.
The NCLAT, in its order, said that while the resolution plan would generally provide higher value than the liquidation value, in case of real estate projects, that may not always be feasible and homebuyers were in dire need of getting their homes at the earliest. “In this case, certain reconciliation is required that what is the actual realisable value which the homebuyers are getting whether it is below liquidation value or above liquidation value”, it observed. Liquidation is the last resort, it noted.
Interim resolution professional (IRP) Gaurav Katiyar told TOI, “According to the resolution plan offered by Ace, it will develop 50% of the 100-acre land area and hand over the same to 500 allottees. The rest of the land it will develop or promote. But this will only be executed after the NCLT issues final orders. There are likely to be a few more hearings before all conflicts in the resolution plan are resolved.”
Lotus City was awarded by NCLT to Ace group for completion in 2020. It is a residential project in Sector 22A. “We had challenged the NCLT order of liquidation at the NCLAT,” Ajay Chaudhary, MD, Ace Group, said.
The NCLT had initiated insolvency proceedings on a petition filed under Section 7 of the IBC by a homebuyer, Arun Kumar Sinha.
“The committee of creditors of the Lotus City CIRP consists fully of homebuyers as there are no other creditors in the project. Over 95% of buyers had voted in favour of Ace but a small segment had disapproved of the plan. We are now happy that we will finally get our developed plots,” Amit Tyagi, member of the core committee of Lotus City Plot Buyer Welfare Association, said.