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The NCLAT stays liquidation of "Three C Homes", asked NCLT to explore additional possibilities

The National Company Law Appellate Tribunal (NCLAT) has overturned the NCLT's judgement to liquidate Three C Homes and ordered that additional options for resolving the debt-ridden real estate business be examined.

While remanding the case to NCLT, the appeal panel stated that liquidation should be the last choice for any residential project's bankruptcy resolution process and urged NCLT to reconsider its decision. On February 8, 2021, the National Company Law Tribunal (NCLT) New Delhi bench rejected Ace Infracity Developers' resolution plan for Three C Homes and instructed its resolution professional (RP) Gaurav Katiyar to begin the liquidation process by submitting an application before it. According to NCLAT, while a resolution plan will typically give a higher value than a liquidation value, it may not always be viable in the case of real estate developments. It went on to say that the purchasers are in desperate need of a place to live. "Liquidation is the final step, and this homebuyer programme requires some calibration and appropriate review," NCLAT stated. The appeal tribunal stated that in this instance, certain reconciliations are necessary, such as what is the actual realisable value that the homebuyers are receiving and if it is less than or greater than the liquidation value.

It further stated that there is a need to petition the Yamuna Expressway Industrial Development Authority (YEIDA) to determine the status of the farmer dispute and its consequences. "We are remanding the issue to the Adjudicating Authority and setting aside their liquidation ruling with a direction to evaluate the programme in its entirety, as well as the relevant sections of the Code and Regulations," NCLAT stated. The NCLAT panel of two members, Justice Jarat Kumar Jain and Ashok Kumar Mishra, further stated that the NCLT is allowed to issue suitable orders as they see fit and proper in line with the law.

The NCLAT decision was made in response to a batch of three petitions submitted by stakeholders and its resolution expert Gaurav Katiyar, as well as successful resolution applicants (bidders) Ace Infracity Developers and Lotus City Plot Buyers Welfare Association. The NCLT observed that the liquidation value of Three C Homes was Rs 480.70 crore, but Ace Infracity Developers' resolution plan entails a capital injection of just Rs 95 crore over a two-year period.

According to NCLT, it "does not have any potential" to fulfil the aspirations of homebuyers because it is just 19.77% of the liquidation value. According to the appellants, the resolution plan was adopted with a vote share of 62.9 percent. Furthermore, the resolution plan authorised by the Committee of Creditors (CoC) does not comply with the rules of the Insolvency and Bankruptcy Code (IBC) and the CIRP regulations, which go into effect on August 7, 2020, according to NCLT. The petitioners, however, contended that NCLT did not consider the impact of calculations such as Rs 211 crore, the quantum of debt due to allottees after giving allottees possession of plots, Rs 50.70 crore to be paid by Resolution Applicant to ex-management, and Rs 38.75 crore waived in satisfaction of interest due to allottees.

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