Lotus 300 Apartment Owners, ... vs Induslnd Bank Ltd. & Ors

(Arising out of the Order dated 11.11.2022 passed by the National Company Law Tribunal, New Delhi Bench (Court-II) in CP (IB) No. 419(ND)/2022)

IN THE MATTER OF:

Lotus 300 Apartment Owner Owner's Association, GH-01, Sector 107, Noida, Gautam Budh Nagar 201301 ...Appellant Versus

1. IndusInd Bank Ltd., (Acting through its Authorized Officer) Branch Office at Hyatt Regency Complex, 11th Floor, Block A, District Centre, Bhikaji Cama Place, R.K. Puram, New Delhi - 110066. ...Respondent No. 1

2. Hacienda Project Private Limited Having Registered Office at: C-23, Greater Kailash Enclave Part-I, South Delhi, New Delhi-110048.

Also at: Tech Boulevard, Central Block, Plot No. 6, Sector 127, Noida, Uttar Pradesh-201301,

Through its Interim Resolution Professional Shri Ayyagari Viswanadha Sarma Registration No. IBBI/IPA-001/IP-01524/2018- 19/12396, ...Respondent No. 2 Comp. App. (AT) (Ins.) No. 1471 of 2022

3. Interim Resolution Professional/ Resolution Professional of the Corporate Debtor presently being Shri Ayyagari Viswanadha Sarma Registration No. IBBI/IPA-001/IP-01524/2018- 19/12396, C-23, Greater Kailash Enclave Part-I, South Delhi, New Delhi-110048.

Also at: Tech Boulevard, Central Block, Plot No. 6, Sector 127, ...Respondent No. 3 Noida, Uttar Pradesh-201301.

Present For Appellants: Ms. Purti Gupta, Ms. Henna George & Ms. Sunidhi Sah, Advocates.

For Respondents: Mr. Diwakar Maheshwari, Ms. Pratiksha Mishra & Mr. Karan Bhootra, Advocates for R1.

JUDGEMENT

( 28.05.2025)

NARESH SALECHA, MEMBER (TECHNICAL)

1. The present Company Appeal (AT) (Ins) No. 1471 of 2022 has been filed

by the Appellant i.e. Lotus 300 Apartment Owners', which represents the owners

of 330 residential Apartments in Lotus 300 Project of the Corporate Debtor,

Hacienda Projects Pvt. Ltd., under Section 61 of the Insolvency and Bankruptcy

Code, 2016 ('Code'), challenging the Impugned Order dated 11.11.2022 passed

by the National Company Law Tribunal, New Delhi Bench (Court-II)

("Adjudicating Authority") in CP (IB) No. 419(ND)/2022.

Page 2 of 16

Comp. App. (AT) (Ins.) No. 1471 of 2022

2. IndusInd Bank Limited, who is the Financial Creditor, is the Respondent

No. 1 herein.

3. Hacienda Projects Pvt. Ltd., who is the Corporate Debtor, is the

Respondent No. 2 herein.

4. Interim Resolution Professional/Resolution Professional of the Corporate

Debtor is the Respondent No. 3 herein.

5. The Appellant submitted that it is the sole registered association since

31.10.2019 representing buyers of all 330 apartments in the Lotus 300 Project,

the only real estate project of Hacienda Projects Pvt. Ltd., launched in 2010 at

Plot No. GH-01/A, Sector 107, Noida. All apartments are sold, with 295 owners

having made full payments and received fit-out possession letters.

6. The Appellant submitted that the project, slated for completion by 2014,

was abandoned by the Corporate Debtor's promoters, who siphoned off Rs. 190

Crores, prompting FIRs and a charge sheet. The Appellant submitted that it

recovered Rs. 25 Crores via Economic Offences Wing, Delhi, and Rs. 18.78

Crores through Delhi High Court proceedings, reflecting its proactive efforts to

protect homebuyers.

7. The Appellant contended that homebuyers invested over Rs. 636 Crores

between 2010-2014, with a financial stake exceeding Rs. 1,000 Crores. Since

2019, the Appellant has funded Rs. 15 Crores and plans Rs. 10-15 Crores more

to fully complete the project, with two towers complete, four near completion.

Page 3 of 16

Comp. App. (AT) (Ins.) No. 1471 of 2022

8. The Appellant submitted that the project's external development (central

park) is at the final stage, and the community club is partly done, but completion

is stalled due to unpaid Noida Authority dues, hindering occupancy certificates

and sale deed registrations, despite homebuyers' payments to the Corporate

Debtor.

9. The Appellant contended that the Impugned Order, admitting the Section

7 petition by IndusInd Bank for Rs. 33 Crores, was passed mechanically without

notice to the Appellant, violating principles of natural justice. It is the case of the

Appellant that the loan appears collusive, as the project was fully funded by

homebuyers, and the Bank's claim is a fraction of the homebuyers' stake.

10. The Appellant submitted that the Adjudicating Authority failed to consider

the project's near-completion and homebuyers' efforts, contravening Vidarbha

Industries Power Ltd. v. Axis Bank Ltd., [(2022) SCC OnLine SC 841], which

holds that CIRP admission under Section 7(5) of the Code is discretionary and

must account for the Corporate Debtor's viability and stakeholders' interests.

11. The Appellant contended that the Resolution Professional's takeover

would delay completion, as it lacks funds and capability to finish the project,

creating a quandary for homebuyers who have waited 8-10 years, enduring EMI

and rent burdens.

12. Concluding his arguments, the Appellant requested this Appellate Tribunal

to keep the Impugned Order in abeyance and allow its prayers.

Page 4 of 16

Comp. App. (AT) (Ins.) No. 1471 of 2022

13. Per contra, the Respondent No.1, the main contesting Respondent, denied

all averments made by the Appellants as misleading and baseless.

14. The Respondent No. 1 submitted that the present appeal filed by the

Appellant against the Impugned Order dated 11.11.2022, is not maintainable, as

the Appellant lacks locus standi, not being a party to the original proceedings.

The Appellant's impleadment in Company Appeal No. 1410/2022 filed with

Suspended Director of the Corporate Debtor (also being heard by us along with

this appeal), allows it to agitate grievances there, rendering this appeal redundant.

15. The Respondent No. 1 contended that the Impugned Order, admitting the

Section 7 application under the Code, is well-reasoned, having considered the

Corporate Debtor's submissions and the Adjudicating Authority rightly found

that the Corporate Debtor's default of Rs. 33,00,42,833.09/- justifies CIRP

initiation.

16. The Respondent No. 1 submitted that the Appellant's allegation of a

collusive loan is baseless and unsubstantiated. The Bank's application under

Section 7 seeks recovery of rightful dues from the Corporate Debtor, which has

been a Non-Performing Asset since 29.12.2020, negating claims of temporary

hardship.

17. The Respondent No. 1 contended that the Lotus 300 Project is far from

complete, with only two of six towers finished and pending works (main

electricity, basement, fire ventilation, club, swimming pool, horticulture, and

Page 5 of 16 Comp. App. (AT) (Ins.) No. 1471 of 2022

main gate) requiring at least two years. The Corporate Debtor's failure to pay

Noida Authority dues further obstructs project completion.

18. The Respondent No. 1 submitted that the Appellant's claim of promoters

siphoning Rs. 190 Crores is irrelevant to this appeal and should be addressed

before the Adjudicating Authority or RERA and not before this Tribunal in guise

of Appeal against the Impugned Order.

19. The Respondent No. 1 submitted that CIRP does not prejudice

homebuyers, as the CoC itself can take measures like raising funds on the basis

of the Corporate Debtor's assets (Lotus 300 being the primary asset), collecting

pending dues from homebuyers and the Appellant part of CoC can oversee

completion. The Appellant's reliance on Vidarbha Industries Power Ltd.

(Supra) is misplaced, as the Adjudicating Authority applied its judicial mind and

found no exceptional circumstances to deny CIRP.

20. The Respondent No. 1 submitted that the Adjudicating Authority's

findings align with precedents like Drip Capital Inc. v. Concord Creations,

[(2021) SCC OnLine NCLAT 616], which upheld CIRP admission upon

established default. The Corporate Debtor's claim of financial viability is

undermined by its failure to repay debts despite project sales.

21. Concluding his pleadings, the Respondent No.1 requested this Appellate

Tribunal to dismiss the appeal.

Page 6 of 16

Comp. App. (AT) (Ins.) No. 1471 of 2022

Findings

22. We note that the Appellant has sought the following relief.:

"a. That the judgment and order dated 11.11.2022 passed by the Ld. Adjudicating Authority, New Delhi Bench in CP (IB) No. 419(ND)/2022 be set aside to a limited extent such that appropriate directions are incorporated whereby: -

(i) The Appellant Association is permitted to complete the Project Lotus 300 (as more particularly described hereinabove in the Appeal) by completing the balance remaining work in the Project "Lotus 300" and keeping the insolvency process in abeyance.

(ii) The Resolution Professional be restrained from taking over the Project Lotus 300, be restrained from interfering in the work of the Appellant Association in the said Project and should allow the Association to complete the said Project.

(iii) In order to continue the Corporate Debtor as a going concern, the Resolution Professional and/or the Corporate Debtor be directed to take steps to execute and register the necessary Sale Deeds in favour of the members of the Association who have purchased flats in the said Project and as also seek all necessary statutory permissions for the said real estate project if so required by the Association.

(iv) Protect the rights and assets of the Home Buyers.

(v) Pass other directions necessary to give effect to aforesaid prayers.

Page 7 of 16 Comp. App. (AT) (Ins.) No. 1471 of 2022

b. To set aside and modify the impugned order to the limited extent as described in prayer (a);

c. To pass final orders in terms of prayer (a) such that the Corporate Insolvency Resolution Process of the Corporate Debtor and/or any Resolution Plan shall not affect any act done, completed in terms of the directions given in prayer (a); d. To keep the Insolvency Process of the Corporate Debtor abeyance with necessary directions as described in prayer

(a);

e. Such further and/or other order and/or orders be made and/or direction and/or directions be given as to which this Hon'ble Tribunal may deem fit and proper.

Such further and/or other order or orders be passed, direction or directions be given as Your Lordships may deem fit and proper. And your petitioner, as in duty bound, shall ever pray."

(Emphasis Supplied)

23. Thus, we observe that it is the case of the Appellant that the Appellant

representing homebuyers, who had invested their hard earned money and paid

more than Rs. 636 Crores between the years 2010 to 2014 to the Corporate Debtor

and their financial stake is more than Rs. 1000 Crores in the project should be

allowed to command the project without Promoters or Resolution Professional,

keeping CIRP in abeyance.

24. The project was supposed to be completed by the year 2014, has not yet

been completed due to failure of the Corporate Debtor, and due to alleged

Page 8 of 16 Comp. App. (AT) (Ins.) No. 1471 of 2022

siphoning of Rs. 198 Crores (approx.) by the Promoters of the Corporate Debtor

as alleged by the Appellant, and the Ex-Promoters of the Corporate Debtor have

virtually abandoned the project. The Appellant has also brought to our notice that

they have taken lot of initiative including filing of FIR against the Promoters.

25. During pleading before us, the Appellant stated that this Appellate Tribunal

in connected case i.e., Comp. App. (AT) (Ins.) No. 1410 of 2022 has given the

stay on the constitution of the CoC vide order dated 28.11.2022. At this stage,

we take into consideration order dated 28.11.2022 of Comp. App. (AT) (Ins.) No.

1410 of 2022 which reads as under :-

"This Appeal has been filed by the Suspended Director of the Corporate Debtor against the Order dated 11.11.2022 initiating 'Corporate Insolvency Resolution Process' (CIRP in short) against the Corporate Debtor who is Real Estate Developer. It is submitted by Learned Counsel for the Appellant that 95% of the Project is complete and the Corporate Debtor has only one project.

2. I.A. No. 4423 of 2022 has been filed by Lotus 300 Apartment Owners' Association seeking intervention in Impleadment. It is submitted on behalf of Applicant that 99% of the project is complete and the home-buyers themselves are investing their money for completion of the project.

3. Learned Counsel for the Bank submits that no concrete proposal was submitted on behalf of the Appellant for taking care of the debt of the Bank hence the Order admitting CIRP be maintained.

Page 9 of 16 Comp. App. (AT) (Ins.) No. 1471 of 2022

4. After hearing the parties and having perused the record, we are, in the facts of the present case, of the view that ends of justice will be served in directing that Committee of Creditors be not constituted in pursuance of the Order dated 11.11.2022 till further orders.

5. Issue notice. Learned Counsel appearing for the Resolution Professional, who is present, may file 'Status- Report' within three weeks. Learned Counsel appearing for the Respondent (Financial Institution) may also file Reply- Affidavit, within three weeks.

6. Learned Counsel for the Applicant submits that they have also filed the Appeal challenging the Order dated 11.11.2022 vide diary no. 41421/2022. Impleadment Application I.A. No. 4423/2022 is allowed. Let Applicant be impleaded as one of the Respondents (Respondent No. 3) to the Appeal.

7. On-going project may go on with due information of every step including accounts to the Resolution Professional. All concerned may cooperate in ongoing project. List this Appeal on 13th January, 2023."

(Emphasis Supplied)

26. From above, we note that this Appellate Tribunal earlier gave partial relief

to the extent that ongoing project may continue by the Promoters with

information being submitted to the Resolution Professional. However, there is

no specific mention about the role of the Appellant herein, who were allowed in

that case for intervention. This resulted in stay since CoC was not allowed to be

constituted but protection of Section 14 was allowed. In this background, we are

Page 10 of 16 Comp. App. (AT) (Ins.) No. 1471 of 2022

not clear as what is the rational for such reliefs being sought by the Appellant as

mentioned in Para 22. It needs to be appreciated that if CIRP continues, the

Resolution Professional has to perform his role in accordance with provisions of

the Code and Regulations. It is also not clear how the Appellant can directly be

permitted to complete the project by passing the Suspended Director of the

Corporate Debtor and/or the Resolution Professional. We note that the Appellant

submitted that they have stake of around 98% in CoC, as such in any case, the

Appellant has absolute dominance in CoC. We are of opinion that the project can

continue to be completed by Resolution Professional under advise/ directions of

the CoC in accordance with the provisions of Code and Regulations, during the

period CIRP goes on.

27. We also note that the Financial Creditor/ Respondent No. 1 has opposed

the appeal and stated that the Impugned Order has been correctly passed in CP

(IB) No. 419 (ND)/2022. The appeal was filed by the Respondent No. 1 who is

a Financial Creditor of the Corporate Debtor against the Corporate Debtor and

defence of the Corporate Debtor was that the Corporate Debtor is a viable

company and is covered by the ratio of Vidarbha Industries Power Ltd. (Supra).

28. In this connection, we take into consideration the relevant portion of the

Impugned Order which reads as under :-

"9. The Respondent has emphasized that it is a healthy and financially viable company, since it has almost completed the Project and the initiation of CIRP of such a company will not

Page 11 of 16 Comp. App. (AT) (Ins.) No. 1471 of 2022

be fruitful. Had the company been a financially sound entity, it would not have defaulted in payment of its dues to the Applicant Bank. Hence, in our view, the completion of a Project cannot be the sole parameter to judge the overall health and viability of a company.

10. It is further contented by the Respondent that initiation of CIRP will prove to be a death knell of the company. In our view, any company which is admitted into the CIRP is attempted to be revived/ resolved first and mere admission of a company into CIRP does not directly result in its instant liquidation or dissolution under the Scheme of IBC.

11. It is further contended by the Respondent that a security/comfort letter amounting to Rs. 20 Crore has been issued by a Company namely, Three C Residency Private Limited (third party) in lieu of the outstanding dues of the Respondent. However, the Applicant, through its rejoinder, has shown no confidence in that undertaking and has considered it only a speculative undertaking.

12. We further observe that despite the claim of selling the most of the units (301 out of the 330 units as pleaded by the Respondent in its Reply) in the Project, the Respondent has failed to repay its financial debt, therefore, there is no exceptional case made out whereby despite default, the CIRP shall not be initiated against the Respondent."

(Emphasis Supplied)

29. We observe that the Adjudicating Authority has gone into facts and law

including Vidarbha Industries Power Ltd.(Supra) and came into conclusion that

there was a debt and default and CIRP had to be initiated and ordered accordingly. Page 12 of 16

Comp. App. (AT) (Ins.) No. 1471 of 2022

30. The Respondent No. 1 has stated that the debt and default still continues

and therefore there is no need for any interference in the Impugned Order by this

Appellate Tribunal, therefore, the Appellant's appeal is not justified.

31. We have already taken into consideration the reliefs sought by the

Appellant that the Appellant/ Lotus 300 Apartment Owners Association be

permitted to complete the project without any interference from the Resolution

Professional and the Resolution Professional should be restrained from taking

over the project and further the Corporate Debtor should be allowed to continue

as a going concern. The Appellant has also seeking directions from this Appellate

Tribunal that steps should be taken by the Resolution Professional and the

Corporate Debtor to execute necessary sale deeds in favour of the members of the

Appellant i.e., homebuyers. The Appellant requested this Appellate Tribunal to

keep CIRP in abeyance.

32. We consciously note that although there was stay on constitution of CoC

vide this Appellate Tribunal order dated 28.11.2022 in Comp. App. (AT) (Ins.)

No. 1410 of 2022, however, we do not find any order or submissions by the

Appellant to clarify the capacity in which they have been executing the work by

way of operation of stay. It is the Corporate Debtor who was supposed to execute

the work with furnishing the accounts to the Resolution Professional, which has

not been done.

33. We have already heard connected appeal filed before this Appellate

Tribunal bearing Comp. App. (AT) (Ins.) No. 1410 of 2022, which has been

Page 13 of 16 Comp. App. (AT) (Ins.) No. 1471 of 2022

dismissed by us in separate order, resulting in automatic vacation of stay granted

in that appeal.

34. We may have sympathy and empathy with the homebuyers who has

invested their money as Homebuyers and large majority of flats owners have also

occupied the flats, but we are bound by provisions of the Code and Regulations.

The reliefs sought by the Appellant are not covered by any provisions of the Code

and Regulations and therefore, cannot be accepted. We note that there is no direct

stay granted in the present appeal. Having said so, it is for CoC to decide the

future fate of the project and the Appellant being in control of 98% of the CoC as

claimed by the Appellant before us, can easily guide the Resolution Professional

to complete the project. In fact, during the CIRP, the Corporate Debtor is given

all protection of Section 14 of the Code. The other relief of the Appellant are of

similar nature. It need to be appreciated that if CIRP continues, the Resolution

Professional need to perform its role. Also, we need to appreciate that in addition

to the Appellant (members Homebuyers), the Respondent No. 1 is also Financial

Creditor and Respondent No. 1 as other Financial Creditor has right to participate

in CoC. The pleading made by the Appellant is not legal or ethical and cannot be

accepted.

35. It is noted that the CoC shall constitute primarily with all the homebuyers

as a class who are stated to be predominate in the composition of CoC with the

Respondent No. 1. It is for CoC to decide the future course of action and needless

to say the Resolution Professional is supposed to act in accordance with the Code

Page 14 of 16 Comp. App. (AT) (Ins.) No. 1471 of 2022

and the relevant regulations under the advise and directions to the CoC. We also

note that the Appellant has stated that 99% project is already completed, hence,

we feel that the remaining work as indeed may also be completed by the CoC

through Resolution Professional in accordance with law.

36. We also do not find any merit in the contentions of the reliefs sought by

the Appellant that we should give directions to the Corporate Debtor and

Resolution Professional for registration of sale deeds. We feel that it is for the

concerned authorities like NOIDA Authority to do so in accordance with the law

and the Appellants are free to approach them in accordance with the relevant laws

and various judicial pronouncement if applicable.

37. The appellant also brought to our notice that the Hon'ble Allahabad High

Court had passed certain strictness against the Respondent No. 1 in one different

case and against which the Respondent No. 1 has gone in the appeal to the

Hon'ble Supreme Court of India and the case is still pending before the Apex

Court. On this point, we note that from the pleadings of the Respondent No. 1

that the pending case in the Apex Court has got nothing to do with the present

appeal, as that is entirely different matter and not connected with the Impugned

Order. We tend to agree with the logic of the Respondent No. 1.

38. In conclusion, we do not find any merit in the contentions of the Appellant

that the CIRP should be kept in abeyance, however, neither Promoters nor

Resolution Professional should be allowed to interfere in CIRP and only

Appellant should be allowed to complete the project.

Page 15 of 16

Comp. App. (AT) (Ins.) No. 1471 of 2022

39. We do not wish to look into the contention of the appellant regarding

alleged involvement of the Respondent No. 1, who according to the Appellant

has acted in collusion with the Promoters of the Corporate Debtor. In any case,

this is a subject matter which is pending before the Hon'ble Supreme Court of

India.

40. In fine, we are not convinced with the arguments of the Appellant. We do

not find any error in the Impugned Order. The Appeal devoid of any merit stand

rejected. No cost. I.A., if any, are closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical) Sim

Page 16 of 16