supertech: explained: what the bankruptcy of real estate agent Supertech means for its home buyers

NEW DELHI: Realtor Supertech, which has undertaken several projects in Noida, Gurugram, Ghaziabad and Greater Noida, was declared bankrupt by the National Company Law Tribunal (NCLT) on Friday for defaulting on payment of Rs 431 crore to a consortium of banks. The move could impact 11,000 homebuyers from the company’s ongoing projects in the NCR region.
What happened: The action came after Union Bank of India took the company promoted by RK Arora to court as the builder – whose two illegal towers are being demolished in Noida – failed to repay loans to the state-run lender. The loan had been used for the Eco Village II project in Greater Noida.
Supertech Ltd, which plans to challenge the order in the National Company Law Appellate Tribunal (NCLAT), said the company’s projects have 38,041 units, of which 27,111 houses have been delivered. Arora said the order will not impact several of the group’s projects, including Supernova, ORB, Golf Country, Hues, Azalia, Esquare, Valley and Basera, as they were under a different company.
Now, what is this case about?
In 2013, Supertech took out a loan of Rs 350 crore from a consortium of banks to part fund its Eco Village II project in Greater Noida. Union Bank’s exposure to the credit facility was the highest at Rs 150 crore. Supertech has been erratic in debt repayment and stopped paying altogether from July 2019.
In April 2019, an NCLT notice was sent to Supertech for non-payment. Despite this, Supertech failed to repay the principal amount and interest.
In January 2020, Supertech applied for Rs 1,500 crore from the newly established government stress fund to complete its 12 ongoing housing projects in Noida and Greater Noida in Uttar Pradesh. A year later, Union Bank moved the NCLT claiming that Supertech had defaulted on payment of Rs 431.92 crore.
Is the demolition of the twin towers linked?
Moreover, in a landmark judgment of August 31, 2021, the Supreme Court had ordered the demolition of the twin towers being constructed by Supertech in Noida due to illegal construction facilitated by the collusion between the developer and the development authority .
The Supreme Court had ordered that the entire investment of 633 buyers who had booked apartments in the twin towers be repaid with 12% interest. 248 homebuyers benefited from early repayment, while 133 took apartments in other Supertech projects.
The court also ordered Supertech to pay Emerald Court Project Residents’ Welfare Association Rs 2 crore for harassment caused due to the construction of the Twin Towers, which allegedly blocked sunlight and air fees for existing residents of the project.
In February, the Noida Authority said that the demolition of the towers will be completed in May, work on which has already started.
Projects impacted
Projects that will be impacted include Eco Village I, II and III in Greater Noida (West), known as Noida Extension, as well as the Emerald Court project, which houses the twin towers.
Meanwhile, Union Bank of India reportedly rejected a single debt settlement proposal submitted by Supertech and on March 25, 2022, the bankruptcy court ordered the commencement of insolvency proceedings against the real estate company acting on the Union Bank’s plea.
Supertech is not the first developer to go bankrupt
Supertech joins several builders in and around Noida, including Jaypee and some of the Lotus 3C companies, where insolvency resolution action has been launched but homebuyers have not seen much progress as business falters. the round of several legal forums for years despite insolvency and bankruptcy. Code mandating process completion in 270 days. This is in addition to Unitech and Amrapali, which are directly supervised by the Supreme Court.
What is the version of Supertech?
Supertech, however, said it would approach NCLAT to appeal the order, saying the case involved a financial creditor. The company said the NCLT order will not impact the construction of ongoing projects or the operation of the company and “we are committed to delivering the units to beneficiaries. We have a strong delivery track record of over of 40,000 apartments over the last 7 years and we will continue to deliver our buyers as part of our “Completion of Mission – 2022” under which we have committed to delivering 7,000 units by December 2022.”
What does it mean to be declared insolvent?
The opening of insolvency proceedings puts an end to the promoter’s role in the company. Following the NCLT order, there will be a moratorium against the company until the resolution process is completed. The moratorium will apply to all pending civil, consumer and RERA cases, including executions.
It will be a long process for homebuyers
With the opening of insolvency proceedings, homebuyers now fear further delays in the delivery of their homes.
“Homebuyers who have invested in Supertech properties and are waiting for their apartment have no choice but to wait for their home until a resolution is reached. Usually such procedures take a long time to finally come to a resolution. The only silver lining is that the supreme court had earlier declared that owners are part of the body of creditors in such insolvency proceedings,” said Prashant Thakur, Principal Director and Head of Research , ANAROCK Group, a real estate consulting firm.
Like Unitech and Amprapali, the case was taken over by the NCLT and the acquirer was considered a creditor in the case, which means that the waiting period for resolution should not exceed one year.
Also, since only one company has been declared insolvent, buyers who have invested in other projects of group companies should not be impacted,” said Pankaj Kapoor, MD at Liases Foras.
What should homebuyers do?
When a developer goes bankrupt, the first step to take as a buyer is to go through the contract for options and clauses.
“Homebuyers must submit their claims to the insolvency resolution professional. Once the claim is approved, the homebuyer becomes a member of the creditors’ committee and is granted financial creditor status, allowing them to vote on critical decisions alongside other financial creditors.As financial creditors, they now have a vote in the cash-strapped real estate agent’s settlement process and can participate in decision-making. do,” said Sonam Chandwani, Managing Partner, KS Legal & Associates.
Homebuyers should keep an eye out for various announcements from the resolution professional by checking the Supertech website regularly. They should work collectively as a team and not stop paying EMIs for home loans even after your builder becomes insolvent because it could turn into another legal battle, which will only complicate matters.
“It would be interesting to see if the debtor company challenges the order made by the NCLT and how the National Company Law Appeals Tribunal handles the appeal. Although the Insolvency and Bankruptcy Code requires the CIRP be completed within 330 days, it is often seen as such deadlines are not met,” said Nitish Sharma, Solicitor, Anant Law.
“While the opening of insolvency proceedings against Supertech Limited is likely to hamper the realization of its ongoing projects, homebuyers are not left without recourse as they also have financial creditor status and are placed on equal footing with banks and other lenders under the IBC As a first step, homebuyers must register their claims immediately by submitting the necessary documents to the IRP. in the decision-making process for reviving the business,” said Kunal Arora, Partner, Lakshmikumaran & Sridharan Avocats.

Janet E. Fishburn