The Bengaluru Bench of the National Company Law Tribunal (NCLT) has directed debenture holders to consider a fresh settlement proposal for the dues owed to them by a real estate developer, by taking into account the severe economic conditions resulting from the COVID-19 pandemic.
Private equity fund India Asset Growth Fund and its debenture trustees (financial creditors) had filed an insolvency petition against CMRS Projects Private Limited for alleged non-payment of dues. The financial creditors had subscribed to the non-convertible debentures of the company in various tranches totalling ₹13 crore in 2017. As on March 15, 2019, they claimed a default amount of about ₹18.5 crore, including principal and interest. The NCLT noted that the financial creditors had not explored the options available to deal with default in the Trust deed. “The developer has engaged several contract workers for the purpose of construction and is incurring an expenditure of about ₹3 lakh towards monthly salaries of its employees. It has 110 home buyers and various other vendors, who will be severely affected and prejudiced, if insolvency proceedings are initiated,” the NCLT added.
The adjudicating authority cannot ignore the devastating effect caused to the Indian economy due to the outbreak of COVID-19 pandemic, in addition to the recent amendments to the Insolvency and Bankruptcy Code, which suspended insolvency proceedings for defaults on or after March 25, 2020, the NCLT noted.
Even though the present case is not covered by the amendment, the developer is willing to settle it in the light of an earlier one-time settlement, which was discussed by the financial creditors.
The NCLT told the developer to extend full cooperation to the settlement efforts and gave liberty to the financial creditors to pursue insolvency proceedings if the settlement talks failed.