Supertech stares at insolvency amid heat of twin-tower demolition

A couple of years ago, real estate firm Supertech Ltd was gaining steam with several thousand apartments in Delhi-NCR.

It advertised extensively and the firm was among the top in the real estate sector. Then in 2020 came the Covid pandemic, which turned everything upside down and created an unprecedented crisis for the real estate industry.

As things begin to normalise, it seems normalcy has reached beyond the reach of Supertech with the company receiving a twofold blow.

First, in August last year, the Supreme Court ordered demolition of its two 40-storey towers in Noida, and in March this year, the National Company Law Tribunal (NCLT) declared Supertech as insolvent while admitting a plea filed by the Union Bank of India (UBI) over non-payment of its dues.

In August 2021, the apex court ordered demolition of the twin towers in Sector 93, Noida, within three months, and also directed that the entire amount of homebuyers should be refunded with 12 per cent interest from the time of booking.

Supertech fought a long and draining legal battle to protect its twin towers -- having over 900 flats and 21 shops -- against demolition, which had been ordered for violation of building bylaws.

It filed a plea in the apex court seeking to save one tower and partially demolish 224 units in the other to conform with building bylaws. However, in October last year, the top court junked the plea by Supertech seeking extension of time for payment of compensation to homebuyers and demolition of twin towers.

Finally, the fate of its twin towers was sealed on February 7, when the apex court directed the authorities to commence the process for demolition of towers within two weeks.

The Noida authority informed the apex court that the demolition will be completed by May 22, and the debris will be removed by August 22.

The past few of months have been dramatic for the real estate company. In January, the Supreme Court pulled up the realty major for not complying with its orders to demolish the twin towers. The top court warned "its directors will be sent to jail for playing truant with the court", and also took serious note of the deductions in refund made to the homebuyers.

Another jolt hit Supertech when the NCLT in March approved UBI's application to begin corporate insolvency resolution process (CIRP) against the realty major for non-payment of around Rs 432 crore worth dues.

Supertech is supposed to deliver nearly 25,000 units to homebuyers in 50 projects, which are spread across Noida, Greater Noida, Yamuna Expressway, Ghaziabad and Gurugram, among other cities.

The NCLT appointed Hitesh Goyal as the Interim Resolution Professional (IRP), superseding the board of Supertech. One of the promoters of Supertech moved the NCLAT, challenging the NCLT order.

Earlier this week, the National Company Law Appellate Tribunal (NCLAT) gave the real estate firm one more opportunity to settle its dispute with the Union Bank of India. The bank took the real estate firm to the insolvency court after it failed to pay its debt since July 2019.

The NCLAT extended its stay over formation of a committee of creditors (COC) to overtake Supertech till May 2, after a counsel for a director of the suspended board of Supertech sought one more chance to present a better proposal before the lender bank.

The Union Bank of India counsel had contended that it has received an offer, but it has been rejected on various grounds. The bank's counsel said it did not mention paying any upfront amount and the tenure of repayment was 24 months, and insisted that Supertech should come up with a definite upfront payment plan for the dues.

On April 4, the Supreme Court said it will protect the interest of Supertech's twin-tower homebuyers in the backdrop of the appointment of an IRP in the insolvency proceedings against the real estate firm.

According to a note filed by advocate Gaurav Agarwal, amicus curiae in the matter, NCLT passed an order on March 25, 2022, by which corporate insolvency resolution process (CIRP) has been initiated against Supertech and moratorium under Section 14 of IB Code, 2016, has been declared.

Agarwal urged the top court to consider whether payments to be made to the remaining homebuyers of the twin towers should form part of the resolution process or whether the payments should be made by the company from the funds available (or which may become available in future), i.e., the said payments be kept out of the CIRP process?

Also, in case the payments are part of the CIRP process, will the amounts due to the homebuyers be included as a separate category in the proposed resolution plans so that homebuyers get the refund with interest from the successful resolution applicant?

The top court said it will protect the interest of homebuyers in the Supertech's twin towers in Noida. It said that homebuyers should file their claims with the IRP and seek response from the IRP on the disbursal of their claims.

A note submitted in the top court by Agarwal said: "As per the information given by Supertech Ltd, out of 711 customers/units, the claims of 652 customers/units are settled/paid. Fifty-nine homebuyers still have to be refunded the amounts. The principal outstanding would be Rs 14.96 crore."

The apex court is likely to next hear the matter in the first week of May.