NCLT begins insolvency proceedings against realty firm Supertech

Union Bank claims unpaid dues of Rs 492 crore

The National Company Law Tribunal (NCLT) on Friday initiated insolvency proceedings against real estate developer Supertech, which is engaged in more than 30 projects across north India, after a petition by Union Bank claimed unpaid dues of Rs 492 crore.
 

The NCLT order mentioned two transactions that have gone sour. The first was in 2015 for Eco Village II in Greater Noida with an estimated project cost of Rs 1,106 crore, in which a consortium of banks lent Rs 350 crore. Union Bank was the lead creditor in the transaction, accounting for Rs 150 crore of the loans. In 2015, another Rs 200 crore credit facility was extended to the company by Union Bank and Vijaya Bank, where each of the creditors gave loans of Rs 100 crore to the company. This was for the Phase II of the same project. Although Supertech has argued that the bank did not follow due process in classifying the loans as non-performing assets (NPA) and dragging the company to NCLT, the bankruptcy tribunal made the decision to go ahead with the order.
 

The company said it would approach the NCLAT to challenge the order and that homebuyers across its multiple properties need not worry as the matter pertains to just one project.  After several reports claimed that around 25,000 homebuyers will be affected due to the insolvency, a company spokesperson said that Supertech has 38,041 customers, out of which homes have been delivered to 27,111.
 

“Now, buyers will avoid products from tier 2 and tier 3 developers and stick to projects by Grade A players in order to avoid any execution risks. Definitely, smaller developers may henceforth find it difficult to get buyers for their projects,” said Prashant Thakur, head of research at real estate consulting firm Anarock. “In the interest of homebuyers, preference was given to construction and delivery of projects over repayment of bank dues which can be fulfilled after project completion,” the company said in a statement.
 

“As all the projects of the company are financially viable, there is no chance of loss to any party or financial creditor. The order will not affect operations of any other Supertech group company,” it added.

According to Sundaresh Bhat, Partner and Leader of Business Restructuring Services at BDO India, real estate companies generally create special purpose vehicles (SPVs) for each project or a group of projects which then act as the entities dealing with banks and homebuyers. “When there is an insolvency case, it is typically against those particular SPVs which may be joint ventures, subsidiaries or associates of the parent company. It is the creditor’s prerogative to drag the entire group or just particular entities to the insolvency tribunal,” he explained.
 

Supertech Group Managing Director Mohit Arora told PTI, “There are around 11-12 housing projects in Supertech against which insolvency proceedings have been initiated. Around 90 per cent of these projects are completed.”

The total debt of Supertech is around Rs 1,200 crore, including nearly Rs  150 crore loans from Union Bank of India, he said.

According to Arora, there are three-four other companies in the group that are developing many projects across Delhi-NCR, including project Supernova. “We have a strong record of delivering more than 40,000 flats during the past seven years and we shall continue to give delivery to our buyers under our “Mission Completion – 2022” under which we have undertaken a target of delivering 7,000 units by December,” said the company.
 

According to a top executive at a Delhi-based real estate company, the bankruptcy law and RERA have failed to fully secure the rights of homebuyers. “What has happened in the Jaypee Infratech case even after five years? So many homebuyers are still in the lurch whether they will ever get their money back,” he said.
 

Jaypee Infratech, which owns Delhi-Agra Expressway and land on both sides of the expressway, was referred to the NCLT in August 2017 under the bankruptcy code after it defaulted on Rs 22,600 crore of loans. Lenders are expecting to sell the insolvent asset to Suraksha Realty by the end of this month under the bankruptcy process, thus ending a long-drawn litigation over the company’s bankruptcy.
 

Suraksha Realty had made the winning bid of Rs 7,736 crore as against the government-owned NBCC India’s Rs 6,536 crore offer in June last year.