NCLAT refuses to limit insolvency process of Spaze Towers to one project

Appellate tribunal NCLAT on Tuesday dismissed the plea filed by the former promoters of realty firm Spaze Towers to confine the Corporate Insolvency Resolution Process to only one project -- Spaze Arrow.

The National Company Law Tribunal (NCLT), on October 21, 2024, directed the initiation of insolvency proceedings against Spaze Towers, admitting a plea filed by its flat owners.

Appealing against the order, the former management approached the National Company Law Appellate Tribunal (NCLAT), requesting to confine the CIRP process to only one project.

However, the appellate tribunal rejected it, saying, "When the claimants have filed claims for the Project Corporate Park, which is not complete despite the Occupancy Certificate and Completion Certificate, by confining the CIRP to only one Project shall be tantamount to excluding the claims filed before the RP from different Project".

"We, thus, after considering the facts and circumstances, which have been brought on the record by the parties, are of the view that at this stage, we are not persuaded to pass an order, confining the CIRP to only one Project, i.e. Spaze Arrow," the NCLAT said, adding that "the prayer made cannot be allowed".

Allowing insolvency proceedings, the NCLT said the company has defaulted in completing the construction of flats in the project 'Spaze Arrow' at Sector 78, Gurugram, and giving possession within the promised timeline of 42 months.

The Delhi bench of the NCLT also appointed an interim resolution professional to run the company, suspending the board and putting it under the protection of moratorium as per provisions of the Insolvency & Bankruptcy Code.

The NCLT also rejected the submissions of Spaze Towers that it had settled the dues of nine petitioner allottees and hence, they should not be treated as financial creditors.

The commercial project was launched in 2012, promising a high-end commercial complex, comprising retail shops, showrooms, restaurants, and a tower block with offices and serviced apartments.

As per the agreement, during 2016-2019, buyers made payments as per the agreed construction-linked payment plan. The realty firm was to deliver the possession of the shops to the financial creditors within 42 months from the date of signing of the agreement.

However, it failed to do so and was also not able to procure several necessary licences for the project.

This is the second time Spaze Towers has faced insolvency.

In October 2021, in another project, Spaze Corporate Park, an IRP had been appointed where claims of some Rs 600 crore were received. However, without disclosing all the claims to the Supreme Court, the company settled the claims and the CIRP process was set aside.