Flaws in Today Homes IBC process, UVARC demands offer to be reconsidered

First it shot into the limelight for making a Rs 16,000-crore bid — the highest — for Reliance Communications and Reliance Telecom, and before that for Aircel under the IBC process. Now, UV Asset Reconstruction Company (UVARC) is fighting a fresh battle after writing to the resolution professional or RP for Noida-based real estate company Today Homes, demanding that its offer for the latter’s stressed assets should be reconsidered. 

UVARC was one of two bidders for the assets. It has also demanded a re-vote by the committee of creditors (CoC), alleging that the IBC provisions had not been complied with. If UVARC’s grievances are not redressed, it has indicated to the RP that it might have no option but to go to the National Company Law Tribunal (NCLT) or the Insolvency and Bankruptcy Board of India (IBC).

The CoC in this case comprise over 1,757 residential flat owners spread across 18 towers and 21 commercial units in Noida. No banks are creditors.

The Today Homes Noida project started in 2011 but last year the NCLT admitted a plea to start corporate insolvency resolution process once it became clear that Today Homes Noida was unable to complete the project.

The RP received two offers, one from UVARC and the other from real estate developers One Group. After several rounds of discussions, the two proposals were put to the vote. One Group’s offer was endorsed. An email sent by Business Standard to RP Rabindra Kumar Mintri and the CEO of the Noida Authority did not get a reply.   

UVARC has stated three main grounds for its discontent in its communication to the RP. One is that, under section 30(2) (b) of the IBC, the payment to an operational creditor cannot be less than the liquidation value of the asset. In this case, the only secured operational creditor is the Noida Authority as it has the first charge on the assets of Today Homes Noida. 

However, UVARC has come to know from homebuyers that the approved plan (which got the votes) does not meet this criterion. UVARC says it has been informed that the liquidation value is to the tune of Rs 45 crore to Rs 50 crore while the  approved plan has offered Rs 4 crore which is far lower and could not, as such, have been presented for voting as it is non-compliant with IBC rules.  

Sources in UVARC say it had offered to pay the Noida Authority Rs 30 crore or the liquidation value, whichever was higher. The RP’s decision has meant a major loss to UVARC, a fact it has pointed out to the Noida Authority in a separate communication. 

Secondly, it has told the RP that only 52 per cent of the home buyers were able to cast their vote owing to a flaw in the voting process. UVARC argues that under section 25A of the IBC, home buyers have an option to vote physically or electronically. Given that home buyers were not provided the option to vote physically, the voting instructions obtained from the process are ‘invalid’ and ‘bad in law’. 

Thirdly, based on feedback from homebuyers, UVARC told the RP that owners were not properly informed and, therefore, could not take an informed decision. Under UVARC’s plan, for example, homebuyers would have had to pay only an additional Rs 289 per sq ft to finish the project, far lower than the figure in the plan approved by the  homebuyers.

UVARC’s reasons of discontent

*Under section 30(2) (b) of the IBC, the payment to an operational creditor cannot be less than the liquidation value of the asset

*It told the RP only 52% of buyers were able to cast their vote owing to a flaw in the voting process

*Based on feedback from buyers, UVARC told the RP homebuyers were not properly informed and, therefore, could not take an informed decision