The Supertech Conundrum: twin towers coming down will not ensure flats for 25,000 waiting

When Supertech’s twin towers come down on Sunday – powered by a Supreme Court order, 3,700 kg of explosives and some activist citizens – it will be cold comfort for 25,000 home buyers in Delhi waiting for years for the builder to deliver flats.
This is what is holding up homes for those waiting who have already paid up, and why there is no succour in sight.

NCLT and NCLAT
The group's flagship company and also the builder of the controversial twin towers, Supertech Limited, promoted by R K Arora, was declared bankrupt as per the provisions of insolvency and bankruptcy code (IBC) by the National Company Law Tribunal (NCLT) on March 26, 2022, acting on the petition filed by the Union Bank of India for a default of around INR432 crore worth of dues, ET Prime reported.

This would have been a good thing – except it wasn’t.

NCLAT, the appellate authority, ruled in favour of Supertech Limited and implemented project-wise insolvency.
In its interim order on June 10, 2022, it said the insolvency proceedings will be restricted to only one project, Ecovillage II located at Greater Noida (West) with the condition that construction will be carried out by the promoters on the rest of the projects of the company, under the supervision of the appointed resolution professional — following the concept which has been called as reverse CIRP (Corporate Insolvency Resolution Process).
Even though only one project is currently under IBC, many other projects under Supertech Limited or SPVs (Special Purpose Vehicles) of the group are also years behind schedule.

No way out
There are conflicting views on project-wise insolvency, legally termed as reverse CIRP, which is not enshrined in the IBC but is the invention of the NCLAT.
While some experts perceive it as a positive move as a reverse CIRP safeguards the interest of the homebuyers of other projects, a set of homebuyers feel that a full-fledged insolvency proceeding should have taken place as other projects too are facing issues and are delayed for more than five to six years.

“No moratorium on other projects allows the homebuyers to pursue their legal proceedings against the developer but in case of Supertech, it does not honour such orders. I have represented several homebuyers who have Rera orders in their favour, court decrees in their favour but Supertech has failed to honour it,” says Aditya Parolia, partner, PSP Legal, a Delhi-based law firm representing several aggrieved homebuyers of Supertech.
“Also, when they couldn’t finish these projects in all these years, they can’t do anything new now. It will still continue the same way without any respite for the homebuyers,” says Parolia.
There is only one ray of hope.

If the situation doesn’t improve, other lenders may approach NCLT against Supertech SPVs.

Indiabulls Housing Finance declared Supertech’s account as NPA back in 2018. In October 2021, Dinanath Dubhashi, the managing director and chief executive officer of L&T Finance Holdings mentioned that the company had started doing interest reversal on the account of Supertech Limited and has classified the account as NPA.

The homebuyers who have been waiting for their flats for years now, will have to wait for the resolution process to complete and a resolution applicant to take it over. That too, they might have to take a massive haircut on their invested money.
“The current scenario of the Delhi-NCR real estate market with many real estate developers going through insolvency processes can have a negative impact on the ongoing market. With more and more delayed and stalled projects, the buyer might lose confidence in investing in under-construction projects. This will further lead to more debt on the books of real estate developers,” says Aniket Dani, director, Crisil Research.