The move by flat-owners and a section of lenders to go for partial/project-wise resolution for the fraud-hit Housing Development and Infrastructure Ltd (HDIL) has fallen short of the majority. In the recently concluded e-voting, they managed only 35.18% of favourable votes as against 36.16% of who opposed the move. A large chunk of creditors (28.65%) abstained from voting.

Some big creditors such as Life Insurance Corp (LIC) and Punjab & Maharashtra Co-operative Bank (PMC Bank) opposed the move while Suraksha ARC and YES Bank abstained from voting. All decisions require 51% approval by financial creditors.

“My hope is fading. The resolution process is going on endlessly without any light at the end of the tunnel,” said a flat-owner who had invested around ₹70 lakh nearly a decade ago, in Whispering Towers, a sprawling complex in Mumbai's Mulund, abandoned half-way into the construction.

At last count, there were three potential bidders—Adani Properties (APPL), Sunteck Realty, and Suraksha Asset Reconstruction Ltd, for the prized jewels of HDIL. The resolution professional, Abhay N. Manudhane told the Committee of Creditors (CoC) that the three bidders were interested in three different projects of HDIL and that they had filed separate applications before the National Company Law Tribunal (NCLT) for the project-wise resolution/demerger.

Flat-owners, running into 4,500 in total, whose investments are stuck at the troubled builder were hoping to attract bidders for their projects, if sold through project-wise resolution, and restart the long-delayed construction work. The homebuyers voted enthusiastically (11.14%) in favour of the move.

The assets were divided into seven projects—Majestic Towers, Whispering Towers, Premier Exotica, Galaxy Apartment, BKC Inspire, Paradise City and the rest of the company.

The first five projects are located on land belonging to Mumbai’s Slum Rehabilitation Authority (SRA) and HDIL is only a “developer”. Of the five projects, four are carved out of the Mumbai International Airport Limited (MIAL) rehabilitation project that was awarded to HDIL in 2007. There is a precondition under the agreement between SRA and HDIL which stipulates that the rehabilitation projects should be completed within the specified period, failing which a penalty is imposed by way of reduction in the entitlement of transferable development rights (TDRs) which goes up to a maximum of 3%. TDRs allow developers to build over and above the permissible floor space index (FSI). Typically, TDRs are given to developers and landowners as a sop in slum rehabilitation projects. The agreement has further specified that in such events, SRA will take over the remaining construction work with HDIL holding no legal right. This meant that a project-wise resolution plan needed SRA’s nod.

Crawford Bayley & Co., the legal advisors to the resolution professional, had opined that there is no explicit bar under the Insolvency and Bankruptcy Code, 2016 (IBC) for project-wise resolution. It said the decision would ultimately have to be taken by the CoC based on the commercial wisdom after weighing in the viability, complexity, and equity of undertaking such a resolution.

The CoC had two options: one, to re-run the process of inviting Expressions of Interest (EoI) for the entire company as a going concern; and two, to re-run the process of inviting EoI for the entire company as a going concern and also allow parties to submit a resolution plan for one or more projects by way of demerger/ restructuring.

The process, however, raised several queries from the creditors. Aalok Dave, representing Suraksha ARC, enquired as to whether assets and liabilities of each project are proposed to be segregated, and if there was a separate CoC proposed for each project based on its exposure/charge on assets.

The erstwhile promoter, Sarang Wadhawan told the CoC that the four properties that are linked with the MIAL project could be clubbed as one since the obligations are indivisible and combining them will fetch better response from bidders. Flat-owners stated that there should not be a project-wise CoC formation. They were of the opinion that SRA should be made a party once the resolution plan is approved by the CoC.

On January 11, Fortune India had reported that all three prospective bidders of HDIL have stayed away from submitting any resolution plan as the deadline expired on January 7.

One of the bidders, Adani Properties Private Ltd (APPL) had filed an interlocutory application in the NCLT, seeking partial resolution of HDIL by way of demerger of the identified assets, liabilities, right, title, and interest of the scam-hit real estate company.

The flat-owners, who have invested their life’s savings in various HDIL projects, were eagerly awaiting the close of the insolvency process. The Mumbai-based real estate company, which specialised in TDRs, is undergoing a corporate insolvency resolution process at the NCLT since August 2019. The company has over two dozen financial creditors, including a dozen public sector banks, YES Bank, and LIC.

In September 2020, the NCLT process suffered a delay after the promoters—Rakesh Wadhawan and his son Sarang—were arrested for their alleged involvement in the multi-crore scam at PMC Bank.

According to the latest statement of claims of HDIL’s financial creditors as on November 30, 2020, the total claims admitted stood at ₹7,757 crore. This includes ₹6,896 crore of lenders’ money and ₹861 crore of individual homebuyers.

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