NCLT revives Lavasa insolvency, rejects Darwin Platform’s plea

The corporate insolvency resolution process (CIRP) of Lavasa Corporation took a dramatic turn on Friday as the National Company Law Tribunal (NCLT) at Mumbai rejected an application by Darwin Platform Infrastructure Ltd (DPIL), the successful resolution applicant, seeking assistance in acquiring the controversial planned city project in Pune. [Darwin Platform Infrastructure Ltd v. Union Bank of India and Ors].A bench of Judicial member Kuldip Kumar Kareer and technical member Anil Raj Chellan while ordering the revival of the CIRP, directed the Committee of Creditors (CoC) to exclude the period from July 13, 2021, to January 3, 2022, from the resolution timeline and restored Shailesh Verma as the resolution professional (RP) of Lavasa Corporation..Lavasa Corporation, promoted by Hindustan Construction Company (HCC), has faced numerous regulatory and financial hurdles since its inception. These issues culminated in its insolvency in August 2018, following a petition from Raj Infrastructure Development India Private Limited. Since then, the bankruptcy proceedings have drawn in a variety of stakeholders including homebuyers, financial creditors, the Maharashtra State Electricity Distribution Company Ltd (MSEDCL) and property lessees, all of whom have raised objections and legal challenges throughout the process..In July 2023, the NCLT approved DPIL’s ₹1,814 crore resolution plan for Lavasa Corporation, which included an upfront payment of ₹100 crore to be made within 90 days of the plan’s approval. However, DPIL failed to make the payment.Subsequently, in April this year, ICICI Bank on behalf of creditors invoked guarantee worth ₹25 crore citing failure to implement the resolution plan and approached the tribunal seeking restoration of resolution process. DPIL too approached the insolvency court against the invocation of bank guarantee..DPIL’s primary argument for its failure to implement the resolution plan revolved around Lavasa Corporation’s status as "active, non-compliant" in the Ministry of Corporate Affairs (MCA) records.DPIL claimed this non-compliant status along with ongoing litigation created uncertainty and made it difficult to secure the necessary funds for the acquisition..Despite these arguments, the tribunal found that DPIL had failed to raise these concerns during seven Monitoring Committee meetings where the company was repeatedly asked to make the required payments.In its order, the tribunal expressed its dissatisfaction with DPIL, noting that the company “miserably failed to take any positive action to implement the approved resolution plan without any justifiable reasons.” The court ruled that no purpose would be served by granting DPIL additional time, stating that further delays would “severely affect the interest of various stakeholders” and could make resolution impossible..The NCLT's decision to revive the CIRP and reinstate Shailesh Verma as the RP signals the tribunal's intent to move forward with the resolution process after DPIL’s inaction stalled proceedings for over a year..One of the key aspects of the tribunal’s ruling was the invocation of a ₹25 crore Performance Bank Guarantee (PBG) provided by DPIL. The tribunal found that DPIL’s failure to comply with the resolution plan's terms warranted the invocation of the PBG, which was subsequently encashed by Union Bank of India. “Since the SRA [Successful Resolution Applicant] is blatantly and consciously responsible for the failure of implementation of the Approved Resolution Plan, its inevitable consequence is the invocation of PBG,” the NCLT said. It concluded that the bank’s actions were lawful and justified..The tribunal also rejected DPIL’s claim that Lavasa’s non-compliant status with the MCA was a legitimate reason for the delay in implementing the resolution plan. The tribunal highlighted that payment obligations under a resolution plan are unconditional and cannot be linked to the company’s MCA status or other external factors..DPIL’s argument that ongoing litigation created uncertainty and prevented them from making the required payments, was similarly dismissed by the tribunal. It noted that litigation is a common aspect of insolvency cases and does not excuse delays unless a court or tribunal issues a stay order. “The pendency of litigations initiated by any person or stakeholder is not a justifiable ground for non-implementation unless the implementation is stayed by a court/tribunal,” the tribunal observed..Senior advocate Gaurav Joshi with advocates Dhruva Gandhy, Abhishek Kale, Deepak Deshmukh, Vivek Dwivedi and Nevil Chopra appeared for Darwin Platforms.Senior Advocate Prateek Seksaria and advocates Shriraj Khambete and Naman Jain appeared for Union Bank of India..[Read Order]