NOIDA: Home loans disbursed by a bank to buyers cannot be considered as a financial debt of the developer of a project, the National Company Law Appellate Tribunal (NCLAT) has ruled, rejecting UCO Bank’s plea to be recognized as a financial creditor in the insolvency case of Bulland Buildtech Pvt Ltd, the developer of the Bulland Elevates project in Greater Noida.
A two-member bench of Chairman Justice Ashok Bhushan and Technical Member Arun Baroka upheld two National Company Law Tribunal (NCLT) orders dismissing the bank’s Rs 19 crore claim and approving a resolution plan filed by Savior Builders for the developer.
Residential units in Bulland Elevates were sold between 2013 and 2015. Forty-five home buyers took out loans with UCO Bank. Under a tripartite agreement, the bank sanctioned loans directly to the buyers and paid the money to the builder. When Canara Bank initiated insolvency proceedings against Bulland Buildtech in March 2021, UCO Bank filed a claim of Rs 18.8 crore in the corporate insolvency resolution process (CIRP), seeking to be treated as a financial creditor.
However, the Interim Resolution Professional (IRP), and then RP Debashish Nanda, dismissed UCO Bank’s claim in April and September 2021 respectively, stating that the loans were between the bank and the buyers, and not on the builder.
According to RP, of the 45 home loans, 13 units were vacant, 20 had already been assigned to other buyers, six claims were rejected due to lack of data and 24 borrowers had not filed any claims. Only one apartment, allocated to a buyer, was confirmed and accepted as genuine.
UCO Bank argued that it was a secured financial creditor as it had entered into legally binding tripartite agreements and registered a charge against the financed units with the Central Registry of Securitization Asset Reconstruction and Security Interest (CERSAI). Counsel for the bank said both the builder and the buyer had responsibilities under the agreement. “In case the borrower fails to repay the dues, the bank has the absolute right to transfer, dispose of and deal with the property to recover the outstanding dues,” the counsel said.
The bank alleged that the builder had an obligation to pay damages under the agreement, making the transaction a financial liability under the Insolvency and Bankruptcy Code (IBC). It also cited Debt Recovery Tribunal (DRT) orders of 2019-2020 against the borrowers and Bulland Buildtech as evidence of liability.
The RP opposed the arguments and stated that the corporate debtor never borrowed money from UCO Bank. The home loans were sanctioned to the allottees, not to the company. The RP counsel further pointed out that several of the so-called allottees did not appear in the official documents of the builder and that the financial facility was extended to individual home buyers, and not to the company.
RP also highlighted that the Committee of Creditors (CoC), with a 94% voting share, had already approved a resolution plan in March 2022. A winding-up petition under Section 66 of the IBC was filed to investigate suspicious transactions by the builder’s promoters and any recoveries made thereunder would be taken into account towards the bank’s dues only after approval of Savior Builders, the successful resolution applicant.
Savior Builders reiterated that Bulland Buildtech had no repayment obligation to UCO Bank, but said that if any money was recovered from a winding-up proceeding, it would have no objection to that money being paid to the bank. On Wednesday, NCLAT reaffirmed NCLT’s stand that UCO Bank was not a financial creditor under IBC and noted that the tripartite agreements did not create any repayment obligation on the builder. The tribunal also clarified that the scheme was not a subsidy scheme, where a builder takes responsibility for repayment until possession is transferred. In this case, Bulland Buildtech never assumed such an obligation.
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