Case Number: Civil Appeal No. 1925 of 2023

Judges Name: Hon’ble Judges Mr. Justice Dinesh Maheshwari, Mr. Justice Sanjay Kumar

Order Dated: 11.05.2023

Facts of the Case:

1. Indiabulls Asset Reconstruction Co. Ltd. (corporate debtor) received credit facilities by way of sanction letter from Union Bank of India totaling to an amount of Rs. 150 Cr using mortgage, corporate guarantees and personal guarantees, for the development of Eco Village II, with a further amount of Rs. 200 Cr being granted by way of agreement between Union Bank of India and Bank of Baroda, with Union Bank of India having a total exposure of Rs. 100 Cr. 
2. Upon the corporate debtor being unable to pay back the amount, they were considered to be a Non Performing Asset, and Union Bank of India filed an application for CIRP under Sec 7 of IBC, accepted by the NCLT by order dated 25/03/2022. Aggrieved by the same, the promoter filed an appeal under the NCLAT, which the NCLAT responded to by passing an interim order postponing the date for constitution of the CoC. 
3. By order dated 10/06/2022, the NCLAT partly modified the previous order, stating that the CoC would now be constituted only for the Eco Village II Project, ex-management support shall be availed for its completion, and all other projects shall be considered ongoing projects and not be affected by this order. 
4. The Appellants, financial creditors of corporate debtor, filed an appeal against this order by the NCLAT before the Hon’ble Supreme Court, challenging the adoption of reverse CIRP and the limiting of the CIRP and CoC to only one project of the corporate debtor, namely Eco Village II.

Supreme Court Observed/ Held as Follows:

• The Supreme Court observed the limited use cases for Reverse CIRP, a process not established via the IBC but a product of judicial invention. 
• This Court declined to alter the order made by the NCLAT on 10/06/2022, giving reasons regarding the nature behind granting interim reliefs, and the special case-by-case usage of Reverse CIRP. Citing the cases of Union of India v. M/s Raj Grow Impex and Dorab Cawasji Warden v. Coomi Sorab Warden, it held that whilst considering the viability of implementation of any interim relief mechanism, the elements of balance of convenience and likelihood of irreparable injury and prima facie case must be taken into account, so as to determine whether the granting or not granting of said mechanisms would cause injustice or irreparable damage to the parties involved. 
• The Supreme Court highlighted the benefits and protection such a mechanism would bring for the homeowners, who in other cases would not be able to handle this matter by themselves albeit being considered to be Financial Creditors. 
• The order of the NCLAT dated 10/06/2022 shall thus continue to be in effect, regardless of the claims made by the Financial Creditors and other parties involved, the reverse CIRP and the appointment of the promoter to cover the default and complete the Eco Village II Project. 
• The above proceedings shall be subject to orders of this Court in the final proceedings listed for the second week of July