NCLT Delhi Rejects Kalka Home Developers Resolution Plan Paying Government Dues Below Liquidation Value

The New Delhi Bench of the National Company Law Tribunal (NCLT) on 3 July held that a resolution plan cannot provide an operational creditor, including the government, an amount lower than the liquidation value payable to it under the Insolvency and Bankruptcy Code, 2016 (IBC).

Judicial Member Ashok Kumar Bhardwaj and Technical Member Atul Chaturvedi rejected the plan submitted for Kalka Home Developers Pvt. Ltd., observing that the plan failed to comply with Section 30(2)(b) of the IBC, which requires operational creditors to receive at least the amount they would have received in liquidation. The Bench observed:

“Merely because the plan value is lower than the liquidation value may not, by itself, constitute a ground for rejection of the Resolution Plan once the same has been approved by the Committee of Creditors. However, it would not be gainsaid that clause (b) of sub-section (2) of Section 30 of the Code mandates that the payment of debts of operational creditors shall be made in such manner as may be specified by the Board and shall not be less than the amount that would have been payable to such creditors in the event of liquidation of the Corporate Debtor under Section 53 of the Code”

Kalka Home Developers Pvt. Ltd. was undergoing the Corporate Insolvency Resolution Process (CIRP). During the proceedings, several interlocutory applications were filed, including one by suspended director Deepak Mangla, who alleged fraud and collusion by Resolution Professional Mukesh Gupta.

The allegations included manipulation of voting outcomes, siphoning of assets, illegal transfers of land to relatives of promoters, and demands for money in connection with land transactions. The Resolution Professional was also accused of failing to disclose avoidance transactions under Sections 43, 45, 50 and 66 of the IBC, preparing a defective information memorandum, and undervaluing assets. It was further alleged that only 180 out of 630 allottees were permitted to submit claims, raising concerns over transparency in the CIRP.

While examining the resolution plan, the Tribunal noted that the Successful Resolution Applicant (SRA) had valued the Corporate Debtor at Rs. 28.25 crore, whereas the liquidation value was Rs. 34.67 crore. The plan allocated government dues at only 5% of the admitted claims, despite the government being an operational creditor. It held:

“Thus, though, in terms of the waterfall mechanism, no amount may actually be payable to the Government, when any amount is found payable to it, the same should not be less than the amount admissible to it in the event of liquidation of the Corporate Debtor under Section 53 of the Code. In the present case, the liquidation value of the Corporate Debtor being higher than the plan value, apparently, the amount payable to the Operational Creditor, i.e., the Government, in terms of the Resolution Plan is much lesser than the amount which would be payable to it in the event of liquidation.”

The Bench also found that the resolution plan failed to address the primary default involving non-delivery of possession of units to homebuyers. It noted that Regulation 38(3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations requires a resolution plan to demonstrate feasibility, viability, and effective implementation.

Accordingly, the NCLT rejected the resolution plan, appointed Vikram Kumar as the new Interim Resolution Professional (IRP), and directed him to invite fresh claims from allottees and creditors and constitute a new Committee of Creditors (CoC) within 150 days.

For Applicant: Advocates Palash S Singhai, Harshal Sareen and Aashima Gautam

For Respondents: Advocate Shankari Mishra