NCLT Bengaluru Bars Investors From Other Dreamz Projects From Taking Part In Samhita Project CIRP

The National Company Law Tribunal (NCLT) at Bengaluru has refused to allow an investors' association representing depositors in other Dreamz Infra projects to intervene in the project-specific insolvency proceedings for the Dreamz Samhita project, holding that it had failed to establish any project-specific interest.

A coram of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada dismissed an application filed by Dreamz GK Investors Welfare Association seeking impleadment in the Corporate Insolvency Resolution Process (CIRP) of Dreamz Infra India Limited's Dreamz Samhita project and a stay on the August 24, 2023 admission order commencing insolvency proceedings.

“Since neither any rights and interests of members of the Applicant are subject matter of petition nor being considered, there is no reason to implead a stranger to the project specific matter at this mature stage, in the face of stiff opposition of concerned parties by trampling their dominus-litis. The impleadment otherwise also will derail the entire process and side-track the matter, and thereby seriously prejudice the interested homebuyers besides violating the objects of enactment of IBC.,” the tribunal held.

The association contended that the Karnataka government had attached the corporate debtor's properties, including the Dreamz Samhita project, under the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004, following complaints from investors, and that related proceedings were pending before the KPID Special Court and the Karnataka High Court.

It argued that despite the prior attachment and an interim order passed by the Karnataka High Court in connected proceedings, the Dreamz Samhita project was admitted into CIRP on August 24, 2023 on a Section 7 insolvency petition filed by homebuyers.

Opposing the application, the Resolution Professional argued that the CIRP was confined to the Dreamz Samhita project, a resolution plan had already been approved by the Committee of Creditors with an 83.05% voting share, and the plan was awaiting approval by the Tribunal.

Referring to the Karnataka High Court's orders, the Tribunal observed that the interim stay granted by the Division Bench was confined to the operation of a Single Judge's decision concerning KPID proceedings and the broader issue of the interplay between the KPID Act and the Insolvency and Bankruptcy Code.

It held that no specific stay had been granted against the CIRP of the Dreamz Samhita project, which was admitted nearly ten months after the High Court's interim order.

“There is neither any explicit nor implied stay against the CIRP of the Samhita Project. This position is further fortified by the order of the Hon'ble High Court in WP No.18811/2023, wherein it was categorically clarified that homebuyers and other stakeholders have the liberty to choose their forum under different statutes, which would invariably include the proceedings initiated under Insolvency and Bankruptcy Code, 2016.” it said.

The tribunal further noted that the applicant association itself had not challenged the Dreamz Samhita CIRP before the Karnataka High Court when it approached that court in separate proceedings, which undermined its claim that a blanket stay operated against the insolvency process.

It noted that project-wise insolvency resolution in real estate cases involving multiple projects of the same corporate debtor is a recognised principle under the IBC aimed at protecting the interests of homebuyers of the concerned project. The Tribunal also noted that the suspended director's challenge to the admission order had already been dismissed by the NCLAT.

While observing that the association's allegations of diversion of funds may be genuine, the Tribunal held that it had failed to produce any evidence linking investments made by its members to the Dreamz Samhita project.

“In the absence of such clear and tangible evidence linking their funds to the Samhita Project, the Applicant cannot be permitted to stall the resolution process of an independent project,” it held.

The bench further observed that since the resolution plan approved by the Committee of Creditors was already pending consideration, permitting intervention at such an advanced stage would prejudice hundreds of homebuyers awaiting resolution and defeat the IBC's objective of time-bound resolution and maximisation of asset value.

Accordingly, the tribunal dismissed the application.

For Applicant: Ragini Bundela

For Respondent: Chithra Nirmala