NCLT Admits Insolvency Application Filed by Wave Group
The National Company Law Appellate Tribunal (NCLT) admitted an insolvency application filed by Wave Group stating that it is trying to protect the interest of the homebuyers after Noida authority sealed its' under-construction project and taken over the possession of over one million sq ft.
The well-known real estate firm the Wave Mega City Center (WMCC) Private Limited, has voluntarily initiated insolvency proceedings against itself under section 10 of the Insolvency and Bankruptcy Code, that allows a debtor to initiate insolvency resolution process against itself if it has committed any default.
The application was filed as it is unable to clear the dues of the Noida Authority. WMCC has been developing commercial and residential projects in Noida in different sectors of the city.
In the application filed before the Tribunal, the developer contended to initiate insolvency proceedings against it due to its failure i.e. the corporate debtor (Wave Megacity Centre) to pay dues of the Noida Authority for an amount of Rs 1,222.64 crore. The firm added that it lacks adequate cash flow to meet its obligation to the customers and financial lenders.
The company further mentioned in its petition that "The board of directors of the corporate debtor has examined the financial situation and in order to keep the corporate debtor as a going concern have approved/ resolved to file the application keeping creditors and share-holders interest in mind."
The petition will be listed soon before the Tribunal's Principal Bench in New Delhi.
The firm filed an application under Section 10 of the Insolvency and Bankruptcy Code, 2016 (IBC) that permits a corporate debtor to initiate a corporate insolvency resolution process (CIRP) against itself if it has committed any default.
The company initiated an application after the Noida Authority had taken over possession of 1.08 lakh sq. meters of commercial land that was allotted to the real estate developer over unpaid dues.
In the petition, the company stated that "The Noida Authority on 11 March 2021 has taken over physical possession of 1.08 lakh meter of land which the Corporate Debtor has made construction and sold units to third parties on portions thereof."
The Noida Authority has even refused to execute sub-lease deed due to non-payment of outstanding dues for units that have been completed in the fully paid-up land parcel measuring 56,400 sq. meters.
The petition specifically stated that "It is unable to generate revenue from the sale/transfer of such units and is also in default of its obligations to the allottees of the residential and commercial units resulting in the corporate debtor not having the adequate cash flow to meet its obligation to the customers and financial lenders."
The company further mentioned that it has been facing loss and in the financial year 2019-20, it had a loss of Rs 875.62 crore, and additionally there is a provisional loss of Rs 232.53 crore in the present fiscal. It added that it has received Rs. 1,398 crore from the allottees of residential and commercial units.
The company has been facing many cases against it that are still pending at various judicial forums filed by its customers/flat buyers seeking refund claims of around Rs. 254 crore.
The company stated in its petition that "Such cases are likely to increase due to failure of the Noida Authority to execute the tripartite agreement with the corporate debtor and the allottees of its residential and commercial units." Hence, it voluntarily moved to the Tribunal for initiation of insolvency proceedings.