Supreme Court refuses to stay Adani Goodhomes’ resolution plan for insolvent realtor Radius Estates

The Supreme Court on Friday declined to stay the resolution plan of Adani Goodhomes, a subsidiary of Adani Infrastructure and Developers, to acquire the insolvent real estate company Radius Estates. 

The bench, comprising Justices Sanjiv Khanna and Sanjay Kumar, issued a notice to Adani Goodhomes and other parties, including the dissenting creditor Beacon Trusteeship, which challenged the plan in the Supreme Court after it was upheld by the NCLAT. Beacon Trusteeship claimed the plan imposed an around 93% haircut on its claims.

The case will be heard again in January 2025.

This case highlights the ongoing issue of substantial haircuts taken by lenders in insolvency resolutions. 

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The Congress party, on 4 September 2024, raised concerns based on data from the All India Bank Employees Association (AIBEA), which revealed that public sector banks took a 74% haircut on their outstanding dues from 10 financially stressed companies after they were acquired by the Adani Group.

In this case on 27 May, the National Company Law Appellate Tribunal (NCLAT) upheld Adani Goodhomes' plan to take over Radius Estates, rejecting challenges from dissenting creditors includes ICICI Prudential Venture Capital Fund and Beacon Trusteeship. This decision reaffirmed an earlier order from the Mumbai bench of the National Company Law Tribunal (NCLT), which had approved the plan and dismissed allegations of collusion.

Dissenting creditors, such as Beacon Trusteeship, alleged that the resolution professional (RP), Jayesh Sanghrajka, and HDFC Ltd, the largest creditor, colluded, resulting in only one bid being received. They demanded a restart of the insolvency process, but the NCLT Mumbai approved Adani Goodhomes' bid in December 2022, citing insufficient evidence for these claims.

Financial creditors' loss, homebuyers' gain

The Resolution Plan violated Section 30(2) of the Code, according to dissenting creditors. They argued it was unfair because it imposed a 93% haircut on secured financial creditors while providing 100% recovery to homebuyers through allotted units without reductions or price increases. They also criticized the RP for expediting the Corporate Insolvency Resolution Process (CIRP) and pressuring the Committee of Creditors (CoC), alleging that the incomplete Valuation Report hindered an informed decision.

Adani Goodhomes has offered approximately ₹76 crore to Radius Estates' creditors, who have claims totalling around ₹1,700 crore, resulting in a 93% haircut for the creditors, accoding to media reports.

The resolution plan received support from over two-thirds of the creditors, including nearly all of the 700 homeowners, as well as financial creditors like HDFC, Yes Bank Ltd, Piramal Capital & Housing Finance Ltd, Infinite Buildcon Private Ltd, and ICICI Bank Ltd.

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ICICI Prudential Venture Capital Fund, and Beacon Trusteeship were the only dissenting creditors who challenged the plan, citing foul play. Their challenges were rejected by both the NCLT and NCLAT, prompting them to escalate the matter to the Supreme Court.

Homeowners had collectively advanced around ₹800 crore to book their homes. Although they are considered a separate class of creditors, they have the same rights as financial creditors. Of the ₹1,700 crore claims filed by financial creditors, debenture holders' claims are estimated at around ₹200 crore.

Adani Goodhomes has also committed to completing the residential project in Mumbai at no additional cost to the homeowners. Following the plan's approval, Adani Goodhomes infused ₹450 crore as interim finance by 31 December 2021, which was used for dues payment, FSI premiums to the Municipal Corporation of Greater Mumbai (MCGM), and the commencement of construction.

Radius Estates' bankruptcy

Radius Estates and Developers Pvt. Ltd. had partnered with MIG (Bandra) Realtors and Builders Pvt. Ltd. to redevelop land in Bandra (East), Mumbai. The project aimed to construct residential flats for the rehabilitation of members of the Middle-Income Group Co-operative Housing Society, along with a free-sale component. However, construction halted in January 2020, leading Beacon Trusteeship Ltd. to file a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process. On 30 April 2024, the NCLT initiated insolvency proceedings.

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At the start of the moratorium, Radius Estates had sold 224 units and had 146 units left for sale. Out of the 15 proposed buildings, only nine were partially constructed, while the construction for the remaining six had not yet begun. When the resolution professional invited plans, Adani Goodhomes and Ashdan Developers submitted proposals. Adani Goodhomes' plan was approved by the Committee of Creditors with an 83.93% voting share and received NCLT approval.