NCLT Orders Initiating Insolvency Proceedings Against Mantri Developers

NCLT has directed initiating insolvency proceedings against Bengaluru-based real estate firm Mantri Developers admitting the plea filed by Indiabulls Housing Finance Ltd. A two-member bench has also suspended the board of Mantri Developers and appointed Ahsan Ahmad as the interim resolution professional for the company.

Indiabulls Housing Finance Ltd (IHFL) had moved the Bengaluru bench of the National Company Law Tribunal (NCLT) claiming a default of Rs 456.68 crore by Mantri Developers, part of the Mantri Group of Companies engaged in the real-estate business in Bengaluru, as on January 1, 2022. "In view of the facts and circumstances... the present petition being complete and having established the default in payment of the financial debt and for the default amount being above Rs 1 crore, the petition is admitted in respect of respondent -- Mantri Developers Private Ltd -- under Section 7 of the I&B Code, 2016," said NCLT.

The NCLT bench consisting of Manoj Kumar Dubey and T Krishnavalli in its order delivered on March 28, 2023, also declared a moratorium under the Insolvency & Bankruptcy Code (IBC) protecting it from any suits, judgment, decree of court or sale and transfer of its assets during the CIRP. IHFL had sanctioned five loans and aggregate disbursed loan amount of Rs 574.20 crore.

However, Mantri Developers failed to comply with the provisions of the Loan agreements. Accordingly, the financial creditor issued five separate notices on June 29, 2021, with respect to each loan account. Neither the corporate debtor (CD) nor its co-borrowers made any payment of the outstanding amounts, following which IHFL moved NCLT under section 7 of the I&B Code.

NCLT also observed that Mantri Developers has availed loan facilities from the financial creditor against payment of interest and it defaulted in repayment of such 'financial debt' which has become due and payable. The real estate firm in its reply contended that despite its continuous efforts to complete its projects on time, they were unable to do so, due to IHFL's failure in disbursing the loan amount on time.

It further contended that the company is having sufficient assets and means to meet its debts, and thus it cannot be liquidated summarily merely at the instance of a frivolous creditor and the corporate debtor cannot be held liable for such debts and since there is a clear indication of settlement, the discretion must be exercised to facilitate such settlement to conclusively close the transactions between the parties.

Rejecting it, NCLT said: "However, we are of the considered view that the said contentions are not tenable in law".It also rejected Mantri Developers' contentions that out of five sanctioned loan facilities, three loans were sanctioned not only to the Mantri Developers but also to other co-borrowers, who were not made parties in this present petition and thus it is not maintainable.

The aggregate amount claimed to be in default is Rs 456.68 crore in five loans. "Even if the two instances of loan to the CD itself (without any co-borrower) are considered, the amount is well above the threshold requirement of Rs 1 crore," it said. Moreover, it also observed in response to the notices received under the Code, CD vide letter dated January 16, 2022, stated that negotiations in respect of the OTS are underway, and the terms of the OTS (one-time settlement) is being captured under definitive agreements. "It is noticed from the above reply that the CD has neither disputed the claim nor denied the agreements entered into between the parties," it said.