Introduction

The case of Anand Murti (S) v. Soni Infratech Private Limited And Another (S) (2022 INSC 486) adjudicated by the Supreme Court of India on April 27, 2022, centers on the completion of a stalled housing project under the framework of the Insolvency and Bankruptcy Code, 2016 (IBC). The appellant, Anand Murti, a suspended director of Soni Infratech Pvt. Ltd., sought modification of the National Company Law Appellate Tribunal's (NCLAT) order, which had directed the continuation of the Corporate Insolvency Resolution Process (CIRP) to address the project's completion. The case highlights key issues related to resolution plans, stakeholder settlements, and the role of promoters in facilitating the revival of distressed companies within the ambit of IBC.

Summary of the Judgment

The Supreme Court reviewed the appellant's challenge against the NCLAT's decision to reject his modification application. The NCLAT had previously directed the formation of the Committee of Creditors (CoC) to oversee the CIRP, dismissing the appellant's settlement with a single home buyer as insufficient for resolving the broader insolvency. However, upon the appeal, the Supreme Court observed that the appellant had subsequently reached settlements with the majority of stakeholders, supported by an affidavit undertaking by the promoter to complete the project within specified timelines without escalating the cost of flats. Considering the minimal opposition from a few home buyers and the promoter's commitments, the Supreme Court quashed the NCLAT's impugned order, allowing the appellant to proceed with the completion of the housing project under the modified resolution plan.

Analysis

Precedents Cited

The judgment references several key sections of the Insolvency and Bankruptcy Code, 2016, particularly Section 7, which deals with the initiation of CIRP by financial creditors. Additionally, the Court considered previous decisions related to the modification of resolution plans and the authority of the NCLAT in overseeing such modifications. The case reinforces the precedent that resolution plans must adequately address the interests of all stakeholders to be deemed acceptable under the IBC.

Legal Reasoning

The Supreme Court's legal reasoning focused on balancing the interests of the home buyers with the feasibility of completing the housing project. Key factors included:

• The extent of completion of the project (approximately 70% completed).
• The promoter's genuine efforts and financial commitments to complete the project.
• The settlement reached with the vast majority of stakeholders, minimizing dissent.
• The promoter's undertaking to honor the cost of flats and provide refunds to a minority of dissenting buyers.
• The potential higher costs involved if CIRP were to continue, possibly affecting the remaining stakeholders adversely.

The Court held that the resolution plan, supplemented by the promoter's affidavit, presented a viable path to project completion, serving the best interests of the majority of stakeholders.

Impact

This judgment sets a significant precedent for similar insolvency cases, particularly in the real estate sector. It underscores the importance of:

• Constructive engagement between promoters and stakeholders to reach comprehensive settlements.
• The provision of concrete undertakings by promoters to ensure project completion and protect stakeholder interests.
• The flexibility of appellate tribunals and the Supreme Court in facilitating resolutions that prevent prolonged insolvency proceedings, thereby promoting economic efficiency.

Future cases may reference this judgment when evaluating the viability of modified resolution plans and the sufficiency of stakeholder settlements under the IBC framework.

Complex Concepts Simplified

Corporate Insolvency Resolution Process (CIRP): A mechanism under the IBC aimed at resolving insolvency of companies by restructuring their debts and ensuring the continuation of business operations.

Committee of Creditors (CoC): A body comprising financial creditors (entities owed money by the insolvent company) responsible for approving or rejecting the resolution plan during CIRP.

Modification Application: A request filed with the NCLAT seeking changes to its previous orders, typically to accommodate new settlements or plans proposed by the appellant.

Resolution Plan: A detailed proposal for reviving the insolvent company, which outlines how debts will be restructured and the business operations will be sustained.

Conclusion

The Supreme Court's decision in Anand Murti v. Soni Infratech reinforces the judiciary's role in facilitating equitable and practical resolutions within the insolvency framework. By allowing the promoter to proceed with the completion of the housing project, contingent upon his comprehensive commitments and majority stakeholder consent, the Court emphasized the importance of constructive resolution over prolonged insolvency proceedings. This judgment not only aids the immediate stakeholders but also contributes to the broader objective of the IBC to foster a conducive environment for business recovery and economic resilience.