The Supreme Court has invoked its extraordinary powers under Article 142 of the Constitution to issue a series of steps to ensure the completion of the stalled Supernova real estate project in Noida, whose developer, Supertech Realtors Pvt Ltd., had been facing insolvency proceedings (Ram Kishor Arora Vs Bank of Maharashtra).
In the December 16 ruling, a Bench comprising Chief Justice of India Surya Kant and Justice Joymalya Bagchi set up a court-monitored mechanism to ensure the completion of construction, protect homebuyers, and oversee further resolution proceedings against Supertech.
“This is a fit case for this Court to exercise its powers under Article 142 of the Constitution of India,” the Bench recorded, adding that the prevailing circumstances warranted a solution beyond the conventional insolvency framework.
Invoking Article 142, the Court discharged Supertech's interim resolution professional (IRP), the committee of creditors, and the suspended board of directors, and constituted a three-member empowered committee to take over the management of the project.
The committee comprises:
- Justice MM Kumar, former Chief Justice of the Jammu and Kashmir High Court and former President of the NCLT, as chairperson;
- Dr Anoop Kumar Mittal, construction and project management expert;
- Rajeev Mehrotra, financial management expert
The committee will operate from New Delhi, with costs borne by Supertech.
Other key directions from Supreme Court
Immediate takeover: The three-member court-appointed committee will immediately replace the IRP, the committee of creditors and the suspended board to take charge of the project.
Flexible composition: The Chairperson may add members or reconstitute the committee if required for effective implementation.
Project execution: The committee will appoint an executor to implement the approved project plan and take all operational decisions. The role of Supertech's former directors is limited to technical support, while the discharged IRP must assist when required.
New developer and fund control: A new developer will be selected through a vetted, proposal-based process, excluding entities linked to the erstwhile management of Supertech. All project inflows will be routed through an escrow account for construction only.
Final authority with consultation: Although the committee has been asked to consult lenders, homebuyers and NOIDA while making decisions, the committee’s ultimate decisions will be final and binding.
Audit: A forensic audit of Supertech has been ordered.
Zero period and approvals: Development authorities must process approvals without insisting on past dues from homebuyers. The Court further said that there will be a zero period, whereby the payments due from Supertech to lenders or NOIDA are to wait until project completion and the handing over of dwelling units to homebuyers. The Court added,
"During this period, the NOIDA Authority and the financial lenders shall not initiate or continue any coercive action against home buyers who have paid the consideration for their respective dwelling units. Upon completion of the project, any surplus generated shall be utilized towards the satisfaction of the dues of the financial lenders and the NOIDA Authority."
The case was tied to insolvency proceedings initiated against Supertech Realtors Pvt Ltd in relation to its flagship Supernova project in Sector 94, Noida, a large mixed-use development consisting of residential apartments, studios, office spaces, and commercial units.
The National Company Law Appellate Tribunal (NCLAT) had earlier upheld the initiation of the Corporate Insolvency Resolution Process (CIRP) against Supertech at the instance of a financial creditor. A suspended director of Supertech eventually filed an appeal before the Supreme Court. During these proceedings, other stakeholders also approached the Court claiming that their rights were also affected by these proceedings.
With the project remaining stalled for years and multiple stakeholders asserting competing claims, the Supreme Court appointed Senior Advocate Rajiv Jain as amicus curiae to assist it on the way forward.
The amicus prepared a report after consulting with all stakeholders, and told the Court that the financial creditors had failed to take timely action against Supertech when the company was showing early signs of financial distress. This weakened the financial creditors' claim that the repayment of dues owed to them should be prioritised.
The Court also noted that all stakeholders had broadly agreed to having a court-monitored mechanism to oversee future steps.
Accordingly, it set up a three-member committee to ensure that the completion of the project is prioritised, while also tasking it with overseeing the repayment of dues owed by Supertech to its lenders.
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