Insolvency proceedings can not be extended to subsidiary: Ex-Supertech developer to SC

Supertech Group’s erstwhile developer Ram Kishore Arora has told the Supreme Court that the insolvency proceedings involving its Supernova project in Noida cannot be extended to a commercial tower operated by its subsidiary, Supertech Retails, which he said is a going concern and is not facing any insolvency proceedings

Supertech Group’s erstwhile developer Ram Kishore Arora has told the Supreme Court that the insolvency proceedings involving its Supernova project in Noida cannot be extended to a commercial tower operated by its subsidiary, Supertech Retails, which he said is a going concern and is not facing any insolvency proceedings.

(HT Archive)

The response came on Tuesday after a court-appointed empowered committee headed by former high court justice MM Kumar flagged what it described as serious concerns over the alleged dissipation of assets of Supertech Realtors Pvt Ltd (SRPL), the erstwhile developer of Supernova.

In a report recently submitted to the Supreme Court, the committee said a forensic audit of Supertech Ltd (STL) and SRPL had uncovered “serious and continuing diversion” of SRPL’s assets through Supertech Retails, a nearly 100% subsidiary of SRPL. It sought orders to replace the management of Supertech Retails and initiate a forensic audit of the company.

On Tuesday, a bench headed by Chief Justice of India Surya Kant reserved its order on the committee’s demands and Arora’s response. During the hearing, the CJI told Supertech Retails, “You (S Retails) are an alter ego of the promoter.”

Homebuyers’ lawyers, meanwhile, urged the court to prioritise completion of the project. Advocates UK Uniyal and Surat Singh said around ₹8 crore had been spent over the past eight months on committee members’ salaries and forensic audit consultation fees, while no relief had reached homebuyers. “In the last eight months, not a single brick has been placed even as so much expenses have been incurred,” they said, adding that they welcomed the forensic audit but wanted a developer capable of infusing funds to complete the projects and hand over the flats.

The court said it would consider the concerns and noted that homebuyers had earlier been permitted to convey their views to the empowered committee through the amicus.

Advocate Rajiv Jain, assisting the court as amicus curiae, pointed out that an 8,000 sq metre parcel within the land leased to SRPL for the Supernova project had been sub-leased to Supertech Retails for construction of a commercial tower, Astralis Tower, under a 2018 tripartite deed between Noida, SRPL and Supertech Retails.

“The mandate of the committee is the resolution of SRPL and not its liquidation,” Arora had said, questioning the committee’s authority to take over the governance of a solvent subsidiary.

He argued that taking over the management of a solvent commercial subsidiary with no homebuyers was “neither necessary for, nor incidental to” the committee’s assigned task and amounted to an exercise beyond its jurisdiction.

On the committee’s allegation of asset diversion, Arora said Supertech Retails had instead paid more than ₹342 crore to Indiabulls Asset Reconstruction Company Ltd on behalf of SRPL, thereby discharging a liability of the corporate debtor. “The allegation that S Retails has been built only for diversion of funds and assets from SRPL is, therefore, not merely unproved. It is contradicted by the record which committee has itself placed before this court,” he said.

The dispute comes as the completion of the wider Supernova project remains pending. Of the 2,863 housing units sold, possession has been granted for 1,121, while around 5,251 units remain unsold, with construction pending at various stages.

The mixed-use project in Sector 94, Noida, spread over 70,002 sq metres, comprises residential and commercial units, office space, studio and service apartments and shopping centres. It was estimated to cost ₹2,326.14 crore.

The project was initiated by SRPL, which is currently undergoing insolvency proceedings after defaulting on loan repayments. The National Company Law Tribunal initiated the corporate insolvency resolution process on June 12, 2024. The decision was upheld by the National Company Law Appellate Tribunal in August and subsequently challenged by Arora in the Supreme Court. The Supreme Court later constituted the justice Kumar-led empowered committee to oversee the project and identify a developer to complete it.