NEW DELHI: The Enforcement Directorate (ED) has accused the real estate developer Experion Developers of improperly utilizing the Insolvency and Bankruptcy Code provisions to acquire 9.3 acres of land in Gurugram’s Sector 62.
As part of a Prevention of Money Laundering Act (PMLA) investigation involving Religare Finvest, the ED attached assets owned by the corporate debtor, Dignity Buildcon, which was subsequently purchased by Experion.
The ED has filed a petition with the National Company Law Tribunal (NCLT) requesting a review of its May 2023 decision that permitted Experion to take over Dignity Buildcon through the insolvency procedure.
The ED highlighted that Experion Capital (ECPL), a group entity of Experion Developers, not only acquired 60% of the voting rights in the committee of creditors (CoC) via credit facility purchases but also unduly influenced the voting decisions of CoC member Alchemist ARC, which held 35% of the total voting shares. “ECPL spent ₹223.92 crore to gain 60% voting rights and influenced a CoC member with 35% voting rights, receiving ₹334.08 crore from EDPL post-resolution plan approval. This represents a significant misuse of Section 30(5) of the IBC, 2016,” the ED asserted. The agency claimed that the successful resolution applicant (SRA) intentionally delayed the corporate insolvency resolution process (CIRP) until the CoC’s composition and voting rights shifted in its favor.
Experion has labeled these allegations regarding improper CoC reconstitution as unfounded.
“All debt assignments to ECPL were fully compensated, all changes were presented to the NCLT, and the updated CoC was correctly displayed on the IBBI website. The law allows a creditor to act as a resolution applicant,” stated a spokesperson for Experion.
“Moreover, the Enforcement Directorate previously indicated to the Delhi High Court its intention to attach RS Infrastructure’s properties—not DBPL’s. The subsequent attachment of DBPL assets seems to be an erroneous move to obstruct its revival. The high court has provided interim protection for these attached assets,” the spokesperson added.
The ED’s inquiry revealed that financial creditors who incurred losses due to Dignity Buildcon’s defaults transferred debts to ECPL, resulting in a 70.17% haircut. Consequently, ECPL benefitted from this haircut while simultaneously controlling 60% of the voting rights and having indirect control over 35% of CoC voting rights.
“The SRA exerted undue influence over a CoC member, coercing it to support the resolution plan proposed by the SRA. The CoC, significantly influenced by the SRA and its affiliates who were now CoC members, was maneuvered into approving a resolution plan that was financially inadequate and commercially unjustifiable, thereby harming the interests of other potential resolution applicants (PRAs) and undermining the fairness and transparency of the resolution process,” the ED stated.
