NOIDA: The National Company Law Appellate Tribunal (NCLAT) has determined that home loans issued by a bank to buyers do not constitute a financial debt owed by a project’s developer. This ruling came as it rejected UCO Bank’s request to be recognized as a financial creditor in the insolvency case of Bulland Buildtech Pvt Ltd, the firm behind the Bulland Elevates project in Greater Noida.
A bench consisting of chairperson Justice Ashok Bhushan and technical member Arun Baroka upheld decisions from the National Company Law Tribunal (NCLT) that denied the bank’s Rs 19 crore claim and approved a resolution plan for the developer presented by Saviour Builders.
Residential units at Bulland Elevates were marketed between 2013 and 2015, with forty-five homebuyers securing loans from UCO Bank. The bank had sanctioned loans directly to buyers under a tripartite agreement, disbursing the funds to the developer. When Canara Bank initiated insolvency procedures against Bulland Buildtech in March 2021, UCO Bank lodged a claim of Rs 18.8 crore in the corporate insolvency resolution process (CIRP), asserting its status as a financial creditor.
However, both the interim resolution professional (IRP) and the subsequent resolution professional (RP), Debashish Nanda, denied UCO Bank’s claim in April and September 2021, respectively, noting that the loans were agreements between the bank and the homeowners, not the developer.
The RP noted that of the 45 home loans, 13 properties were unoccupied, 20 assigned to other buyers, six claims were rejected due to inadequate records, and 24 borrowers failed to file claims. Only one buyer’s claim was validated and accepted.
UCO Bank contended that it was a secured financial creditor due to the legally binding tripartite agreements and having registered a charge with the Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI) against the financed properties. The bank’s counsel asserted that both the builder and the purchasers had obligations under the agreement, stating, “If the borrower defaults, the bank retains the right to manage and realize outstanding dues from the property.”
The bank claimed that the builder had an indemnity obligation under the agreement, categorizing the transaction as financial debt under the Insolvency and Bankruptcy Code (IBC). Additionally, it referenced Debt Recovery Tribunal (DRT) orders from 2019-20 against the borrowers and Bulland Buildtech as evidence of liability.
The RP rebuffed these claims, clarifying that the corporate debtor did not borrow from UCO Bank. The home loans were approved for the buyers, not the company. The RP’s counsel added that several of the alleged allottees were absent from the builder’s official documentation and that the financial assistance was granted to individual homebuyers, not to the corporation.
The RP also highlighted that the Committee of Creditors (CoC), which holds a 94% voting share, approved a resolution plan in March 2022. An application for avoidance under Section 66 of the IBC was submitted to investigate potential suspicious transactions by the builder’s promoters, with any recoveries under consideration for the bank’s claims only upon Saviour Builders’ approval as the successful resolution applicant.
Saviour Builders reaffirmed that Bulland Buildtech bore no repayment obligation to UCO Bank but indicated no objection towards any recovered funds from avoidance proceedings being allocated to the bank. On Wednesday, NCLAT upheld the NCLT ruling, stating that UCO Bank did not qualify as a financial creditor under the IBC and clarified that the tripartite agreements imposed no repayment duty on the builder. The tribunal further emphasized that Bulland Buildtech did not undertake any subvention obligations concerning repayment.
