NCLAT dismissed appeal by Central Bank of India against approval of Resolution Plan for Neptune Developers

The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal filed by the Central Bank of India against the approval of a resolution plan for Neptune Developers Pvt. Ltd, a bankrupt real estate company. The tribunal made it clear that as a dissenting financial creditor, the bank cannot overturn a resolution plan that has been approved by the Committee of Creditors (CoC) using its “commercial wisdom.”

This ruling is a major relief for over 2,000 homebuyers who have been waiting for more than ten years to get possession of their flats in Neptune’s stalled project, “Project Swarajya” in Kalyan, Mumbai.

The controversy began after the National Company Law Tribunal (NCLT) in March 2023 approved a ₹390 crore resolution plan submitted by Shree Naman Developers Pvt. Ltd., which had secured 85.35% approval from creditors. The Central Bank of India, which held 11.83% voting rights in the CoC, objected to the valuation of assets and argued that its interests were being ignored. It claimed that the liquidation value of the company’s assets was much higher than what was presented by the appointed valuers.

During the insolvency process, multiple valuers gave varying figures. While the first two valuers estimated liquidation values between ₹2.21 crore and ₹8.39 crore, a third valuer—appointed after the bank’s objections—assessed it at ₹11.08 crore, still far below the bank’s claimed value of ₹26.83 crore. The bank alleged that crucial assets, including flats given to contractors in barter deals, had been excluded, making the reports “faulty.” However, the tribunal noted that such flats were already exchanged as payment and could not be treated as realizable assets.

The CoC had also set aside ₹26.83 crore as a disputed value for the bank, but the lender later contested the arrangement. The bank argued that the NCLT had “prematurely” approved the resolution plan before considering the third valuation report.

Countering this, the resolution professional’s counsel and representatives of homebuyers stressed that the CoC had acted within its rights, and that under the Insolvency and Bankruptcy Code (IBC), a dissenting creditor is entitled only to its liquidation value. They added that further delays would unfairly harm homebuyers who had already suffered for more than a decade.

The NCLAT bench, led by Justices Ashok Bhushan and Barun Mitra, sided with the CoC, stating that valuation reports prepared by registered experts cannot be replaced with subjective claims from creditors. It also said the bank could not “indirectly achieve what it could not directly” by trying to block the resolution plan.

The appellate tribunal found “no merit” in the bank’s objections and upheld the NCLT’s approval of Shree Naman Developers’ resolution plan. This ensures that the project can now move forward, providing long-awaited relief to homebuyers while affirming the principle that CoC’s commercial decisions cannot be second-guessed without solid evidence.

The National Company Law Appellate Tribunal (NCLAT) is a tribunal which was formed by the Central Government of India under Section 410 of the Companies Act, 2013. The tribunal is responsible for hearing appeals from the orders of National Company Law Tribunal(s) (NCLT), starting on 1 June 2016.

The National Company Law Tribunal (NCLT) is a quasi-judicial body in India established to handle company law matters, including insolvency and corporate disputes. It was established on June 1, 2016, under the Companies Act, 2013. The NCLT aims to provide a specialized forum for resolving company-related issues, leading to more efficient and timely resolutions compared to traditional courts.