Summary
In the CIRP of Earth Infrastructures Ltd (EIL), the Supreme Court set aside the NCLAT's annulment of the approved resolution plans of Roma and Alpha for projects on land GNIDA had leased to EIL's subsidiaries and SPC. It lifted the corporate veil because EIL was the real developer and payer and the lessees were only a front. It held GNIDA's inaction, belated claims and inconsistent stand disentitled it to penal interest and penalties, and restored the plans on terms that the applicants pay GNIDA's principal dues over 24 months without burdening buyers. The NCLAT had also wrongly set aside the plan for a Gurugram project unconnected with GNIDA.
Issues
- Whether leasehold lands held by subsidiaries and an SPC of the corporate debtor could be dealt with in resolution plans in the CIRP of the holding company, and whether the corporate veil should be lifted.
- Whether GNIDA, the lessor, could have the approved resolution plans set aside for want of notice and participation in the CIRP.
- Whether GNIDA was entitled to penal interest, penal charges and time-extension penalties on its dues.
- Whether the NCLAT rightly set aside the approval of Alpha's plan in respect of a project on freehold land in which GNIDA had no interest.
- Whether dissenting homebuyers within a class, and an association whose objections had been finally rejected, could challenge the approved plan; and whether appeals filed beyond the condonable period under Section 62 were maintainable.
Provisions considered
- Section 62(2), Insolvency and Bankruptcy Code, 2016The Court can condone delay only up to a further 15 days beyond the 45-day period; appeals filed beyond that limit were dismissed as time-barred. (¶ 4)
- Section 25A(3A), Insolvency and Bankruptcy Code, 2016The authorised representative of homebuyers votes for the whole class per the majority of those voting; homebuyers in the dissenting minority cannot separately oppose a plan approved by that class vote. (¶¶ 30, 31)
- Section 60(5)(b), Insolvency and Bankruptcy Code, 2016Since the NCLT can entertain claims by or against subsidiaries of the corporate debtor, GNIDA, as a creditor of the subsidiaries, could have filed its claims in EIL's CIRP but failed to do so in time. (¶ 38)
- Section 13-A, Uttar Pradesh Industrial Area Development Act, 1976GNIDA relied on Prabhjit Singh Soni, which treats it as a secured creditor with a statutory charge; the Court held GNIDA could not approbate and reprobate by denying EIL's connection with the lands while claiming dues in EIL's CIRP. (¶¶ 45, 51)
- Section 7, Uttar Pradesh Industrial Area Development Act, 1976Noted as the source of GNIDA's power to lease land on terms it fixes; the lease deeds bound lessees to build to approved plans within seven years and required GNIDA to monitor the projects. (¶¶ 34, 35)
- Section 2(87), Companies Act, 2013Referred to on GNIDA's argument that a subsidiary is a separate legal entity; the Court accepted the separate-entity principle but held it yields where the veil should be lifted. (¶ 53)
- Regulation 36A(1), Clarification, IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016Noted that the clarification permits project-wise invitation of resolution plans in real estate cases, and that even before it, project-specific CIRP had been approved. (¶ 12)
Held
- A holding company and its subsidiaries are ordinarily distinct legal entities, but the corporate veil may be lifted where associated companies are so inextricably connected as to be one concern or public interest so requires. Here EIL controlled the lessees, they shared directors, their only assets were the leased lands, EIL developed all projects and paid GNIDA's dues, and GNIDA knew this; the subsidiaries were only a front and the veil was lifted. (¶¶ 53, 54, 55, 56)
- GNIDA was informed of the CIRP by the IRP and the RP and asked for its dues, but filed no timely claims: its Earth Towne claim came after the CoC approved Roma's plan, its Earth TechOne claim was sent years later to the displaced IRP, and none was made for Earth Sapphire Court. The Information Memorandum and plans covered only development rights, not title. GNIDA could not portray itself as an uninformed victim or blame the RP. (¶¶ 36, 37, 38, 46, 47, 50, 51)
- The resolution plans contemplate only transfer of possession to complete the projects, with buyers taking as sub-lessees; ownership of the land remains with GNIDA. (¶ 44)
- GNIDA's sporadic default notices, failure to monitor development under the lease deeds and inaction on buyers' complaints contributed greatly to the impasse; agreeing with the NCLAT, it is disentitled to penal interest, penal charges and time-extension penalties, but may recover the principal dues. (¶¶ 48, 49, 67)
- Drawing on the objective of the Uttar Pradesh policy package on stalled projects, the resolution plans were restored on terms that the successful applicants pay GNIDA's recalculated principal dues themselves, without burdening buyers, in instalments over 24 months without interest, with registration in favour of buyers only after full payment. (¶¶ 64, 65, 66, 67, 68)
- The NCLAT erred in setting aside approval of Alpha's plan in respect of Earth Copia, a project on freehold land in Gurugram in which GNIDA had no interest. (¶¶ 14, 29)
- Homebuyers voting as a class through an authorised representative are bound by the majority; an association whose objections to Alpha's plan were rejected by the NCLT and NCLAT, without further challenge, had no locus to intervene and reopen the approval. (¶¶ 30, 31, 32, 75)
- An offer by a public sector undertaking to complete the projects that was only an in-principle, conditional letter, and which the undertaking itself did not pursue before the Court, was not worthy of consideration. (¶ 52)
Result
Appeals of Alpha, the Monitoring Committee representative, Roma, two buyers' associations and Earth Copia Owners Society allowed; corporate debtor's appeals disposed of; GNIDA's appeals, Earth United Consumer Association's appeals and time-barred diary appeals dismissed. Resolution plans restored; GNIDA to recalculate principal dues without penal components within two weeks, payable by Alpha and Roma over 24 monthly instalments from 07.07.2026 without interest; completion timelines run from 01.06.2026. Interventions rejected; no costs.