The Supreme Court has declined to stay the resolution plan proposed by Adani Goodhomes, a subsidiary of Adani Infrastructure and Developers, to acquire the insolvent real estate company Radius Estates. The case has been highlighted as a prime example of the ongoing challenges surrounding substantial haircuts taken by lenders in insolvency resolutions.

The National Company Law Appellate Tribunal (NCLAT) had previously upheld Adani Goodhomes' plan to take over Radius Estates, rejecting challenges from dissenting creditors. However, the dissenting creditors, including Beacon Trusteeship, have now escalated the matter to the Supreme Court, alleging collusion between the resolution professional and the largest creditor, HDFC Ltd.

Adani Goodhomes has offered approximately INR 76 crore to Radius Estates' creditors, who have claims totalling around INR 1,700 crore, resulting in a 93% haircut for the creditors. Homeowners had collectively advanced around INR 800 crore to book their homes. Although they are considered a separate class of creditors, they have the same rights as financial creditors. Of the INR 1,700 crore claims filed by financial creditors, debenture holders' claims are estimated at around INR 200 crore. Adani Goodhomes has also committed to completing the residential project in Mumbai at no additional cost to the homeowners.

According to the dissenting creditors the resolution plan imposes a staggering 93% haircut on secured financial creditors, while providing 100% recovery to homebuyers through allotted units. They have argued that the plan violates Section 30(2) of the Insolvency and Bankruptcy Code, claiming it is unfair and biased towards homebuyers.

Despite the challenges, the resolution plan has received support from over two-thirds of the creditors, including nearly all of the 700 homeowners, as well as financial creditors like HDFC, Yes Bank Ltd, Piramal Capital & Housing Finance Ltd, Infinite Buildcon Private Ltd, and ICICI Bank Ltd.

Radius Estates and Developers Pvt. Ltd. had partnered with MIG (Bandra) Realtors and Builders Pvt. Ltd. to redevelop land in Bandra (East), Mumbai. The project aimed to construct residential flats for the rehabilitation of members of the Middle-Income Group Co-operative Housing Society, along with a free-sale component. However, construction halted in January 2020, which lead Beacon Trusteeship Ltd. to file a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, initiating the Corporate Insolvency Resolution Process. On 30 April 2024, the NCLT initiated insolvency proceedings.

At the start of the moratorium, Radius Estates had sold 224 units and had 146 units left for sale. Out of the 15 proposed buildings, only nine were partially constructed, while the construction for the remaining six had not yet begun. When the resolution professional invited plans, Adani Goodhomes and Ashdan Developers submitted proposals. Adani Goodhomes' plan was approved by the Committee of Creditors with an 83.93% voting share and received NCLT approval.

Following the plan's approval, Adani Goodhomes infused INR 450 crore as interim finance by 31 December 2021, which was used for dues payment, FSI premiums to the Municipal Corporation of Greater Mumbai (MCGM), and the commencement of construction.

The case highlights the complexities and competing interests involved in insolvency resolutions. While the dissenting creditors have raised valid concerns about the plan's fairness, the majority of stakeholders, including homebuyers, have endorsed Adani Goodhomes' proposal.

The Supreme Court's decision to issue a notice to the parties involved and schedule a hearing in January 2025 suggests the court's recognition of the significance of this case. As the case progresses, it will be crucial to maintain a delicate balance between the rights of all stakeholders, including creditors, homebuyers, and the acquiring entity. The resolution of this dispute will undoubtedly set a precedent for future insolvency cases, shaping the landscape of India's evolving insolvency framework.