The National Company Law Tribunal (NCLT) has initiated insolvency proceedings against Spaze Towers following a plea from flat owners due to the company's failure to complete the 'Spaze Arrow' project in Gurugram within the promised timeline. An interim resolution professional has been appointed, and the company's board has been suspended. The NCLT rejected Spaze Towers' claims of settling dues with certain allottees and confirmed that outstanding debts exceeding Rs one crore justified the insolvency process. This marks the second insolvency case for the firm, with previous proceedings related to its Spaze Corporate Park project in 2021.
The National Company Law Tribunal (NCLT) has ordered the initiation of insolvency proceedings against real estate company Spaze Towers, following a plea from its flat owners. A two-member NCLT bench determined that Spaze Towers defaulted in completing the construction of its flats in the 'Spaze Arrow' project, located in Sector 78, Gurugram, and failed to hand over possession within the agreed 42-month timeline. The NCLT's Delhi bench also appointed an interim resolution professional (IRP) to oversee the company's operations, suspending the board and placing it under a moratorium as per the Insolvency & Bankruptcy Code.
Spaze Towers had argued that it had resolved the dues of nine petitioner allottees and thus they should no longer be considered financial creditors. However, the NCLT dismissed this defense. It clarified that when a debt becomes due and remains unpaid, the Insolvency Resolution Process (IRP) must be initiated against the corporate debtor. The tribunal expressed its satisfaction that the application was complete in all required aspects.
The NCLT ruled that the financial creditor holds the right to submit an application against the corporate debtor due to the outstanding financial debt, which surpasses the Rs one crore threshold. As a result, the bench declared that, as per Section 7 (5) (a) of the Code, the petition is accepted, and the Corporate Insolvency Resolution Process (CIRP) of Spaze Towers Private Limited will proceed. This decision stemmed from a joint plea by 37 petitioners who claimed a default amounting to Rs 23.37 crore related to the purchase of their respective units in the 'Spaze Arrow' project.
Launched in 2012, the commercial project aimed to offer a high-end complex featuring retail shops, showrooms, restaurants, and a tower block with office spaces and serviced apartments. Buyers had made payments between 2016 and 2019 under a construction-linked plan, with Spaze Towers committing to deliver the shops to these financial creditors within 42 months of the agreement's signing. However, the company failed to do so and was also unable to obtain several essential licences for the project.
This marks the second time Spaze Towers has faced insolvency proceedings. In an earlier case in October 2021, concerning its Spaze Corporate Park project, an IRP was appointed, and claims totalling approximately Rs 600 crore were filed. However, the company eventually settled the claims without fully disclosing them to the Supreme Court, resulting in the CIRP process being set aside.
The initiation of insolvency proceedings against Spaze Towers highlights ongoing challenges within the real estate sector, particularly regarding project delivery and financial accountability. The NCLT's decisive action underscores the importance of adhering to agreed timelines and fulfilling contractual obligations, reflecting a broader commitment to protect the interests of financial creditors and homebuyers. As the company navigates this second insolvency case, the outcomes will likely influence stakeholder confidence in similar projects and the regulatory landscape, emphasizing the need for transparency and diligence in real estate transactions moving forward.
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