The National Company Law Tribunal (NCLT) has ruled in favor of Piramal Capital & Housing Finance, affirming the legality of their charge on the Avenue 54 real estate project owned by Radius Estate Projects in Santacruz, Mumbai. This decision resolves a contentious dispute between creditors, including J.C. Flowers Asset Reconstruction, providing clarity on the financial obligations associated with the project. The ruling solidifies Piramal's position as a significant financial creditor with legitimate claims over the project's assets, despite the initial mortgage holder, Yes Bank, revoking its No Objection Certificate (NOC) due to non-compliance by the developer.
The National Company Law Tribunal (NCLT) has affirmed the legality of the charge held by Piramal Capital & Housing Finance on a real estate development project owned by Radius Estate Projects and spread over a prime 5.4-acre land parcel in Santacruz, Mumbai.
This order resolves a contentious dispute between the creditors, including J.C. Flowers Asset Reconstruction and Piramal Capital and Housing Finance, providing much-needed clarity on the financial obligations associated with the project Avenue 54.
The project has been involved in a legal battle with multiple stakeholders. Radius Estate Projects, formerly Vishwaroop Realtors, had initially secured loans from financial institutions, totaling INR 700 crore, which were backed by mortgages on the project's land and assets.
In 2016, one of the developer's entities executed a deed of mortgage in favor of IDBI Trusteeship to secure a term loan from Yes Bank, which was later transferred to J.C. Flowers Asset Reconstruction. Additional loans were sanctioned, taking the total amount to INR 700 crore, and further charges were created on the property.
In 2018, Diwan Housing Finance Limited (DHFL), later acquired by Piramal Capital & Housing Finance, sanctioned a project loan of INR 1,100 crore and an additional INR 900 crore, totaling INR 2,000 crore to the developer's arm Sumer Radius Reality.
The dispute arose when Sumer Radius Realty and other joint developing entities defaulted on their loan repayments. Despite this, a mortgage over the Avenue 54 project was created in favor of DHFL without obtaining the required No Objection Certificate (NOC) from the initial mortgage holder, Yes Bank.
J.C. Flowers Asset Reconstruction Pvt. Ltd., representing the original creditors, argued that the subsequent charges in favor of DHFL, now Piramal, were illegal and should be invalidated. It also sought to exclude Piramal from being recognized as a financial creditor of Radius Estate Projects.
The NCLT, after a thorough review of the case, ruled in favor of Piramal Capital & Housing Finance. The tribunal recognized that while the initial NOC issued by Yes Bank was conditional and eventually revoked due to non-compliance by Sumer Radius Realty and its joint developing entities, the subsequent mortgages and financial arrangements made by DHFL/Piramal were legitimate.
The NCLT declared that the Avenue 54 Project is subject to the charges held by Piramal, which are legally binding. This decision solidifies Piramal's position as a significant financial creditor with legitimate claims over the project's assets.
In June 2023, Piramal Capital & Housing sold INR 3,656 crore bad loans portfolio to Omkara ARC, which included the loans to Radius Estate Project as well.
The ruling has significant implications for the stakeholders involved in the Avenue 54 Project. It secures Piramal Capital & Housing Finance's financial interests and reinforces their creditor rights, while providing a clear directive on the legal standing of Radius Estate Projects' financial obligations and the prioritization of creditor claims.
The ruling also underscores the importance of adhering to proper procedures in financial agreements and obtaining necessary approvals when creating charges on mortgaged properties.
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