Tripartite Loan to Homebuyers Not Financial Debt of Builder: NCLAT Upholds RP’s Rejection of UCO Bank’s ₹18.82 Cr Claim [Read Order]
The Tribunal upheld the Resolution Professional’s (RP) rejection of UCO Bank’s claim of ₹18.82 crore, ruling that the corporate debtor never undertook repayment liability towards the Bank. Consequently, the approval of the resolution plan remained unaffected, as UCO Bank was not recognised as a financial creditor in the Corporate Insolvency Resolution Process (CIRP).
NCLAT-RP-Rejection-UCO Bank - taxscan
NCLAT-RP-Rejection-UCO Bank - taxscan
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has dismissed appeals filed by UCO Bank challenging the rejection of its claim in the Corporate Insolvency Resolution Process (CIRP) and the subsequent approval of the resolution plan.
The Tribunal ruled that loans sanctioned by UCO Bank to homebuyers under Tripartite Agreements did not constitute financial debt owed by the corporate debtor.
The dispute arose from UCO Bank’s claim of ₹18.82 crore, filed in Form-C during the CIRP of Bulland Buildtech, a real estate company engaged in the residential project “Bulland Elevates” in Greater Noida. The Bank argued that it had sanctioned home loans to 45 unit-holders, disbursing amounts directly to the builder under Tripartite Agreements executed between the borrower, the Bank, and the company.
UCO Bank contended that the builder was jointly bound under the agreements and had created security interests in favour of the Bank, thereby making the Bank a financial creditor under Section 5(8) of the Insolvency and Bankruptcy Code (IBC).
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The Resolution Professional (RP), however, rejected the claim, stating that the financial facility was extended to individual borrowers, not to the corporate debtor. The RP maintained that the builder had not undertaken repayment liability towards the Bank, and only genuine homebuyers could be treated as financial creditors under the Code.
Out of the 45 unit-holders cited by UCO Bank, only one allottee’s claim was admitted, while others were either speculative investors, unverified in the debtor’s records, or had not filed claims themselves. The adjudicating authority (NCLT) upheld the RP’s decision in January 2024, leading to UCO Bank’s appeal before NCLAT.
In its judgment, a two-member bench comprising Ashok Bhushan (Chairperson) and Arun Baroka (Technical Member) examined the Tripartite Agreements relied upon by the Bank. The Tribunal noted that while the agreements permitted the Bank to sell or alienate units in case of borrower default, they did not impose any repayment obligation on the builder. Clauses cited by UCO Bank, including those binding the builder to certain terms, were found insufficient to establish a direct financial liability of the corporate debtor.
The Tribunal emphasized that the definition of “financial debt” under Section 5(8) IBC requires disbursal against consideration for the time value of money, which was absent in the builder’s relationship with the Bank.
The Tribunal further observed that decrees obtained by UCO Bank from the Debt Recovery Tribunal (DRT) against borrowers and the company prior to CIRP initiation were not the basis of its claim in Form-C and could not alter the nature of the transaction.
The Tribunal also noted that avoidance applications under Section 66 IBC were pending with respect to certain transactions, and any recoveries therefrom could be passed on to the Bank subject to approval of the successful resolution applicant.
Upholding the RP’s rejection of UCO Bank’s claim, the Tribunal concluded that the Bank was not a financial creditor of Bulland Buildtech Pvt. Ltd. and therefore had no right to be part of the Committee of Creditors (CoC). As a result, the resolution plan approved by NCLT in July 2024 remained valid and unaffected by UCO Bank’s exclusion.
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