NCLT Rules Against Wadhwa Buildcon Plan for Flaws and Wilful Default - Key Irregularities Lead to Plan Rejection

The National Company Law Tribunal (NCLT) in Mumbai has ruled the resolution plan by Wadhwa Buildcon's promoter as invalid. The decision came into light due to questionable actions by the resolution professional (RP) and the fact that the promoter was marked as a wilful defaulter. The case, initiated by Bank of India, pointed out several issues in the plan's approval process, prompting the tribunal to side with the bank's arguments.

Financial Creditor Versus Homebuyers' Interests

The tribunal observed a drastic shift in voting percentages during the resolution process. The financial creditor's voting share dropped from a full 100% to just over 31%, while homebuyers, who were primarily concerned with receiving their flats, saw their voting rights jump to 66.42%. The NCLT bench, led by Reeta Kohli and Madhu Sinha, noted that the decision-making was heavily influenced by homebuyers, the most vulnerable group in this scenario, rather than by the financial creditor's commercial judgment.

Resolution Professional's Questionable Actions

The resolution professional was criticized for delaying the resolution plan presentation and for increasing homebuyers' representation in the committee, actions that went against the lender's interests. Moreover, it came to light that Ankit Wadhwa, the company's promoter, had been declared a wilful defaulter before the revised resolution plan was submitted. This critical detail, however, was not shared with the committee of creditors (CoC), leading to a significant oversight.

Court Highlights Duty Breach

The court found this lack of disclosure a serious breach of duty by the resolution professional, who failed to provide the CoC with the information needed to make a well-informed decision. Emphasizing the significance of Section 29A of the Insolvency and Bankruptcy Code (IBC), the court stated that plans from wilful defaulters should not be accepted, aligning with the IBC's goal to exclude defaulting promoters from the resolution process.