Maharashtra National Law University, Nagpur

Intra-Moot Court Competition, 2019

MOOT PROBLEM

1. The Republic of Utopia, is divided into 15 separate states, the largest and most developed among
those being the state of Uttam Pradesh. Uttam Pradesh shares its borders with the nation capital –
the national capital region of Arcadia. Owing to such proximity with the national capital, certain
cities of Uttam Pradesh, in the last two decades, witnessed people coming from different parts of
the country and settling, in search of better livelihood. This led to steep development of such cities,
so much so, that such cities are now considered as the National Capital Region (“NCR”).

2. Such steep influx of people prompted various real estate companies, to float housing as well as
commercial projects in NCR. A huge number of people invested their life savings, with a dream of
owning a flat in the NCR. The most prominent player in real estate business M/s Kaypee Infratech
limited (“KIL”) was favorite among the home buyers, and boasted of having 30000 homebuyers,
who had invested in its projects. KIL was not only involved in real estate business but had
stronghold in the cement manufacturing industry.

3. In the year 2018, KIL suddenly started defaulting on its loans and its accounts were declared a non
performing asset by its 13 lenders. To manage its financial distress, KIL sold off its cement
business, but could only pay back to three lenders. After various attempts of restructuring its debt,
in consultation with its lenders failed; one of the its lenders (IBDI Bank Ltd) filed a petition under
Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), before the National Company
Law Tribunal, Arcadia Bench (“Adjudicating Authority”). This petition was admitted by the
Adjudicating Authority and Mr. Manuj Jain was appointed the Interim Resolution Professional,
(“IRP”), to oversee the corporate insolvency resolution process (“CIRP”) of KIL. The committee
of creditors (“CoC”) of KIL, as per its website, is stated to be as following by the IRP:

a. FDHC Bank Ltd. – 10%

b. CICIC Bank Ltd. – 5%
c. IBDI Bank ltd. – 23%
d. Real estate allotees – 62%

4. Since, a large number of home buyers, being unaware of the legal procedures, do not come to vote,
on any agenda, put before the CoC Mr. Manuj Jain, could never get confirmed as a Resolution
Professional, but has been performing all the tasks as an IRP with utmost sincerity and dedication.
It is on his, recommendation, Mr. Kunal Chatterjee was appointed as an authorized representative
of the real estate allotees by the Adjudicating Authority in due compliance with the provisions of
IBC and the regulations therein.

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 5. Even after the best efforts of the IRP, KIL was not able to impress any prospective resolution
applicant and is now on the verge of liquidation.

6. Distraught with such turn of events, the home buyers of KIL formed Kaypee home buyers’ welfare
association (“Association”) an association under the provisions of the Societies registration Act,
1860 and wrote a representation to the IRP, demanding from him to consider the home buyers as
secured financial creditor of KIL, and sought an acknowledgement of their security interest on the
website of the KIL. The home buyers made such plea in the light of the fact that they have invested
their life savings in the projects floated by KIL and are currently paying EMIs on their house loans
along with added burden of rent. Even after facing such financial distress, there is no certainty that
these home buyers will ever get their flats.

7. On such appeal by the home buyers, the IRP put this representation before the entire CoC, but such
suggestion was heavily resisted by the lenders, who by the very virtue of their loan agreements are
secured financial creditors. It was the stance of the lenders and the CoC , that the IBC does not
provide any mechanism to consider the home buyers as secured financial creditor of a corporate
debtor. They also observed that the agreement entered between the home buyer and KIL,
specifically states that execution of the agreement, does not create any right of the home buyer, on
units, booked by them.

8. Since, there was no consensus in the CoC, the IRP replied to the Association, stating that he is
unable to accede to such request, and would abide by any decision taken by any appropriate
authority.

9. Subsequently the Association, filed an application before the Adjudicating Authority, seeking
directions, that the home buyers be treated as secured financial creditor of KIL, and their security
interest be acknowledged by the IRP.

10. When this application was taken up for admission on behalf of Association, the IRP summarily
stated that it will abide by the decision ultimately taken by the IRP and that he does not wish to file
any reply. At that juncture the counsels appearing for the lenders in the CoC of KIL, sought the
leave of the Adjudicating Authority to file their reply, and contest the application of the
Association. Such leave was granted by the Adjudicating Authority.

11. The matter is now posted for final arguments before the Adjudicating Authority.

The laws of the Republic of Utopia, are pari materia to the laws of the Republic of India. The teams are
required to prepare memorials either from the side of the Association or the lenders (depending upon the
sides allotted, as per rules of Internal moot court competition.

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