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Union Bank of India, a state-owned financial institution, has raised objections to the loan-default resolution plan for Lavasa Corp, which is touted as the first private hill-town project in India since Independence. This objection comes less than two months after the National Company Law Tribunal (NCLT) had approved the revival plan submitted by Darwin Platform Infrastructure (DPIL) for Lavasa.
The primary contention raised by Union Bank is its assertion that there was collusion between the resolution professional (RP), Shailesh Verma, and the winning bidder, DPIL, to undervalue Lavasa's real estate assets. According to Union Bank, this undervaluation resulted in substantial losses for the company's creditors. Consequently, the bank is seeking the withdrawal of NCLT approval and demanding that the RP obtain a fresh valuation of Lavasa's assets, followed by inviting fresh applications based on the updated valuation.
In its petition dated September 16, Union Bank stated, "In spite of clear directions from this Tribunal to place the modified or fresh resolution plan before the consolidated CoC (committee of creditors) for their consideration, the respondent no 1 (Verma) with malafide intention and in connivance with the respondent 2 (DPIL) instead of placing the modified or fresh resolution plan and without taking into account valuation of assets of the debtor at that point of time, or February 2023," which the bank's petition said misrepresented facts.
DPIL had submitted its final plan in December 2021, which had proposed a total pay-out of Rs 1,814 crore over eight years to lenders and the delivery of fully constructed houses to 837 home buyers. However, this plan involved a substantial haircut of about 79% for financial creditors. Union Bank now contends that the plan was based on valuations from 2018 and did not take into consideration the improved real estate prospects that have emerged since then. DPIL has not released any official statement on the matter, while the RP denies any wrong doing.
Union Bank's petition also refers to the NCLT order issued in February 2023, which directed the CoC to treat government and other statutory dues on the same footing as financial creditors, with a 20.5% recovery. Instead of recalibrating the resolution plan based on the valuations from February 2023, the RP adjusted the government dues based on the November 2021 plan, just before it was approved by the CoC. Union Bank claims that this action violated the court's order and resulted in losses for creditors.
Union Bank, which leads a group of 17 member creditors with dues amounting to Rs 722 crore and a 12% vote share, is also seeking to restrain Verma and DPIL from implementing the resolution plan. As of now, the bank has not responded to emails seeking comment.
Lavasa, once hailed as India's first privately built and managed city, was envisioned as an escape for affluent urban residents from Mumbai and Pune who sought refuge from the noise and pollution of their cities. Designed to resemble the Italian fishing village of Portofino, Lavasa was planned as a gated city with amenities including a golf course, rowing facilities, and a football academy. However, it faced financial troubles in 2018 after defaulting on payments to creditors. The total dues to financial creditors for Lavasa and its four smaller subsidiaries exceed Rs 6,000 crore.
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