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Piramal Capital and Housing Finance's application for insolvency proceedings against Mumbai-based real estate firm Prithvi Residency has been admitted by a bankruptcy court. The realtor had failed to pay over INR 850 crore in dues to the mortgage lender DHFL, which was later acquired by Piramal through an insolvency auction. The dues amount includes the principal amount and accrued interest.
The National Company Law Tribunal's Mumbai bench has appointed Jayesh Natvarlal Sanghrajka as the administrator for the insolvency proceedings. Piramal had filed the application in January 2022, while the developer had defaulted on its dues in March 2019. The company had originally taken a loan of INR 485 crore from Dewan Housing Finance (DHFL) in 2017.
Between November 2016 and June 2017, DHFL disbursed a total of INR 484.95 crore to Prithvi Residency. As per the revised sanction letter in March 2017, an interest moratorium of 15 months from January 2017 was provided to the company, with annual servicing of interest. The first such annual interest servicing was due on March 31, 2018.
However, the developer failed to fulfil its obligations under the loan agreement, with the first default occurring in March 2019. DHFL sent notices to the developer in December 2019 and January 2020, asking for payment. But the realtor failed to pay, and finally, in April 2020, DHFL issued a notice informing the developer that it had failed to pay two instalments totalling over INR 113.2 crore and recalled the entire loan amount of INR 615.12 crore. DHFL asked the company to pay the amount within seven days from the date of notice, but the developer still defaulted.
The admission of the insolvency plea against Prithvi Residency is expected to have an impact on the real estate sector, which has been reeling under pressure due to the pandemic-induced economic slowdown. It highlights the need for developers to adhere to their loan obligations and pay their dues in a timely manner. The insolvency proceedings will provide a platform for resolution of the outstanding debt, and the appointment of an administrator will ensure the smooth functioning of the process. The outcome of the insolvency proceedings will be keenly watched by the real estate sector and will set a precedent for other similar cases in the future.
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