Wave Mega City Center (WMCC) Private Limited, a special purpose vehicle of real estate developer Wave group, has moved the National Company Law Tribunal (NCLT) to initiate insolvency proceedings against itself in a rare move in India Inc’s present insolvency situations.
The developer in its application, a copy of which was accessed by ET, has said that it is trying to protect the interest of the homebuyers after Noida authority sealed its under-construction project and took possession of over one million sq ft of space.
WMCC has invested over Rs 3,800 crore in the project which includes investment of Rs 2,213 crores by its promoters and their associates.
Besides this, Rs 200 crore had been raised as a bank loan, and buyers had paid the balance amount of around Rs 1400 crore.
Of this, more than Rs 2,000 crore had been paid to various government agencies, including around Rs 1600 crore to the Noida authority.
Rajiv Gupta, managing director, declined to comment on the matter as it is sub-judice. “We are working for the best interest of the buyers,” he said.
The group said that the move is aimed at protecting the interest of buyers, as under an IBC resolution plan, buyers’ interest is the top priority, placed even before financial creditors.
WMCC is a special purpose vehicle (SPV) for this project and it does not have any investment into any other group company.
Wave Mega City Center Private Limited acquired 6.18 lakh square meters (6.1 million sq ft) of land on a leasehold basis in 2011, spread between Sector 25 and 32 in Noida for around Rs 6,622 crore at the rate of Rs 1.07 lakh per sq. meter.
Authority had taken possession of close to 4.5 million sq ft in 2017, and in February 2021, it had cancelled the allotment of one million sq ft.
As per the original scheme, the repayment schedule was spread over 16 half-yearly instalments after a moratorium of two years.
Each instalment included principal and scheduled interest.
Noida authority’s CEO did not respond to text messages.
“We are open to forensic audit and other scrutiny after the decision to go to insolvency. Usually, buyers or lenders take promoters to insolvency but this is the first time a developer has initiated proceedings against himself as we feel the authority’s actions are not justified,” said a Wave group official.
In December 2016, the authority came out with Project Settlement Policy (PSP) to deliver timely delivery of units to the allottees and recover the outstanding dues on account instalments.
Under the PSP, the developers were allowed to retain land equivalent to 85% of the money deposited with authority and authority was entitled to forfeit the balance of 15%.
The authority, accepting the proposal in principal, allocated only 56,400 sq meters to WMCC as newly allotted land. The authority said that the allotment was done against the principal amount of Rs 709 crore after adjusting 15%.
“In order to fulfil the commitment to its customers, WMCC also requested the authority for little over 50,000 sq. meters of land, which was allotted at the prevailing market rate of Rs 1.60 lakh per sq. meter in 2017. And, the company deposited 20 % of the consideration for this,” the company said.
Three years later in 2020, the authority itself decided not to restore land against balance Rs 733 crore, saying this amount is paid as scheduled interest and therefore cannot be treated at par with the principal, while under the PSP only penal interest is excluded.
“During these three years, it did not allow sanction of drawings/revision of master plan on the pretext that final decision is awaited. Now, the authority raised demand of principal and interest on the entire land retrospectively, including lease rent on a pre PSP basis,” the group said.
During this period, the authority didn’t allow WMCC to open escrow account, which was available under PSP scheme. It has also not given WMCC sub-lease facility, thereby not allowing registry of the fully completed unit to the buyers.
In September 2019, the authority issued occupancy certificates for completed project worth around Rs 700 crore.
However, four months later, it sends a fresh demand of more than Rs 2,500 crore to WMCC asking to pay the amount within seven days.
This demand included Rs 1800 crore toward land price and balance for lease rent and interest.
