Pranav B Prem

In a significant ruling advancing the policy of timely completion of stalled real estate projects, the National Company Law Tribunal (NCLT), New Delhi Bench, has held that a loan disbursed by the government-backed SWAMIH Investment Fund qualifies as 'interim finance' under Section 5(15) of the Insolvency and Bankruptcy Code, 2016 (IBC), and must be treated as part of the insolvency resolution process cost entitled to priority payment.

Also Read: "‘Suspicious Conduct Deters This Court’: Kerala High Court Holds That Furnishing False Information Under Section 12(1)(b) of the Passports Act Attracts Offence Even for Foreign Nationals"

The judgment was delivered by a Bench comprising Shri Manni Sankariah Shanmuga Sundaram (Judicial Member) and Dr. Sanjeev Ranjan (Technical Member) in the matter of SWAMIH Investment Fund I (through SBI Ventures Ltd.) vs Sunil Kumar Agarwal (RP of M/s Ansal Crown Infrabuild Pvt. Ltd.) & Anr. The application was moved under Section 60(5) of the IBC read with Rule 11 of the NCLT Rules, 2016.

Background and Issue

Corporate Insolvency Resolution Process (CIRP) was initiated against M/s Ansal Crown Infrabuild Pvt. Ltd. on 21.04.2023. SWAMIH Investment Fund I, a fund sponsored by the Government of India to provide last-mile financing for affordable and mid-income housing projects, had sanctioned and disbursed an amount of ₹5.3 crore (total claim: ₹6.08 crore including interest and charges) for completion of the “Sushant Megapolis” housing project in Greater Noida. The facility agreement was dated 24.12.2020, and the claim was filed on 08.05.2023.

However, the Resolution Professional (RP) refused to classify the claim as 'interim finance' on the ground that the amount was disbursed prior to commencement of the CIRP. SWAMIH then filed the instant application objecting to the resolution plan and seeking recognition of its funding as interim finance.

Applicant’s Contentions

Senior Advocate Mr. Krishnendu Datta, appearing for SWAMIH, submitted:

• The definition of 'interim finance' was amended by the 2020 Amendment Act to include “such other debt as may be notified.”

• The MCA Notification dated 18.03.2020 specifically notifies debt extended by SWAMIH Fund as falling under the scope of Section 5(15).

• The Ordinance preceding the Amendment Act clearly reflected the legislative intent to grant top repayment priority to last-mile funding, even if the same was provided pre-CIRP.

• The Notification makes no distinction between pre- and post-CIRP funding, and the Tribunal must apply a purposive interpretation.

• The RP lacks adjudicatory power and overstepped authority by rejecting the claim based on legal interpretation—contrary to the principles laid down in Swiss Ribbons Pvt. Ltd. v. Union of India [(Writ Petition (Civil) No. 99 of 2018)].

• The rejection of SWAMIH’s claim undermines the government’s objective to safeguard homebuyers and revive stalled projects.

• A clarificatory notification should be deemed to have retrospective effect, as supported by the Supreme Court in Sedco Forex International Drill Inc. v. CIT [(2005) 12 SCC 717].

RP’s Objections

The RP argued that:

• ‘Interim finance’ under Sections 5(13) and 5(15) refers strictly to funding raised during CIRP.

• SWAMIH’s debt was disbursed well before CIRP began (facility agreement: 24.12.2020, CIRP initiation: 21.04.2023).

• The notification does not expressly authorize classification of pre-CIRP funding as interim finance.

• The Committee of Creditors (CoC) had approved the resolution plan with 98.52% majority, and the applicant never pursued a challenge under Section 42.

• The claim is already being repaid under the plan, and the attempt to seek priority now amounts to abuse of process.

• The applicant’s belated challenge indicates a commercial strategy to gain a higher payout post CoC approval.

Tribunal’s Analysis and Findings

The Tribunal undertook a comprehensive examination of the legal framework and the facts of the case. It first analyzed the amended definition of ‘interim finance’ under Section 5(15) of the IBC, which, after the 2020 Amendment Act, includes “such other debt as may be notified.” In light of this, it found that the Notification dated 18.03.2020 issued by the Ministry of Corporate Affairs squarely covered the debt extended by SWAMIH Investment Fund, thereby categorizing it as interim finance. The Tribunal emphasized that this notification made no distinction between funds disbursed before or after the commencement of the Corporate Insolvency Resolution Process (CIRP), and the statutory language was broad, categorical, and without temporal limitation.

In examining the policy rationale, the Tribunal noted the Statement of Objects and Reasons of the 2019 Ordinance, which explicitly stated the need to give the highest repayment priority to last-mile funding to corporate debtors. The SWAMIH Fund, established as a government initiative to provide priority debt financing to stalled affordable and mid-income housing projects, fit squarely within this intent. The Tribunal also referred to the Explanation appended to the Notification, which described the fund's purpose and clarified that it is a SEBI-registered alternate investment fund created to assist in project completion.

Also Read: Amount Paid Under Protest After Clearance Of Goods Is Not Covered By Unjust Enrichment: CESTAT

The Tribunal further addressed the role of the Resolution Professional (RP), holding that the RP had no adjudicatory power to reject a claim on the basis of statutory interpretation. This action exceeded the RP’s administrative function as delineated by the Supreme Court in Swiss Ribbons Pvt. Ltd. v. Union of India. On the compatibility of the relief sought with the Resolution Plan, the Tribunal highlighted that Clause 6.1 of the Plan expressly provided for the payment of all CIRP costs in priority and in full within 30 days from the effective date. Therefore, it was unnecessary to remit the Plan back to the Committee of Creditors, as the Tribunal could enforce compliance within the existing structure of the approved Plan.

Final Directions

In conclusion, the Tribunal held that the funding provided by SWAMIH Investment Fund qualifies as ‘interim finance’ under Section 5(15) of the IBC and must be treated as a component of CIRP cost as defined under Section 5(13). Accordingly, it directed the Successful Resolution Applicant to make full payment of the amount due to SWAMIH in priority to all other claims under the approved Resolution Plan. The payment is to be made within 30 days from the effective date of the plan, in line with the undertaking given in Clause 6.1. With these findings and directions, the Tribunal disposed of the application.

Appearance

For Applicant: Mr. Krishnendu Datta, Senior Advocate, Mr. Nikhil Mehndiratta, Mr. Agastya Sen, Ms. Nidhisha Chokshi, Advocates.

For RP: Adv. Abhishek Anand, Adv. Karan Kohli, Adv. Ridhima Mehrotra, Adv. Rakesh Kumar, Adv. Preeti Kashyap, Adv. Ankit Sharma, Adv. Yash Dhawan, Sunil Kumar (in person)

For SRA: Mr. Nipun Gautam, Adv.

Cause Title: M/s Conquerent Control Systems Private Limited V. M/s Ansal Crown Infrabuild Private Limited

Case No: CP (IB) No. 783 (ND)/ 2022

Coram: Shri Manni Sankariah Shanmuga Sundaram [Hon’ble Member (Judicial)], Dr. Sanjeev Ranjan [Hon’ble Member (Technical)]

[Read/Download order]