Lavasa Bankruptcy: NCLT Orders Lenders to Opt for Consolidated Corporate Insolvency Process

On February 26, National Company Law Tribunal (NCLT) ordered the lenders of Lavasa Corporation Limited (LCL) and its subsidiaries to go for a consolidated corporate insolvency process as the bankrupt real estate firm was facing difficulties in finding bids for the last 18 months.

Originally set up in 2000 by Ajit Gulabchand-led Hindustan Construction Company Limited (HCC), Lavasa was supposed to develop a hill station in Mulshi and Velhe talukas in Maharasthra’s Pune district. However, the real estate project which has now turned into a ghost city has been mired in numerous controversies including forceful land acquisition from tribals and environmental violations.

As Lavasa began defaulting on its debt obligations, NCLT in August 2018 began insolvency proceedings against LCL under Insolvency and Bankruptcy Code, 2016.

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As of January, lenders have claimed over Rs 7,700 crore from LCL and its subsidiaries. With the latest NCLT order, the committee of creditors of LCL will now seek fresh bids for acquiring the entire Lavasa-associated projects including its subsidiaries Warasgaon Power Supply and Dasve Retail, which were earlier not under insolvency process.

“Any standalone resolution does not seem to be possible and would therefore defeat the objective of the IBC code, which is to maximise the value of the company,” stated the NCLT order.

At the time of admitting it for the resolution process, HCC held 68.7% stakes in Lavasa, followed by Gautam Thapar’s Avantha Group with 17.18%, Venkateshwara Hatcheries with 7.81%, and Vithal Maniar with 6.29% stakes.

Lavasa is spread over 12,000 acres encompassing 18 villages on the bank of Varasgaon dam on the Mose river. It was proposed that Lavasa would house residential facilities, hotels and be a tourist destination.

In 2001, the Maharashtra government sanctioned 10,000 acres of land for the construction of Lavasa, which only saw the completion of first phase work leaving behind multiple projects under  construction.

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Lavasa hit a roadblock in 2017 when the Maharashtra government under the then Chief Minister Devendra Fadnavis revoked the special planning authority (SPA) status for Lavasa and assigned the Pune Metropolitan Region Development Authority (PMRDA) as its planning authority.

Earlier in 2010, the Union Environment Ministry had imposed a two-year ban on construction work of LCL citing environmental violations. Besides regulatory warnings, Lavasa has also seen opposition by tribals in the villages where the hill town was being constructed who opposed land acquisition and alleged destruction of the forests there. The National Alliance for People’s Movement has been helping the tribals for fighting for their cause.