Wave Mega City Centre files application before NCLT to initiate CIRP

New Delhi, March 26 The Wave Mega City Centre (WMCC) Private Limited, the company that was developing a mega commercial-cum-residential project in Noida, has filed an application before the National Company Law Tribunal (NCLT) to initiate voluntary corporate insolvency resolution process (CIRP) to protect the interests of hundreds of buyers in the project, who are left stranded after an unreasonable decision of the Noida Authority.

Responding to the queries on WMCC, Rajiv Gupta, Managing Director, Wave Infratech, said, "We cannot comment as the matter is sub-judice. We are working for the best interest of the buyers."

Noida Authority's abrupt decision to seal the residential-cum-commercial project in the prestigious Sectors 32 and 25 is being seen as an attempt to settle a commercial dispute through arbitrary means.

The WMCC has invested over Rs 3,800 crore in the project which includes investment of Rs 2,213 crore by its promoters and their associates. Besides this, a sum of Rs 200 crore has been raised as bank loan, and buyers have paid the balance amount of around Rs 1,400 crore. Of this, more than Rs 2,000 crore is paid to various government agencies that include around Rs 1,600 crore to the Noida Authority.

The move is aimed at protecting the interest of the buyers, as under the IBC resolution plan, buyers' interest falls in top priority even before financial creditor.

The 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 Centre Private Limited acquired 6.18 lakh sq mt 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 mt. 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.

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 per cent. This amount does not consider payment made toward stamp duty, penal interest, restoring charges, and other statutory charges.

Accordingly, WMCC was entitled to land equivalent to Rs 1,227 crore (after deducting Rs 226 crore, which is 15 per cent of Rs 1,443 crore). Therefore, at the allotment rate of Rs 1.07 lakh per sq mt, WMCC was entitled to 1.14 lakh sq mt, as per the PSP.

The authority, accepting the proposal in principal, allocated only 56,400 sq mt to WMCC as newly allotted land. It stated that the allotment was done against the principal amount of Rs 709 crore after adjusting 15 per cent. They treated this parcel of land as fully paid up, which was not sealed.

For the rest of land measuring approximately 58,000 sq mt against the scheduled interest of Rs 733 crore out of Rs 1,443 crore, the authority forwarded the request to the state government. In order to fulfil the commitment to its customers, WMCC also requested the authority for little over 50,000 sq mt of land, which was allotted at the prevailing market rate of Rs 1.60 lakh per sq mt in 2017. And the company deposited 20 per cent of the consideration for this.

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 etc. on the pretext that the 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.

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 addition even the fully paid up land, as per the Noida Authority, was impacted causing serious delays at the project site including major escalation of the project cost.

In September 2019, the authority issued occupancy certificates for completed project worth around Rs 700 crore. It may be noted that Noida Authority, as per its policy, never issues and occupancy certificate unless the dues for the land in question have been cleared.

However, four months later, it sent a fresh demand of more than 2,500 crore to WMCC, asking it to pay the said amount within seven days. This demand included Rs 1,800 crore towards land price and the balance for lease rent and interest.

Unfortunately, on March 10, a land parcel measuring 1.08 lakh sq mt was acquired by Noida Authority and two towers were also sealed.

( With inputs from IANS )