Rashmi Housing illegally sells 82 flats during insolvency process

I understand that you’re providing information about a recent development involving Rashmi Housing, a realty developer in Mumbai. The company was undergoing the Corporate Insolvency Resolution Process (CIRP) when its promoters illegally sold 82 apartments in violation of the law. As a result, the National Company Law Tribunal (NCLT) has invalidated the sale of these flats and imposed a fine of Rs 3 lakh on each of the promoters.

Finance Advisors & Managers and Vista ITCL, formerly an IL&FS trust company, had taken Rashmi Housing to the NCLT after the company defaulted on payments. The NCLT admitted the company under insolvency and appointed OP Agrawal as the interim resolution professional to oversee its operations. The directors of the company were suspended, and they were informed about the implications of the moratorium under the insolvency code.

In February 2019, an employee of the company requested the resolution professional to authorize the suspended directors to sign pre-CIRP sale agreements. However, the resolution professional stated that permission for such agreements would need to be presented before the committee of creditors (COC). The resolution professional argued that no permission was granted for signing sales agreements during the CIRP or even for pre-CIRP.

The suspended directors initially submitted a resolution plan in November 2019, which was rejected. They later submitted a revised resolution plan in March 2020, which was also rejected. In June 2020, the resolution professional filed an application for liquidation, which is still pending and sub-judice.

To maintain the company as a going concern, the resolution professional retained some employees who were instructed to act only on the resolution professional’s instructions and not on the instructions of the suspended directors. These employees were aware of the unsold inventories of the company, which were spread across 17 projects in 73 buildings located in various parts of Mumbai, including Ghatkopar, Vasai, and Naigaon.

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