Unitech’s Scheme of Compromise: InGovern recommends AGAINST

Unitech Limited (“Unitech”) informed the Stock Exchanges on October 3rd that the Hon’ble High Court of Delhi has ordered convening of meetings of certain customers (home buyers), as unsecured creditors, of Unitech to approve a Scheme of Compromise and Arrangement.

The Scheme covers 41 residential projects and 13,337 units of home, construction of which have been delayed beyond the due date of completion.
Some of the terms of the Scheme which are against the interest of the home buyers are:

  • Withdrawing all existing litigations and foregoing the right to litigate against Unitech, its promoter Directors and officers
  • Foregoing all penalties due till date due to the delay in construction
  • Meagre penalties on account of further delays
  • Minimal disclosures by Unitech on its plan of completion of project and administration of the Scheme

Under the proposed Scheme the home buyers compromise a lot more than what Unitech does. If approved, this Scheme would set a wrong precedent and may encourage other real-estate developers to take similar route.

Such Scheme of Compromise would only work if there are greater disclosures and enhanced governance of the Scheme. InGovern recommends home buyers, as unsecured creditors, vote AGAINST this Scheme.

Download our detailed report on the Scheme of Compromise here: Unitech Scheme of Compromise – InGovern CG Alert