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Jaypee Infratech insolvency: NCLAT steps in to tweak NBCC’s bid

Surya Sarathi Ray
Jaypee Infratech., Jaypee Infratech insolvency, NCLAT, NBCC, stakeholders, industry news

After the lenders rejected the state-owned NBCC's bid to take over the bankrupt Jaypee Infratech (JIL), the National Company Law Appellate Tribunal (NCLAT) on Tuesday took in its hands the task of finding a resolution which benefits all stakeholders, chiefly the homebuyers.

A three-member bench headed by chairman Justice SJ Mukhopadhyaya directed representatives of banks, allottees and other stakeholders to appear before it on July 17 to consider how NBCC's bid can be altered so that it is agreeable to all the parties.

The appellate tribunal's direction came after it was informed that the voting in the committee of creditors (CoC) which concluded on June 10 on NBCC's bid, 34.75% of home buyers voted in favour, 1.44% voted against, whereas 23.8% did not vote. However, all the 13 banks, which constitute 40.75% of CoC voted against the bid.

As many as 13 banks and over 23,000 home buyers have voting rights in the CoC of JIL.

Homebuyers represent nearly 60% of voting rights, while banks have the rest. For approval of any resolution plan, at least 66% votes should be in favour. In most bankruptcy proceedings, lenders have the right to vote for or against a resolution plan for a bankrupt firm. In the case of realty firms, home buyers also have voting rights at par with lenders.

In another noteworthy development, the NCLAT bench said it was not keen on considering Adani Group's bid at this stage and even pulled up the banks for conducting backdoor negotiations with the group. On being informed that the Adani group has come up with a better offer which promises faster construction of the flats, the bench said if the company was an interested party, it should have intervened before it.

The appellate tribunal reiterated that in the interest of homebuyers, the resolution of JIL will not be allowed to fail and if it was not possible to find a solution through the NBCC bid, the bench will consider Adani or any other bids.

The bench said NBCC is a government company and one can rely on it, adding that it knows "the pain of allottees" and wants to do justice for them. It asked the banks to nominate a high ranking officer who will negotiate, while asking them to produce a gist of the resolution plan submitted by NBCC and objections they have with regard to the plan. Bankers have reservations with the NBCC's bid because of certain concessions sought by the firm related to future tax liabilities and approval from development authority YEIDA for transfer of land and Yamuna Expressway.

In its revised offer, NBCC has proposed infusion of Rs 200-crore equity capital, transfer of 950-acre of land worth Rs 5,000 crore to banks and completing construction of flats by July 2023 to settle an outstanding claim of Rs 23,723 crore of financial creditors.

This is the second round of bidding process to revive JIL, which went into insolvency in August 2017 after the National Company Law Tribunal (NCLT) admitted an application filed by an IDBI Bank-led consortium. In the first round of insolvency proceedings conducted last year, the Rs 7,350-crore bid of Lakshadweep, part of Suraksha Group, was rejected by lenders. Later in October 2018, the interim resolution professional started the second round of bidding process. In May, the CoC had rejected Suraksha Realty's bid.