The committee of creditors (CoC) of Jaypee Infratech (JIL) rejected the revised bid of NBCC on Thursday as a major contention was the state-run firm’s proposal for paying liquidation value to dissenting financial creditors (DFCs) through enforcement of security interest, which sources said was not compliant with the Insolvency and Bankruptcy Code (IBC).
In its revised resolution plan, NBCC proposed that DFCs would be allowed to enforce security interest, forming a part of the institutional financial creditors’ (IFCs’) security interest, but only to the extent of the liquidation value (LV) owed to them. This includes guarantee security interest and promoter security interest, sources said.
The revised bids were submitted by both the resolution applicants on May 18 (Tuesday). The LV of IFCs is around Rs 9,782 crore. NBCC said if the DFCs’ LV is not realised from security interest, it would pay for the shortfall through non-convertible debentures issued by the Expressway special purpose vehicle up to Rs 2,000 crore. It will also make available additional land (besides the 1,903 acre), said one of the sources. NBCC also proposed that DFCs would be free to enforce security interest to the extent of the value receivable to them and in the order of priority available to them as per the corporate insolvency resolution process (CIRP). It includes costs incurred in enforcement of security interest, he added.
“The CoC debated it and came to the understanding that the proposal on NCDs is not in accordance with the CIRP and observations made by the Supreme Court in Jaypee Kensington case on March 24. The guarantee security interest and promoter security interest are also not in accordance with the IBC and the Kensington judgment,” another source pointed out. In the CoC meeting on May 15, it was discussed that including third- party security interest and restricting DFCs’ right to enforce security interest are not in accordance with law. Then on May 17, the interim resolution professional, with respect to NBCC’s May 10 bid, had also explained that third-party security held by IFCs is additional security interest and cannot be included for making payment of LV to DFCs, the same source said. On the other hand, the consortium led by Suraksha Realty in its revised bid proposed that LV payment of DFCs would be by allowing them to enforce their security interest as per the CIRP, he added.
The creditors’ panel has decided to initiate the voting process on Suraksha’s bid next week. The voting is expected to begin on Monday and will be operational for four days. Around 13 banks, 914 fixed deposit (FD) holders and more than 21,780 homebuyers have voting rights in JIL’s CoC. Homebuyers represent 57.7% of voting rights, while bankers and FD holders have 42.21% and 0.1% share, respectively.