Supreme Court directs IRP to complete Jaypee Infra resolution within 90 days

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Published: November 7, 2019 5:19:30 AM

“In the interests of all the stakeholders of JIL,” a Bench comprising justices AM Khanwilkar and Dinesh Maheshwari gave 90-day extension to the insolvency resolution professional (IRP) to complete JIL’s corporate insolvency resolution process (CIRP).

Supreme Court, Jaypee group, Supreme Court, Jaypee Infratech assets, NBCC, Suraksha Realty, NCLTThe apex court allowed only state-owned construction firm National Buildings Construction Corporation (NBCC) and Suraksha Realty to submit their revised bids for takeover of the stalled residential projects.

In a major setback to the Jaypee group, the Supreme Court on Wednesday barred the flagship firm Jaiprakash Associates (JAL) from bidding for its bankrupt arm Jaypee Infratech’s (JIL) assets. The apex court allowed only state-owned construction firm National Buildings Construction Corporation (NBCC) and Suraksha Realty to submit their revised bids for takeover of the stalled residential projects.

“In the interests of all the stakeholders of JIL,” a Bench comprising justices AM Khanwilkar and Dinesh Maheshwari gave 90-day extension to the insolvency resolution professional (IRP) to complete JIL’s corporate insolvency resolution process (CIRP).

“In the first 45 days, it will be open to the IRP to invite revised resolution plan (RP) only from Suraksha Realty and NBCC respectively, who were the final bidders and had submitted resolution plan on the earlier occasions, and place the revised plan(s) before the CoC, if so required, after negotiations and submit a report to the NCLT within such time. In the second phase of 45 days commencing from December 21, margin is provided for removing any difficulty and to pass appropriate orders thereon by the adjudicating authority.”

It also restrained IRP Anuj Jain from entertaining any other bid “individually or jointly or in concert with any other person”.

“JIL/JAL and their promoters shall be ineligible to participate in the CIRP by virtue of the provisions of Section 29A” of the IBC (which bars promoters from bidding), the order stated, while rejecting the Jaypee group’s plea to allow it to give a fresh proposal as it was willing to pay all its dues to lenders and finish all the stalled projects within a period of three years.

The apex court further said that the directions were issued in exceptional situation and these should not be treated as a precedent. The SC exercised its extraordinary powers under Article 142 of the Constitution “to salvage the situation and provide for a wholesome solution which will subserve the interests of all concerned and in particular of large number of home buyers who have voting share of 62.3% (as mentioned in the report submitted by IRP) being constituent of CoC…”

During the arguments, there was complete unanimity between all the stakeholders that the liquidation of JIL must be eschewed as it would do more harm to the interests of the stakeholders, in particular the large number of homebuyers, who aspire to have their home at the earliest.

However, it refused homebuyers’ plea that the apex court should monitor the entire process directly. Citing it earlier judgment in the Chitra Sharma case, it said that matters involving corporate insolvencies require financial expertise and the court should not take upon itself the burden of supervising the intricacies of the resolution process.

The order noted “the project has been implemented in part and out of over 20,000 home buyers, a substantial number of them have been put in possession and the remaining work is in progress and in some cases at an advanced stage of completion. In this backdrop, it would be in the interest of all concerned to accept a viable plan reflecting the recent legislative changes”, the judges stated.

The top court was hearing pleas by JAL challenging the July 30 order of the NCLAT that barred promoters from participating in the fresh bidding for JIL. The NCLAT had also extended the CIRP period of JIL for 90 days during which fresh bids by NBCC, Adani Infrastructure and Development, among others, for the company was allowed.

Senior advocate FS Nariman, appearing for the real estate firm, had reiterated that the Jaypee group is the only one which can complete and deliver all the 27 projects in three years and also pay off banks’ debt with “no haircut”. He said that the Rs 7,350-crore bid of Lakshdeep, part of the Suraksha Group, and NBCC’s bid was already rejected by lenders and they should not be allowed to rebid.

However, the homebuyers had opposed the plea, saying that they have been waiting for last 10 years and wanted their homes, and the issue that whether they are built by the Jaypee group or by the NBCC was immaterial for them.
Without opening the NBCC’s revised bid, which was submitted to it in a sealed cover last month, the bench said that the commercial wisdom to decide on the bid only rests with the CoC.

The Centre is also supporting NBCC takeover of JIL’s unfinished projects as it had told the SC that it would waive taxes, running into crores, if NBCC was to take over the embattled real estate firm. The government had opposed JAL plea to allow it to submit its revised plan, saying it should not be allowed to “delay or derail the resolution process”. It said that the promoter had been declared as ineligible under Section 29A(c) and (g) of the IBC as the provision bars participation of the persons whose misconduct has contributed to default.

Earlier, NBCC had proposed infusion of Rs 200 crore as equity and transfer of 950 acre worth Rs 5,000 crore to the banks towards settling claims of Rs 23,723 crore. It had also promised to complete all the 24,000 units by July 2023. NBCC’s earlier plan was rejected by lenders on the ground that it was a conditional offer.

In the first round of insolvency proceedings conducted last year, the Rs 7,350-crore bid of Lakshdeep, part of the Suraksha Group, was also rejected by lenders. IDBI Bank-led consortium had initiated insolvency proceedings against JIL for failing to repay debt of around Rs 24,000 crore. The NCLT, Ahallabad had admitted the IDBI Bank-led consortium’ plea.

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