NCLT classifies Jaypee Infra as insolvent, home buyers left high and dry
With this, the board of directors of the company remains suspended. NCLT will now appoint an insolvency resolution professional -- an official from one of the 7 accounting firms selected for this purpose.
The Allahabad bench of the National Company Law Tribunal on Wednesday accepted lender IDBI Bank’s plea and classified Jaypee Infratech as an insolvent company.
With this, the board of directors of the company remains suspended. The Tribunal will now appoint an insolvency resolution professional -- an official from one of the seven accounting firms selected for this purpose. The professional will sit with Jaypee’s creditors to see if a resolution of the company’s debt is possible.
The appointed official will get 270 days to turn around the company's finances. In case the turnaround doesn’t happen, the company’s assets will be liquidated.
Jaiprakash Associates, the flagship company of the Manoj Gaur-owned group, has 71.64% stake in Jaypee Infratech. Jaypee Infratech is one of the 12 companies that were referred to the NCLT by the Reserve Bank of India for admission under the insolvency code.
Besides Jaypee, the list of 12 defaulters includes Monnet Ispat, Jyoti Structures, Electrosteel Steels, Amtek Auto, Essar Steel, Bhushan Steel, Bhushan Power and Steel, Jaypee Infratech, Lanco Infratech, ABG Shipyard, Alok Industries and Era Infra & Engineering.
The seven accounting firms mandated to nominate officials who will oversee the debt resolution exercise at these companies are PwC, Deloitte, KPMG, EY, BDO, Grant Thornton and A&M.
As on March 31, 2017, Jaypee Infratech had borrowings of Rs 8,365 crores and an interest service coverage ratio of less than zero, implying an inability to service its debt.
The admission of IDBI Bank’s plea in NCLT is a big setback to thousands of buyers of various properties that were being set up by Jaypee in Noida, Greater Noida and elsewhere. Under the current circumstances, the secured lenders of Jaypee will have the first right to the company’s assets.
In case the lenders are unwilling to convert their debt into equity, there will no option but to liquidate the company, leaving the buyers of the company’s under-construction properties with little choice. These buyers have filed cases against the company at various consumer courts in the country. The projects, already delayed by four years, include Kensington Boulevard, Aman, Kassia, Kalypso, Klassic, Krescent and Cosmos.
Jaypee Infratech had proposed to build 32,000 flats, excluding some plot properties, across various projects in the Wish Town city spread across 5 sectors in Noida along the Yamuna Expressway. Flats, penthouses, villas and plots were all part of these projects.Jaypee’s Wish Town is one of the five integrated townships that the company planned to build over 25 million square meters of land. The development plan included commercial, amusement, industrial, institutional and residential purposes across the five locations—one in Noida, two in district Gautam Budh Nagar and one each in Aligarh and Agra.