Crisis-hit Jaiprakash Associates Ltd (JAL) today said the company provided certain land parcels of its subsidiary Jaypee Infratech as additional collateral to its lenders and the mortgage transactions could not be termed as "fraudulent". The Allahabad bench of National Company Law Tribunal (NCLT) last week passed an order directing JAL to return nearly 760 acre land to Jaypee Infratech Ltd (JIL), while declaring the transfer of the land as "fraudulent" and "undervalued".
The order came over a petition filed by bankruptcy -hit JIL's resolution professional (RP) Anuj Jain seeking direction over the transactions entered by the firm's promoters, creating mortgage on its 858 acre to secure debt for JAL.
NCLT directed JAL to return only 759 acre out of total 858 acre as it found that the transaction related to 100 acre in Aligarh district was entered before the start period of corporate insolvency resolution process (CIRP). Last year, NCLT had admitted an application of IDBI Bank-led consortium to initiate insolvency proceedings against JIL.
In a regulatory filing, JAL said the company has "raised loans against the security of its own assets and the impugned land was mortgaged only as a collateral security as desired by the lenders".
It added: "There is no undervaluation or stripping off of the assets of JIL and no preferential treatment has been given to any creditor of JIL against others."
JAL had said yesterday that the company would go in appeal against the NCLT order.
It further said that the transaction was done in accordance with the legal provisions in vogue much before the coming into force of the provisions of Insolvency and Bankruptcy Code (IBC) and the relevant look back period.
Therefore, it said, the transaction could not be termed as "fraudulent and would not amount to carrying on business for a fraudulent purpose".
The company said the mortgage of land of JIL was being provided only as a collateral security at the instance and in favour of the lenders of JAL, since 2009 and in normal course of banking.
"The loans of JAL were fully secured by its own assets. It is vehemently denied that JIL's land was mortgaged to get loans for JAL, as sought to be made out and stated to be fraudulent," the filing said.
The area of land provided as collateral security had come down from 1,043.55 acres as on August 8, 2015 to 893.55 acres as on March 31, 2016 and further down to 858.37 acres as on August 8, 2016 and continues to be the same at 858.37 acres till date.
The mortgages were duly approved by the JIL's board comprising nominee of lenders and no lender ever objected to the creation of mortgages till date.
"10 out of 12 lenders of JIL are common and they represent 80 per cent of borrowings of JIL. They have been member of JLF. Their approval was obvious and the mortgages were created in their favour only. In any case, the land under reference was part of JIL's unencumbered land for which no approval of its lenders was required to be taken.
It was lawful for JIL under the Companies Act, 2013 to provide such collateral security for loans of JAL, the filing said.
"The assumption that the land could have been sold instead of using it for raising loans of JAL and that the same is virtually asset stripping is wrong and denied in as much as, in the commercial wisdom of the management, there was no need to sell the said land at that stage and it was never used to raise loans for JAL, as alleged," it added.
JAL said that the collaterally mortgaged land continues in the possession and use of JIL.
"The company believes that no transaction which is permitted under law and has been done in accordance with the legal provisions, that too, transparently and with full disclosures, would amount to carrying on business for a fraudulent purpose," the filing said.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
