A day after the Supreme Court upheld the National Company Law Tribunal order directing Jaiprakash Associates (JAL) to return 758 acres of land, which was pledged with several banks, to its debt-laden subsidiary firm Jaypee Infratech Ltd (JIL), the road is now clear for NCLT to approve the NBCC resolution plan, sources said.
"The plan is likely to be cleared by NCLT by March 3. Funds worth Rs 2,000 crore have already been tied up to start construction," sources told Moneycontrol.
Around Rs 6,600 crore is required to complete construction of around 20,000 housing units in Jaypee projects.
Once clearance by NCLT comes through, NBCC will be handed over the letter of intent (LoI), which is an agreement that confirms the course of action that will be taken after the takeover of Jaypee Infratech, sources said, adding that the successful bidder will also have to submit a performance bank guarantee.
In all likelihood, after the NCLT issues its order, NBCC may take another 90 days to be ready with the formalities such as final tower-wise completion schedule, and collecting data required to prepare tenders.
"The zero period will start from March 4 onwards and construction may start by April," sources told Moneycontrol.
On November 6, the Supreme Court directed completion of Jaypee Infratech's insolvency process within 90 days, adding that the revised resolution plan would be invited only from NBCC and Suraksha Realty.
After the voting results were declared in December, the interim resolution professional, Anuj Jain, had filed a report with the adjudicating authority, which in this case is National Company Law Tribunal (NCLT) Allahabad, by December 21.
The day marked the 45th day since the Supreme Court gave its directions. The NCLT had to issue its final order within the next 45 days. This time period has since been extended by four weeks until March 4, legal sources said.
The December round of voting was the third round of bidding process to find a buyer for Jaypee Infratech, which went into Corporate Insolvency Resolution Process (CIRP) in August 2017.
More than 10,000 homebuyers and major lenders of Jaypee Infratech, including IDBI Bank and State Bank of India had voted in favour of the resolution plan submitted by the government's construction arm NBCC to acquire the embattled real estate firm.
On February 26, the Supreme Court upheld the NCLT order directing JAL to return 758 acres of land, which was pledged with several banks, to its debt-laden subsidiary firm JIL.
"The 758 acre of land which comes back to JIL will finally go to NBCC. For homebuyers, this additional land will make the NBCC resolution plan more financially viable," homebuyers had said.
A bench comprising Justices A M Khanwilkar and Dinesh Maheshwari, in its 174-page judgment, considered various provisions of the IBC and reversed the verdict of the NCLAT.
"The impugned order dated August 1, 2019 as passed by NCLAT in the batch of appeals is reversed and is set aside.
"...consequently, the order dated May 16, 2018 so passed by NCLT is upheld in regard to the findings that the transactions in question are preferential within the meaning of Section 43 of the Code," Justice Maheshwari, who wrote the judgement, said.
The bench said that the mortgage of properties of JIL in favour of the lenders of JAL are "denuded of their value and worth" by the order of the NCLT which has been approved by us.
"To be more specific, the security interests created by the corporate debtor JIL over the properties in question stand discharged in whole," the bench said.
It held that the lending banks of JAL "cannot claim any status as creditors of the corporate debtor JIL and there could arise no question of their making any claim to be treated as financial creditors as such."
The Supreme Court was deciding on a batch of appeals filed by Interim Resolution Professional of JIL and others and set aside the decision of the National Company Law Appellate Tribunal (NCLAT) passed on August 1, 2019.
The NCLAT had allowed the pleas of all banks as well as JAL and held that the transactions were genuine and the allegation of undervaluation was not justified.
The NCLAT had quashed the verdict of NCLT, Allahabad, which on May 16, 2018 had held that the mortgage of properties of JIL, which was facing insolvency proceedings under the Insolvency and Bankruptcy Code (IBC), in favour of the lending financial institutions of holding firm JAL cannot be countenanced.
The NCLT in its order had also held that the lenders of JAL do not fall in the category of the "financial creditors" of corporate debtor JIL just because of the mortgage of JIL's properties in favour of JAL.
The Allahabad bench of the NCLT had asked the holding firm JAL to return 758 acres of land to its subsidiary JIL, declaring the transfer of the land as "fraudulent" and "undervalued".
It had also directed JAL to release and discharge interest created over the patch of land to lenders.
NBCC, in its final bid, had offered 1,526 acres to lenders. For homebuyers, NBCC had proposed to complete pending units, about 20,000 flats, in three-and-a-half years.