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Jaypee Infratech case: NCLAT directs officials of banks and NBCC to negotiate resolution plan

NCLAT also questioned banks on backdoor negotiations with Adani Group.

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In what could be a ray of hope for Jaypee homebuyers stuck with delayed projects for years, the National Company Law Appellate Tribunal (NCLAT) on July 2 observed that buyers have more confidence in a public entity than a private firm and directed senior officials of banks and NBCC to appear before it on July 17 to thrash out differences over the resolution plan, sources said.

NCLAT has hinted that it is keen on amending the NBCC bid to suit the interests of all parties rather than go in for a third round of bidding at this stage. It has directed the Committee of Creditors (CoC) to produce the list of objections they have with regard to the NBCC resolution plan and arrive at a consensus, sources said.

The three-member bench headed by Justice Chairman SJ Mukhopadhyaya also refused to consider Adani Group's bid, saying it has no experience in infrastructure and questioned banks on backdoor negotiations with the business conglomerate.


NCLAT is trying to make efforts to address the differences stakeholders have regarding the NBCC bid and has directed senior officials of NBCC and IDBI to be present at the next date of hearing to try and resolve those issues in a manner that may be satisfactory to all, legal sources present at the hearing said.

The bench also observed that home buyers have more faith in a government company rather than a private firm, they said.

Legal experts are of the opinion that this shows NCLAT's willingness to intervene and  resolve issues on which there are differences between the banks and the government’s construction arm and therefore there is hope for homebuyers.

NCLAT may prevail over both parties. If banks act tough, it may issue a set of directions to it to come around. There may be a bit of give and take on both sides. Both NBCC and IDBI may have to step back on their hardline positions and agree to resolve their differences, they say.

Last month, a large number of homebuyers came forward to vote on the NBCC resolution plan to take over embattled realty firm Jaypee Infratech. Sources said as many as 34 percent homebuyers voted in favour of the bid and 1.4 percent homebuyers voted against it. Banks have rejected NBCC's bid to acquire debt-ridden Jaypee Infratech. In fact, IDBI had filed an application earlier before NCLAT seeking permission for secured financial creditors to vote against the bid last month.

Earlier, on the bankers' plea, the NCLAT had on May 17 annulled voting by homebuyers and lenders on NBCC's bid and allowed renegotiation on the offer by May 30. The voting process restarted on May 31.

Lenders of embattled Jaypee Infratech on May 30 decided to put to vote NBCC's resolution plan to take over the realty firm and complete construction of over 20,000 flats. The offer was put to vote following directions by the National Company Law Appellate Tribunal (NCLAT). The tribunal had asked lenders to negotiate with NBCC by May 30 so that voting could start from May 31.

The government’s construction arm had in its bid earlier agreed to reduce the value of unsold inventories offered to lenders by around 25 percent, sources said, adding that the public sector firm has proposed that it would reduce the value of unsold inventories offered to lenders to Rs 1,300 crore from earlier Rs 1,750 crore.

Banks had been reluctant to acquire over 2000 unsold flats as proposed by NBCC in its revised offer.

However, NBCC did not dilute other conditions in its offer, including exemption from future tax liability, mentioned in its bid.  In its revised offer, NBCC had proposed infusion of Rs 200 crore equity capital, transfer of 950 acres of land worth Rs 5,000 crore to banks and completing construction of flats by July 2023 to settle an outstanding claim of Rs 23,723 crore of financial creditors.

It had put several conditions for the implementation of its plan, including a demand to extinguish an estimated income-tax liability of Rs 33,000 crore over a period of 30 years arising out of the transfer of land parcels from Yamuna Expressway Industrial Development Authority (YEIDA) to Jaypee Group and seeking permission from YEIDA for any business transfer.

On this bid, lenders had reservations on certain relief and concessions sought by NBCC and  sought clarifications from the firm. Clarifications from the NBCC were sought in the wake of IRP Anuj Jain flagging to the lenders that the state-owned firm's bid was conditional and non-binding because of the two conditions.

Business conglomerate Adani Group had also last month made an unsolicited and non-binding bid to acquire Jaypee Infratech and is ready to infuse up to Rs 1,700 crore to expedite the construction of stuck housing projects of the debt-laden realty firm and deliver flats to home buyers.

Adani has promised to infuse another Rs 1,000 crore in two equal tranches of Rs 500 crore each to settle claims of workmen as well as secured and unsecured financial creditors, besides meeting cost for insolvency proceedings.

Adani Group had participated in the first round of insolvency process but did not bid in the current round within the fixed timeframe.

As many as 13 banks and over 23,000 homebuyers have voting rights in the committee of creditors (CoC). Buyers have nearly 60 per cent votes. For the bid to be approved, 66 per cent voters should be in favour of the deal.

Earlier in May. creditors, including banks and homebuyers, rejected a bid by Mumbai-based Suraksha Realty through a voting process, following which the CoC decided to consider NBCC's offer.

Jaypee Infratech went into insolvency process in 2017 after the NCLT admitted an application by an IDBI Bank-led consortium seeking resolution of the realty firm.

In the first round of insolvency proceedings, the Rs 7,350-crore bid of Lakshdeep, part of Suraksha Group, was rejected by lenders. Later in October 2018, the Interim Resolution Professional (IRP) started the second round of bidding process to revive Jaypee Infratech on the direction of NCLT.

First Published on Jul 2, 2019 02:02 pm