Disallows Jaypee Associates from participating in the bid; only NBCC (India) Ltd and Suraksha Realty Ltd can bid for Jaypee Infratech
In a big relief to homebuyers, the Supreme Court on November 6 said that the Jaypee Infratech resolution process should be completed within 90 days and allowed only the government’s construction arm NBCC and Suraksha Realty to submit their revised proposals before the Committee of Creditors.
A total of 90-day extension has been granted by the apex court under extraordinary powers of the Supreme Court under Article 142. The apex court also clarified that this case should not set a precedent.
The apex court made it clear that the parent company of the embattled firm JP Associates cannot bid for Jaypee Infratech.
"JIL/JAL and their promoters shall be ineligible to participate in the CIRP by virtue of the provisions of Section 29A," the apex court order said.
The 90-day extension from November 6 has been granted in the interest of all stakeholders under Article 142 of the Constitution. The Supreme Court has given both NBCC and Suraksha Realty 45 days to submit their revised bid and another 45 days to the insolvency and resolution professional to process the fresh bids.
NBCC has already submitted a revised proposal before the Supreme Court. The court said that the commercial wisdom to decide on the bids only rests with the CoC.
These directions by the SC have been issued in exceptional situation in the facts of the present case and shall not be treated as a precedent.
"Article 142 of the constitution is the power which is vested only with the Supreme Court where it can pass any order to deliver complete justice. SC has expressively said that this should not set a precedent and that it is the rarest of rare cases. These powers have been exercised by the apex court in the interest of all stakeholders," said Ashwarya Sinha, lawyer for petitioner Chitra Sharma.
These orders have again reinstated our faith in the system. Faith has been restored even though the process has been time consuming, he said, adding there is definitely hope for homebuyers.
The Supreme Court on October 23 had taken up Jaypee Group’s plea against the NCLAT order that had barred the parent company from participating in the resolution process of the embattled firm Jaypee Infratech but reserved the order until November 6.
Jaypee Group had said that it be allowed to give a fresh proposal as it is willing to pay all its dues to lenders and finish all the stalled projects within a period of three years. The group said it has built and delivered around 6,000 dwelling units to homebuyers during the insolvency proceedings.
On July 30 this year, the National Company Law Appellate Tribunal (NCLAT) had allowed fresh bidding for JIL but had barred its promoter Jaypee Group from participating in the auction.
The bench comprising Justices A M Khanwilkar and Dinesh Maheshwari was told by senior advocate F S Nariman in October, appearing for the real estate firm, that around 12,000 flats or dwelling units have been delivered to the homebuyers, and of the total around 6,000 have been given during the tough times of facing the insolvency proceedings.
The counsel for the homebuyers opposed the plea and said 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.
Counsel for Chitra Sharma had submitted earlier that there is a window until Nov 14 for the fresh revised plan of NBCC to be considered by the CoC and that the CoC be permitted to consider the fresh/revised plan submitted by the NBCC in the given timeline and any appeal filed by an ex-facie ineligible promoter who has been classified as NPA since March 31, 2015 ought not to be permitted to delay or derail the proceedings within the timeline prescribed under IBC.
Ajit Sinha, senior advocate argued that if the appeal is allowed, the most obvious conclusion would be liquidation which would adversely affect the interest of 20,000 homebuyers in different projects of Jaypee.
"We represent majority of homebuyers i.e. over 5,000 homebuyers. JAL is trying a backdoor entry when is has been expressly barred. If the company is liquidated, the homebuyers would not get anything," he had said.
The apex court had on October 17 said that it would first hear the appeal of Jaypee Group against the NCLAT order that barred it from participating in the auction of JIL and would deal later with the revised proposal of state-owned NBCC to complete the stalled projects of Jaypee Group.
The National Buildings Construction Corporation Ltd (NBCC) had submitted a revised plan in a sealed cover last month before the Supreme Court. The court, however, had not open the seal of the revised plan and told that it would deal with it later.
Earlier, sources had told Moneycontrol that the government's construction arm NBCC may consider reducing the upfront amount to lenders if it decides not to transfer Jaypee Infratech's unsold inventory to them in the revised proposal.
NBCC participated in the second round of bidding for the 16 stalled Jaypee Infratech projects. It had proposed infusion of Rs 200 crore as equity and transfer of 950 acres of land worth Rs 5,000 crore to the banks towards settling claims of Rs 23,723 crore. It had earlier promised to complete all the 24,000 units by July 2023.
Sources had said earlier that NBCC may propose to keep the entire inventory to itself and sell it in the open market to raise money to bridge the funding gap.
"NBCC was initially planning to give Rs 200 crore to lenders and taking Rs 1300 crore from them for the unsold inventory. Now if it decides not to hand over the unsold inventory to lenders, it may consider reducing the upfront amount," sources had said.
The issue of unsold inventory was a major deal breaker in the plan NBCC had submitted earlier. NBCC had earlier agreed to reduce the value of unsold inventories offered to lenders by 25 percent. It had proposed that it would reduce the value of unsold inventories offered to lenders to Rs 1,300 crore from earlier Rs 1,750 crore but banks were reluctant to acquire over 2000 unsold flats as proposed by NBCC in its previous offer and the plan did not go through.
In the revised proposal, it may have also perhaps proposed completing all the unfinished 16 projects within four years.
"If the project is 70 percent complete, it may be handed over within one year, those that are 40 to 70 percent complete may be deliverd within two years and those that are less than 40 percent complete may be delivered within three years.
"There are around 250 towers that are required to be completed and given possession across 16 projects. The status of each project is different. Some that are almost 90 percent complete may be given possession within three months while others that are just 40 percent complete may take longer. The company will also be required to complete all the facilities simultaneously. Therefore, four years is what it may require to complete all the projects," sources had told Moneycontrol.
On September 5, NBCC had agreed to submit a revised proposal to take over the embattled company's unfinished units.
During the hearing, the Centre had told the court that it would waive taxes, running into crores, due to Jaypee Infratech, if NBCC was to take over the embattled real-estate firm.
NBCC's proposal submitted earlier had come with several conditions, including a demand to extinguish an estimated 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 to Jaypee Group and seeking permission from YEIDA for a business transfer. NBCC's bid was rejected due to these "rigid conditions" by the committee of creditors.
NBCC in its resolution plan submitted earlier had proposed creation of a separate company for the Yamuna Expressway to unlock revenue. This could not go through as the IBC norms did not allow for it then but amendments to IBC in August have allowed mergers and demergers.
The second deal breaker (in the NBCC resolution plan submitted earlier) was to do with the income tax demand of Rs 33,000 crore. The recent IBC amendment has made it clear that income tax demand and demand from authorities should be dealt like any other operational creditor. Post the amendments, there is now clarity that any statutory demand is an operational creditor. This problem too seems to have been resolved, experts had said.
With this two major deal-breakers in the resolution plan submitted by NBCC earlier have been dealt with by the recent amendments, sources had told Moneycontrol.
On August 22, the court had ordered status quo for a week on the insolvency proceeding after the Jaypee Group challenged an order of the National Company Law Appellate Tribunal (NCLAT) that allowed fresh bidding for Jaypee Infratech. The NCLAT had barred the parent company, Jaypee Associates, from bidding.
A group of homebuyers moved the apex court in 2017, saying around 23,000 people had booked flats and were paying installments, but their homes were not firstname.lastname@example.org Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.