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NCLAT ‘breached’ IBC provision by extending time limit, Jaypee buyers allege

The group of homebuyers also expressed apprehension against giving NBCC the go ahead to complete the unfinished housing projects of Jaypee

A group of 1000 Jaypee homebuyers have approached the apex court against the NCLAT's direction to representatives of banks, allottees and other stakeholders to appear before it on July 17 to consider how the NBCC resolution plan could be amended for the benefit of homebuyers. The petition says that the “failure” of the resolution process presents a “frightening and extremely disturbing picture to homebuyers” and that “valuable time has been wasted” without reaching any constructive result.

The order of NCLAT on July 2 to reopen CIRP proceeding for negotiation, which has failed twice by now, is “beyond and contrary to the provisions of IBC” and it further “frustrates the Home Buyers as ultimately it will not lead to any affirmative solution,” they said in the petition.

They have also alleged that the NCLAT has “breached” the Insolvency and Bankruptcy Code provision by extending the time limit for completion of CIRP beyond 180 plus 90 days. They have said that there is no solution in IBC to the complex problem involved in this case.

“Because already two rounds of CIRP, the first from 09.08.2017 to 09.05.2018 and second from 09.08.2018 have been frustrated and there is no hope that further result of CIRP would lead to any solution and in the process only precious time would be lost further,” the petition filed by advocate M L Lahoty said.

In their petition to the Supreme Court submitted on July 16, the group of buyers has claimed that the interest of financial creditors as secured creditors, vis-à-vis the homebuyers, is totally opposite and "irreconcilable”. While the financial creditors, namely banks, would prefer the liquidation of the assets of the company and the realization of their funds, the homebuyers’ interest would only be served by the completion of projects, as well as the delivery of their apartments, and not by liquidation.


As for NBCC taking up completion of the stuck projects, the buyers expressed their apprehension, stating that the experience of over 48,000 homebuyers of Amrapali with regard to NBCC was “extremely frustrating” since NBCC had refused to invest and/or arrange any funds for the construction of the project due to which no further construction or completion work was being carried out.

The appellate tribunal (National Company Law Appellate Tribunal) said in June that its priority was to take care of the interest of the home buyers. It asked the representatives of various stakeholders involved to appear before it in the next hearing on July 17 to find how NBCC's plans could be altered for the benefit of all, specially the homebuyers. According to the bench, NBCC is a government company, and one can rely on it. It knows "the pain of allottees", and wants to do justice for them, it added.

Challenging the order, the petitioners said, “The NCLAT has erroneously usurped the functions/powers of the resolution professional wherein NCLAT has sought to call the representatives of the financial creditors, the resolution applicant, the resolution professional, the allottees and the fixed deposit holders for conducting such renegotiation for the resolution plan on July 17 especially when the resolution plan has already been rejected once by the majority of the creditors after the expiry of the statutory period.”

In its revised bid, NBCC agreed to reduce the value of unsold inventories offered to lenders by around 25 percent. The public sector firm 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 have been reluctant to acquire over 2,000 unsold flats, as proposed by NBCC in its revised offer.

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

But, it 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 made an unsolicited and non-binding bid in June to acquire Jaypee Infratech. It 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.

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

Moneycontrol News
first published: Jul 17, 2019 03:44 pm

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