Last Updated : Jan 10, 2018 02:30 PM IST | Source:

SC to decide on RBI’s plea on insolvency proceedings against JAL next month

Orders amicus curiae to set up separate portal for JAL homebuyers. Next hearing on February 5.

Vandana Ramnani @vandanaramnani1

The Supreme Court on Wednesday said that the it will decide on Reserve Bank of India’s plea seeking to start insolvency proceedings against JAL on the next date, February 5, and that the central bank should not act on it, legal sources said.

It also ordered that the parent company Jaiprakash Associates (JAL) to submit a list of all its housing projects they have in the country and their stage of construction and that the amicus curiae should create a new portal for homebuyers who had invested in residential projects by JAL, sources said. It added that JAL should not create third-party interest in the properties.

“The order augurs well for the home buyers of JAL who also have been stuck for close to a decade now. Their complications had multiplied after the Supreme Court orders focused only on projects which were jointly launched by JAL and JIL. The attention of the Supreme Court was drawn towards the projects which were to be developed solely by JAL, and Supreme Court took cognizance of the fact. The data will now be collated by the amicus and it is expected that the interest of all the home buyers of JAL and JIL will be protected as a whole.” said Abhishek Dubey, advocate based out of Delhi.

The Reserve Bank of India on Monday approached the Supreme Court seeking permission to initiate insolvency proceedings against Jaiprakash Associates(JAL), the parent company of Jaypee Infratech (JIL).

A decision on RBI’s application was deferred by the apex court on the ground that the court needs to ensure protection of interests of the home buyers. Accordingly, the RBI’s application would likely be heard in detailed on the next date of hearing February 5, 2018, legal sources said.

The amicus has also been asked but the  Supreme Court to extend the deadline for selection of option for possession or refund for the home buyers of Jaypee Infratech (JIL), sources said, adding the court was informed that around 8% people have opted for refund.

The Court was informed about the on-going demerger of JAL. While the Court did not make any observation regarding this in its order, the Court made an oral remark that there is a restriction on sale of any asset of JAL and/or making any change in status of JAL. Accordingly if any plan of demerger/ merger or such other scheme is found to be violative of SC’s order, JAL directors will have to face consequences including imprisonment.

Certain independent directors of JAL asked for exemption from personal appearance in court hearings on the ground that they are old. The Court granted such exemption to Independent Directors.

Supreme Court, therefore, directed that the directors of JAL should not be allowed to travel overseas and that independent directors should not be present on every date, sources said

The move had more than 25,000 homebuyers of Jaypee Infratech in Noida and Greater Noida worried that if insolvency proceedings against JAL are allowed, who will deposit Rs 2,000 crore with the Supreme Court registry and ensure that homebuyers are refunded from the amount. As many as 4,000 homebuyers own premium projects by JAL in Wishtown and Sports City.

In its application, the RBI has prayed that the “Court may be pleased to allow the applicant to follow the recommendations of the IAC in accordance with the provisions of the Ordinance…”. RBI’s Internal Advisory Committee had identified JAL as the company against which insolvency proceedings needed to be initiated.

The RBI approaching the Supreme Court seems to be a reasonable approach given the fact that the top court is already apprised of the matter. If any process had gone to a lower court (National Company Law Tribunal or NCLT), it could have had the potential of upsetting the apex court as it recently happened in the case of Unitech, said an insolvency expert.

Jaiprakash Associates, with a debt of nearly Rs 29,000 crore, is part of Jaypee Group, promoted by Manoj Gaur and his family and features in RBI’s second list of 28-30 companies to be taken to NCLT. It has deposited Rs 425 crore so far. Besides, JAL is yet to deposit the full amount of Rs 2,000 crore with the Supreme Court registry.

In order to avoid legal complications, the RBI had reportedly asked the lead banker, ICICI Bank last week to exempt Jaiprakash Associates from being filed at the NCLT for now, banking sources aware of the matter had said.

Currently, financially troubled Jaypee Infratech, subsidiary of Jaiprakash Associates, has been battling lenders in the National Company Law Tribunal (NCLT) but reached the Supreme Court dragged by the home buyers impacted by the insolvency proceedings.

Jaypee Infratech is among 12 large stressed companies in the first list referred to banks by RBI to start bankruptcy proceedings in June 2017.

The apex court has ruled that the promoters of the company would not be allowed to sell their personal assets or property without its permission.

While the second list of companies were to be sent to the NCLTs before December end, any resolution plan on selling of its assets could violate the SC ruling, a senior banker had said.

On August 9 last year, the Allahabad bench of the NCLT had accepted lender IDBI Bank’s plea and admitted Jaypee Infratech as a case under insolvency resolution for defaulting Rs 526 crore. It appointed Anuj Jain as the insolvency resolution professional from BSSR & Co.

The SC ruling came after over 20,000 home buyers in the Jaypee Infratech’s projects raised concerns of not getting back their money as the first right of dues would go to the banks and other operational creditors. While some buyers have paid the full amount to the company, there are others who may have paid either 60 percent or perhaps 90 percent of the amount.
First Published on Jan 10, 2018 01:34 pm
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