Explainer: 10 things to know about NCLT's Jaypee Infratech order

The National Company Law Tribunal (NCLT) on March 3 approved the state-run NBCC’s proposal to acquire debt-ridden realtor Jaypee Infratech (JIL), bringing relief to around 20,000 homebuyers in Noida and Greater Noida.

NCLT, which cleared the insolvency process “with modifications, also said the Rs 750 crore deposited by Jaiprakash Associates, the parent company of JIL, will be utilised to complete the homes.

Here are the highlights of the NCLT order:

What are these modifications? 

1) NCLT has said Rs 750 crore belongs to the corporate debtor (JIL) and is part of the NBCC’s resolution plan. It rejected the contention that the money should go back to JAL as it is no longer obliged to complete JIL projects.

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In the order, uploaded on its website on March 5, the NCLT also rejected the submission that Rs 750 crore has not gone into the books of JIL, therefore it cannot be treated as the assets of JIL.

2) NCLT has asked JAL to immediately pay Rs 274 crore to JIL. For other claims, both JAL and JIL have been asked to reconcile statements and make payments to each other.

“Significant amounts and land banks that were contingent receivables of JIL under the NBCC resolution plan have now been crystallised and being paid or delivered to JIL/ NBCC. This includes the Rs 750 crore plus interest collected by SC from JAL and the 858 acres of prime land that the Supreme Court has held was a fraudulent preference and therefore belongs to JIL.

"In addition, NCLT has directed JAL to pay an additional amount of Rs 274 crore to JIL immediately. All these together make JIL a great value proposition for NBCC and it should now put processes and plans in place for early delivery of flats to homebuyers who have fought fierce battles in courts to achieve a resolution for JIL” Abhishek Dubey, a legal expert, said.

3) Payment to ICICI Bank: ICICI Bank is a dissenting financial creditor because of the Rs 750-crore issue. Under the resolution plan, the dissenting financial creditors –ICICI--are not entitled to payment except an equity in expressway special purpose vehicle (SPV) and land parcels, as decided by NBCC.

Expression “payment” in this case means payment of the amount and not a payment in kind (equity). Therefore, NCLT directed that NBCC pay to ICICI an amount that the private lender is entitled under the Insolvency and Bankruptcy Code (IBC) in 12 equal instalments along with interest.

The payment has to be made from the seventh month to the 18th month of the date of the NCLT order, Dubey said.

In its final bid, NBCC offered 1,526 acre to lenders under a land-debt swap deal. It offered to transfer the road asset to lenders but before that, it would take a loan of around Rs 2,500 crore against toll revenue to fund construction spend.

It remains to be seen how payment to ICICI is dealt with, say legal experts.

 4) YEIDA objections: The Yamuna Expressway Industrial Development Authority (YEIDA) told NCLT that since the project was for a public cause, it had no objection to the NBCC resolution plan, provided changes were made by removing fall outs relating to the concession agreement.
To the question if JIL or homebuyers are to pay additional compensation of 62.7% to farmers? 

As and when the claim crystalises, YEIDA will have the right to collect the additional acquisition cost from the land bank SPV and the Expressway SPV but not from homebuyers, NCLT said.

On additional compensation to farmers, an arbitral award held that JIL is not liable to pay such amount. YEIDA has challenged it in the Delhi High Court. NCLT held that this withdrawal requirement cannot be thrust upon YEIDA under a resolution plan, Dubey said.

The order says the bench cannot nullify the rights of YEIDA against the corporate debtor emanating from the concessionaire agreement. On the extension of the concession period, NCLT says it is for YEIDA to decide whether such an extension should be given.

This issue may delay construction, legal experts say.

5)Income tax liabilities: All such liabilities of JIL will stand extinguished. This relates to the claim of Rs 33,000 crore by the income-tax authorities treating transfer of land parcels under the concession agreement as revenue subsidy.

6) Payment of stamp duty payable by NBCC is waived as permitted by law.

7) Any non-compliance arising out of past claims before the insolvency resolution process shall not have any bearing on the corporate debtor. This too is positive.

8) All prior claims placed before the resolution professional and any criminal proceedings appurtenant to those claims have also been extinguished. 

9) NBCC reserves its right to terminate the contracts for the development of land by JAL. As to the claims, if any, the resolution applicant has the right to take appropriate action against JAL. This means that NBCC has the right to review the existing construction contracts.

10) Time granted: The resolution applicant is granted 12 months from the approved date to ensure compliance of applicable laws by the corporate debtor or of its subsidiary about any period up to the approval date and licences if any, to be obtained.

The next few days will be important to see whether ICICI or JAL will challenge the order. If they do, it will delay the handover of JIL to NBCC and consequently, the delivery timelines of flats, say legal experts.