MC Explains| NCLT approves Suraksha Group’s plan to take over Jaypee Infratech

The National Company Law Tribunal (NCLT) on March 7 approved a bid by Suraksha Realty and Lakshdeep Investments and Finance to buy Jaypee Infratech Ltd (JIL), spelling relief for 20,000 homebuyers who bought houses promised by Jaypee in Noida and Greater Noida and are deemed financial creditors to the projects.

The development came six years after Jaypee Infratech entered into insolvency proceedings. For the buyers who have been waiting to receive the keys to their homes for more than a decade, it means light at the end of the tunnel, finally. Most of them have been repaying home loans through equated monthly installments as well as rent for accommodation.

What has happened?

A two-member principal bench of the NCLT headed by president Ramalingam Sudhakar on March 7 approved the resolution plan of consortium of Suraksha Realty and Lakshdeep Investments and Finance, three months after concluding the hearing and reserving the order. The bench had reserved its order on the bid in November 2022.

"We have no other option but to approve the Resolution Plan submitted by Suraksha Realty Ltd along with Lakshdeep Investments and Finance Pvt Ltd along with addendums as duly considered, approved, and recommended by the CoC (Committee of Creditors) and placed by the Applicant/IRP (Insolvency Resolution Professional) of JIL before this Adjudicating Authority," the NCLT said in a 491-page order.

It also dismissed objections raised by Yamuna Expressway Industrial Development Authority, ICICI Bank and JIL's parent firm Jaiprakash Associates Ltd (JAL).

Also Read: India's most delayed residential projects 

On the order of the Supreme Court, JAL had in 2018 deposited a total of Rs 750 crore in several tranches before the registry of the apex court.

NCLT also directed that JIL will get Rs 542.62 crore out of Rs 750 crore deposited by JAL while Rs 106.9 crore will go to an escrow account of homebuyers. JAL, the flagship firm of Jaypee Group, will get only Rs 100.48 crore.

"We direct the Registrar NCLT through Registry of NCLT, Allahabad that out of the total amount of Rs 750 crore and accrued interest thereon, an amount of Rs 649.52 crore along with proportionate interest shall be paid to the JIL/Homebuyers of JIL and the remaining amount of Rs 100.48 crore along with proportionate interest shall be returned to JAL, on receipt of such request from the parties," NCLT said in its order.

The insolvency court also rejected the plea of YEIDA, claiming to be a financial creditor of JIL. YEIDA had entered into a Concession Agreement with Jaypee Infratech in February 2003, and had filed claims of Rs 6,111.59 crore, mainly on account of pending works and External Development Charges (EDCs), Unexecuted External Development Works and other future works.

It had also sought 64.7 percent additional compensation payable to farmers from whom it had acquired land. YEIDA also raised objections towards certain reliefs and concessions sought in the resolution plan and to the "Transfer and Monetisation of Beneficial Interest in Land Parcels" to the assenting financial creditors.

The NCLT rejected YEIDA’s demands, saying: “YEIDA was unable to explain that as to how it has created any security interest".

It also dismissed the objection raised by JAL and Manoj Gaur, the Personal Guarantor of JIL, that the successful bid failed to maximise the value of assets.

The NCLT rejected the plea of ICICI Bank, which had contended that the payment provided to it in the plan fails to satisfy the liquidation value. The tribunal said it found "no error" by the IRP of JIL while calculating the liquidation value of the dissenting financial creditor/ ICICI Bank.

Impact on real estate market

Real estate experts say that after the stuck inventory is completed and distributed, it will boost the number of homes available in the Noida and Greater Noida markets, which may cause a temporary slowdown in real estate prices in the region on the outskirts of New Delhi.

“The Noida real estate market will benefit from the Suraksha resolution plan for the Jaypee Group being approved. After the inventory is finished and distributed, it will boost the number of homes available on the market, which may cause a temporary slowing down in real estate price rises in the region,” said Santhosh Kumar, Vice Chairman of ANAROCK Group.

After this, the market will adapt to the extra supply and matters will stabilise. More importantly, the completion of Jaypee's inventory will boost sentiment on the Noida real estate market, leading to even more long-term demand for real estate because of increased confidence of investors and homebuyers. Higher real estate values will be the eventual outcome, he added.

Also Read: Will court-monitored housing supply help rationalise real estate prices in Noida?

The next steps

In its order, the two-member NCLT bench directed the Interim Resolution Professional to set up an implementation monitoring committee within seven days. The committee is expected to include representatives of the Suraksha Group, IRP Anuj Jain, the lenders, and the authorised representative of the homebuyers, Kuldeep Verma.

The successful resolution applicant should deliver the units for possession by homebuyers in line with the timeframe promised in the resolution plan, the bench said.

The successful bidders propose to deliver as many as 24 projects, of which 15 are in Noida and eight close to Yamuna Expressway, and one in Agra in the next six to 42 months of the plan being cleared by the NCLT.

“The Monitoring Committee(s) as provided in the Resolution Plan shall be set up by the Applicant within 07 days of passing of this Order, which shall take all necessary steps for expeditious implementation of the Resolution Plan as per approval,” said the order, a copy of which is with Moneycontrol.

Timeframe

“The SRA (Successful Resolution Applicant) shall deliver/provide possession of the units to the Home Buyers/Allottees strictly as per the time frame promised in the Resolution Plan and approved by this Authority. The Monitoring Committee will supervise and monitor the progress of construction of units and related infrastructure developments on a day-to-day basis and file the progress report before this Adjudicating Authority on monthly basis,” the order said.

The order said that in case of non-compliance with any part of this order or withdrawal from implementing the Resolution Plan by the Successful Resolution Applicant, the Monitoring Committee shall forfeit the Performance Security furnished by the Resolution Applicant in the form of Performance Bank Guarantees and the Successful Resolution Applicant will be subject to such other action/actions as permissible under the law.

It said that IRP Anuj Jain shall stand discharged of his duties immediately after constituting the monitoring committee(s) as provided in the resolution plan.

“He shall forthwith send a copy of this Order to the CoC, the SRA, and other parties for necessary compliance,” the order said.

Suraksha Group should deliver the units for possession by the homebuyers concerned as per the time frame promised in the resolution plan, it said.

"The monitoring committee would supervise and monitor the progress of the construction of units, related infrastructure development on a day-to-day basis and file report before this Adjudicating Authority (NCLT) on a monthly basis," the order added.

Resolution plan

The nearly Rs. 12,000 crore resolution plan aims to look into the interests of all stakeholders that include corporate debtors, financial and operational creditors. An amount of as much as Rs 4,300 crore will go into completing the projects and delivering them to the buyers as well as issue refunds.

The Suraksha Group, in its resolution plan in 2021, offered secured financial creditors 2,552 acres of land and about Rs 1,300 crore through non-convertible debentures. It had promised to immediately infuse Rs 3,000 crore if its bid was approved by the committee of creditors to ensure construction is not hampered while awaiting the NCLT’s approval of the resolution plan.

It also proposed to complete all unfinished apartments over the next four years.

The Suraksha Group decided to keep the Yamuna Expressway, which Jaypee had built, connecting Greater Noida and Agra. It proposed a line of credit of Rs 3,000 crore as working capital for the construction of projects and pledged to meet any shortfall to dissenting creditors.

The back story

On November 22 last year, the NCLT reserved its order over the plea filed by the IRP of JIL seeking approval for the Suraksha group's bid. In June 2021, the Suraksha-led consortium had received the approval of the CoC, which includes banks as well as homebuyers.

JIL was among the first list of 12 companies against whom the Reserve Bank of India had directed the creditor-banks to approach the NCLT for initiation of insolvency proceedings.

The Corporate Insolvency Resolution Process (CIRP) against JIL was started in August 2017 over an application by an IDBI Bank-led consortium.

On June 23, 2021, the financial creditors of Noida-based Jaypee Infratech chose the Suraksha Group consortium over state-owned NBCC to take over the debt-laden developer and complete the unfinished apartments. The Suraksha Group received 98.66 percent of the votes compared with NBCC’s 98.54 percent. This was the fourth round of bidding to find a buyer for Jaypee.

Under the Insolvency and Bankruptcy Code (IBC), CIRP should be completed within 180 days of the date of admission of the application. Subject to certain conditions, CIRP can be extended and completed within 330 days.

In the first round of insolvency proceedings in 2018, the Rs 7,350 crore bid of Lakshadweep, part of the Suraksha group, was rejected by the lenders. The CoC had rejected the bids of Suraksha and NBCC in the second round held in May-June 2019.

In November 2019, the Supreme Court had directed that the revised bids be invited only from NBCC and Suraksha.

In December 2019, the CoC approved the resolution plan of NBCC during the third round of the bidding process.

In March 2020, NBCC received approval from the NCLT to acquire JIL. However, the order was challenged before the NCLAT and later in the Supreme Court. In August, the top court transferred all pending cases relating to JIL from NCLAT to itself.

On March 21, 2021, the apex court ordered a fresh round of bidding between NBCC and Suraksha group within 45 days. Both companies submitted bids in April. In May, the CoC declared the NBCC bid as non-compliant and Suraksha’s bid was put to vote. In June 2021, Suraksha won the bid to take over JIL and complete the projects