The National Company Law Tribunal (NCLT) dismissed Jaiprakash Associates Ltd's (JAL) argument that its financial difficulties and failure to meet debt obligations were primarily caused by delays in government approvals, prolonged legal battles over land acquisition for Yamuna Expressway, and shifts in government regulations. This decision was made on June 3 when the NCLT initiated insolvency proceedings against JAL.
The Allahabad bench of the National Company Law Tribunal (NCLT) has stated that if a financial creditor files an application under section 7 of the Insolvency & Bankruptcy Code due to a debt and default in repayment, the insolvency plea must be accepted. This decision has been upheld by the Supreme Court.
The insolvency tribunal dismissed JAL's pleas to avoid insolvency proceedings, citing reasons such as the potential for commencing CIRP, the company's financial stability, and the possibility of using receivables to settle outstanding debts.
NCLT in its 120-page order said, "The reason cited by the counsel of JAL is liquidity crunch due to delays in government sanctions /approvals, prolonged litigation with respect to land acquisition for Yamuna Expressway, economic slowdown, change in government policies, etc. which is always present when a business is carried out and that cannot have any bearing on initiation of proceeding under Section 7 of IBC, when there is a debt and default in repayment of such debt as provided under Section 7 of IBC."
JAL has asserted that it maintains a significant amount of assets, despite selling its cement plants to address the loans in Bucket 1 and Bucket 2A. Notably, assets such as the Real Estate Business in Noida and Greater Noida, which includes approximately 11,000 flats, will continue to be owned by the company.
Additionally, it possessed other valuable assets including two luxury hotels in Delhi and one in Agra, two golf courses in Noida and Greater Noida, a Formula One sports complex, a cricket stadium, and real estate properties.
Furthermore, JAL also contended that divesting its cement business would enhance liquidity and boost the company's financial results.
The firm's receivables amount to Rs.7,242 crore, with Rs.5,586 crore stemming from the sale of the cement business to Dalmias.
The NCLT order also documented ICICI Bank's submission, stating that the proceeds from the sale of the cement plant by JAL to address its debts in Bucket 2A will not assist in resolving the debt in Bucket 2B.
In Bucket 2A, JAL had a total debt of Rs.6,367 crore, with Rs 5,072 crore owed to the lenders.
All 32 relevant lenders signed the Master Restructuring Agreement (MRA) for JAL's sustainable debt before December 13, 2017.
Under Bucket 2B, the transfer of assets and liabilities related to a debt of Rs.11,833.55 crore was to be completed through a Scheme of Arrangement.
This involved transferring the remaining debt and land of JAL to a 100% real estate Special Purpose Vehicle (SPV) called Jaypee Infrastructure Development Ltd.
Last month, the JAL had informed that the company had on April 30, defaulted on repayments of a principal amount of ₹1,751 crore and interest of ₹2,865 crore.
JAL also mentioned, "Total borrowing (including interest) of the company is Rs.29,805 crore, repayable by 2037, against which only Rs.4,616 crore is overdue as of April 30, 2024."
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