Suspended board of Jaiprakash Associates moves NCLAT, challenges insolvency proceedings

New Delhi: The suspended board of debt-ridden Jaiprakash Associates has moved appellate tribunal NCLAT challenging last week's NCLT order which directed initiation of insolvency proceedings against the firm.

In September 2018, ICICI Bank had filed an insolvency petition against JAL under Section 7 of IBC. The NCLT rejected JAL’s contention that it faced a liquidity crunch and defaulted on debt repayments mainly due to delays in government approvals and prolonged litigation concerning land acquisition for Yamuna Expressway and changes in government policies.

The petition was listed before a vacation bench of the National Company Law Appellate Tribunal (NCLAT), which declined to grant an interim stay on the NCLT order.

On June 3, the Allahabad bench of National Company Law Tribunal (NCLT) admitted the insolvency plea filed by ICICI Bank. The tribunal also appointed Bhuvan Madan as Interim Resolution Professional of JAL after suspending the board of the company.

It has been held by the Supreme Court that if there is a debt and default in repayment of debt and application filed by a financial creditor under Section 7 of Insolvency & Bankruptcy Code, then the insolvency plea is to be admitted, the NCLT had said.

The insolvency tribunal also rejected the submissions of JAL pleading not to initiate insolvency on grounds such as the feasibility of initiating CIRP, overall financial health and viability of the company and receivables which may go to meet the outstanding debts.

JAL had submitted that it is an "asset-rich company", even after sale of cement plants to resolve the loans under Bucket 1 and Bucket 2A.
Rejecting its contention, the Allahabad bench of NCLT had said, "If the Corporate Debtor (JAL) feels about its viability, feasibility and financial health , it would be more beneficial for it after its resolution under IBC is done expeditiously before its assets get depleted."

ICICI Bank had submitted that sale proceeds shown on account of sale of the cement plant by JAL to pare its debts of Bucket 2A and such sale proceed will not help in settling the debt of Bucket 2B.

Under Bucket 2A, JAL had an overall debt of Rs 6,367 crore, which included Rs 5,072 crore owed to the lenders. The Master Restructuring Agreement (MRA) for JAL's sustainable debt was signed by all 32 relevant lenders before December 13, 2017. Under Bucket 2B, transfer of assets and liabilities pertaining 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 per cent real estate Special Purpose Vehicle (SPV), namely Jaypee Infrastructure Development Ltd.

However, ICICI Bank had submitted that receivable shown on account of arbitration was not finally determined and it was not certain as to when it would be received.

Moreover, 75 per cent of the amount which was claimed to be received as per the scheme of Niti Aayog, was also subject to giving bank guarantee.