Jaypee wants Supreme Court to bar Tribunal from liquidating company, approve its rescue plan

Jaiprakash Associates and its subsidiary Jaypee Infratech on Wednesday filed an appeal in the Supreme Court to restrain the Allahabad bench of the National Company Law Tribunal from passing any order of liquidation or issuing any direction against the latter without seeking the Court’s approval, according to a copy of the application seen by Moneycontrol.

The Noida-based group also sought the apex court’s approval for the Rs 10,000-crore offer it has made to the creditors to resolve Jaypee’s debt problem. The Supreme Court will hear the matter on Friday.

Jaypee Infratech owes Rs 9,094.31 crore to a consortium of over a dozen banks led by IDBI Bank. The state-owned lender alone has a 44.3 percent share in Jaypee’s total debt.  The group has argued in its 28-page special leave petition that Jaypee remains solvent and committed to repaying its creditors.

Jaypee’s application came the same day its creditors rejected Lakshadweep Pvt Ltd’s Rs 7,000-crore offer for being too low. Clearly, the Manoj Gaur-led group wants to grab the window offered to it by the rejection.

According to a note prepared by IDBI Bank, the value of just the immovable assets mortgaged to the IDBI consortium is Rs 17,116 crore while their distress value is pegged at Rs 14,548 crore. Lakshadweep’s Rs 7,000 crore bid pegged Jaypee’s value at less than half of IDBI’s distress scenario number.

Normally, Jaypee would stand no chance as under the Insolvency and Bankruptcy Code, if the creditors and the company fail to arrive a resolution of the debt, the company has to be sent for liquidation.

The law doesn’t allow an existing promoter’s application to be considered -- clearly going with the logic that if the promoter brought the company to this pass, then how can it be trusted any further? For the same reason, the committee of creditors didn’t take up Jaiprakash’s offer Wednesday after it rejected Lakshadweep’s bid.

But the group stands a chance at the Supreme Court as its case is being heard there as a ‘public interest matter’.

As there are still 18,000-19,000 home buyers awaiting delivery of their flats and that’s at least three years away, the company can’t be liquidated as home buyers, being unsecured creditors of the company, will be left twiddling their thumbs if the company was liquidated.  Around 14,000 buyers have been offered possession of their properties with some 5,000 having already started living in the projects running along the Yamuna Expressway.

The company’s plea is exactly what the lawyers would advise in such a situation -- approach the Supreme Court lest the NCLT acts. The NCLT is left with little choice now. With 270 days -- the time given to the parties concerned to arrive at a solution under the bankruptcy code -- lapsing Saturday, the Tribunal would otherwise be well justified in order the company’s liquidation. Hence the plea in the Supreme Court seeking its direction barring the Tribunal from passing any adverse order.