NCLAT junks Jaiprakash Associates' plea against insolvency

The National Company Law Appellate Tribunal (NCLAT) on Friday rejected Jaiprakash Associates Ltd's petition challenging the insolvency proceedings initiated against the company.

While upholding an earlier order, the appellate tribunal NCLAT observed mere pending of loan restructuring arrangement with the lender before NCLT does not debar the creditors to file insolvency proceedings under section 7 of Insolvency & Bankruptcy Code 2016.

A three-member bench led by Chairperson Justice Ashok Bhushan has upheld the order passed by the National Company Law Tribunal (NCLT), which had directed initiating the Corporate Insolvency Resolution Process (CIRP) against the company.

The appellate tribunal said ''after answering all the issues, we are of the view that no grounds have been made out to interfere in order of NCLT''.

The OTS (one-time settlement) proposal submitted to NCLT and as well as before this tribunal on behalf of JAL contains the ''clear acknowledgment of debt'' and default.

''Hence, we are of the view that the findings returned by the Adjudicating Authority (NCLT) on the debt and default are based on materials on record and are affirmed by us,'' it said.

NCLAT also upheld banking sector regulator RBI's ''statutory authorisation'' to direct any banking company to initiate CIRP in respect of default.

Earlier, Reserve Bank of India had on August 14, 2018 directed ICICI Bank to initiate CIRP against JAL. This was also challenged by the promoters of the debt-ridden group contending that JAL is not a defaulter.

NCLAT also noted that the restructuring scheme to make arrangement with creditors filed by JAL before the NCLT being pending ''cannot have effect of arresting the default or to cause any impediment'' in proceedings under Section 7 application which has to be given precedent.

''We, thus, are satisfied that the pendency of proceedings before the NCLT for approval of the scheme of arrangement does in no manner either shall suspend the default which was committed by the Corporate Debtor or preclude the Financial Creditor to proceed with Section 7 application,'' said NCLAT in its 75-page order.

On June 3 this year, the Allahabad bench of NCLT admitted the six-year-old insolvency petition filed by ICICI Bank in September 2018 and appointed Bhuvan Madan as interim resolution professional, suspending the board of JAL.

ICICI Bank had filed an insolvency petition against JAL under section 7 of IBC, claiming a default of more than Rs 16,000 crore.

Besides, the country's biggest lender SBI had also moved NCLT against JAL, claiming a total default of Rs 6,893.15 crore as of September 15, 2022.

JAL, the flagship firm of the debt-ridden Jaypee Group, was part of the Reserve Bank of India's list of 26 big loan defaulters to commercial banks for initiating bankruptcy proceedings in August 2017.

The NCLT's order was challenged before the appellate tribunal NCLAT by Sunil Kumar Sharma, a member of the suspended board of JAL.

On June 11, a vacation bench of NCLAT had asked the consortium of lenders to consider the modified one-time settlement (OTS) submitted by JAL, in which the debt-ridden group has increased the upfront payment and sales of cement assets.

However, on July 3 the consortium of JAL lenders led by ICICI Bank rejected the modified OTS proposal.

Earlier, JAL had moved an OTS proposal to creditors before the NCLT, which had a provision of an upfront payment of Rs 200 crore and the balance of about Rs 16,000 crore to be paid on or before 18 weeks from its acceptance.

However, this was dismissed by the NCLT.

In its modified settlement proposal, JAL has increased the upfront payment to Rs 500 crore. It had proposed an additional deposit of Rs 300 crore besides the Rs 200 crore already furnished.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)