How Jaypee Infratech’s Promoter Manoj Gaur Is Trying To Derail Insolvency Proceedings
Manoj Gaur just won’t let go of Jaypee Infratech Ltd. even as lenders vote on a bid for the insolvent developer. And he hopes to derail the process with the help of people his company abandoned: homebuyers.
About 25,000 buyers are waiting for apartments in the Jaypee Greens Wishtown project in Noida that the debt-ridden developer failed to deliver because of lack of funds. Thanks to the Supreme Court’s intervention, they now control 58 percent of the votes on the committee of creditors.
On April 19, Gaur met with some of them and made an unsolicited offer, according to two homebuyers who attended the meeting—they spoke on the condition of anonymity as the talks were private. The promoter has sought another round of discussions.
The plan involves infusion of Rs 1,500 crore of parent Jaiprakash Associates Ltd.’s cash to complete the homes, paying lenders with a minimum haircut and settling vendors’ debt in full, the people cited earlier said. Gaur also promised to appoint a retired Supreme Court judge to monitor the construction work and ensure that it’s completed in time, they said.
In return, homebuyers need to ensure just one thing: either abstain or vote against Suraksha Asset Reconstruction Company Ltd.’s offer before May 3—the last day of voting. The bid needs 66 percent of the creditors’ votes to be selected, and homebuyers can easily reject it if they decide so.
To be sure, it’s not clear what Gaur stands to achieve by asking homebuyers to not vote for the Suraksha ARC plan. Section 29A of the bankruptcy code doesn't allow the promoter of a defaulting company to bid or buy assets during liquidation.
Still, this is the third attempt by Gaur to retain the developer. While he owns the majority stake in Jaypee Infratech through Jaiprakash Associates, he lost control two years ago. That’s because a resolution professional is in charge and the board is suspended once a company is admitted for proceedings under the Insolvency and Bankruptcy Code.
He offered to infuse Rs 10,000 crore in May 2018 and then proposed to repay lenders and vendors in full in February this year without revealing from where the money will come from. Creditors, however, decided against a settlement since Jaiprakash Associates itself is under insolvency. Jaypee Infratech owes lenders nearly Rs 9,800 crore and apartment owners more than Rs 13,000 crore.
To help homebuyers understand his offer, Gaur has employed a call centre. Executives answer their queries and ask them not to vote for the Suraksha ARC’s offer, the people cited earlier said. But the latest attempt to win back control may fall afoul of the bankruptcy code.
“If such negative canvassing is going to hurt the chances of one bidder under the IBC, then it could be claimed in court that the second bidder was acting in concert with the promoter to derail the process,” according to Ajay Shaw, partner, DSK Legal. “Even if that was not the intention, it could be perceived that way.”
Moreover, Shaw said, only a bidder who is part of the insolvency process since the beginning can intervene in the voting process. “Then their stance is tenable and doesn't violate any regulations under IBC.”
Gaur and Jaypee Infratech’s resolution professional have yet to respond to BloombergQuint’s emailed queries.
Will The Deadline Be Extended?
Nearly 33,000 people had bought homes at Greens Wishtown in early 2000s. But the debt-ridden developer could deliver only 9,000. And the company defaulted on bank repayments.
Prompted by the Reserve Bank of India in June 2017, lenders led by IDBI Bank Ltd. approached the Allahabad bench of the National Company Law Tribunal seeking to initiate insolvency proceedings against the company.
The first round began in August 2017 but financial creditors could not find an eligible bid within the 270-day deadline. As the company headed for liquidation a year later, the Supreme Court intervened to protect the rights of homebuyers. Giving buyers a 58 percent representation in the committee of creditors, it ordered to start insolvency proceedings afresh.
As the second 270-day deadline ends on May 6, the lenders decided to put the Suraksha ARC’s plan to vote since the other bidder—state-run NBCC Ltd.—wanted to wait for government approvals.
NBCC has now informed the lenders and homebuyers that it has the required nod and wants to be considered. The creditors, including homebuyers, are expected to meet on Saturday to discuss the way forward, according to one of the two people quoted earlier.
Meanwhile, the NCLT will hear a petition by the resolution professional for Jaypee Infratech on May 6 to extend the deadline for the resolution process by not factoring in the time spent on litigation in the second round of insolvency proceedings.
Still, a financial creditor who is part of the CoC for Jaypee Infratech, isn’t optimistic about Gaur’s chances of getting the company back. Even if Gaur gets some of the homebuyers to agree, the creditor said on the condition of anonymity, it’s not clear how will he arrange the funding or secure the rights to run the company again.