IBC: Suraksha ARC’s Bid To Acquire Jaypee Infratech Fails

Suraksha Asset Reconstruction Company Ltd.’s bid to acquire Jaypee Infratech Ltd. failed to secure enough votes for the second time, according to two people in the know, leading to uncertainty about the fate of the insolvent developer that is yet to deliver homes to thousands of buyers.

Majority of the banks in the Jaypee Infratech’s Committee of Creditors voted against the resolution plan submitted by Suraksha ARC, the people quoted earlier said on the condition of anonymity as the information is not public. Only private lender The Jammu & Kashmir Bank Ltd. voted in its favour, one of the people said.

About 9,000 of more than 20,000 homebuyers, waiting to get the apartments in Jaypee Greens Wishtown in Noida, participated in voting, the people said. A majority voted in favour of the plan, they said.

Suraksha ARC’s bid has been rejected when promoter Manoj Gaur is trying to regain control of the company by offering to infuse money. He proposed to bring in Rs 1,500 crore to complete the construction work, repay financial creditors with minimum haircut and repay the operational creditors in full. And while it’s not clear how he will arrange the funds, Section 29 of the Insolvency and Bankruptcy Code bars defaulting promoters from taking part in insolvency and liquidation. Jaypee Infratech owes banks around Rs 9,800 crore and more than Rs 13,000 crore to its homebuyers.

Suraksha ARC had failed to get the required 66 percent of the votes in the first round of insolvency of Jaypee Infratech last year as well. At the time, IDBI Bank Ltd., the lead lender, had abstained.

Homebuyers control about 58 percent of the votes in the CoC after the Supreme Court intervened to avoid liquidation and give them representation. The court also ordered to start the insolvency proceedings afresh, and the second 270-day deadline ends on May 6. With no firm buyer still receiving a majority approval, the company might be staring at liquidation again.

To be sure, NBCC (India) Ltd.’s plan for taking over Jaypee Infratech is yet to be put on vote. The state-owned developer had asked lenders to not vote on its plan since it was waiting for government approvals. On May 1, NBCC wrote to the resolution professional for Jaypee Infratech that all government approvals were in place and that it was still keen on taking over the developer. The CoC is yet to decide about voting on the offer.