A security guard walks towards residential buildings under construction at the Jaypee Wish Town Project (Photographer: Prashanth Vishwanathan/Bloomberg)

NCLT Asks Jaiprakash Associates To Return Jaypee Infra’s Land; Reverses Previous Transactions

The National Company Law Tribunal has asked Jaiprakash Associates Ltd. to return control of 759 acres of land to Jaypee Infratech Ltd, calling previous transactions “fraudulent, preferential and undervalued”.

According to the order by the Allahabad bench of the tribunal, Jaiprakash Associates as the holding company for Jaypee Infratech had transferred ownership of 858 acres of Jaypee Infratech’s land to its own lenders, in the form of collateral to avail loans.

The tribunal observed that such transactions, which took place over two years between August 2015 to August 2017, would be considered reversed.

The land in question is currently under the control of a consortium of lenders, including ICICI Bank Ltd., State Bank of India and Standard Chartered Bank. This includes 335 acres of land given to the consortium as collateral for term loans worth Rs 21,081 crore, in 2016. Separately, SBI and Standard Chartered Bank received exclusive control over 90 acres and 25 acres of land respectively, in the same year.

Over and above this, private sector lender ICICI Bank also received exclusive charge over 309 acres of Jaypee Infratech’s land in Uttar Pradesh, against a term loan of Rs 1,200 crore in 2017.

A transaction in 2014, where ICICI Bank Ltd. received charge over 100 acres of land against a Rs 1,500 crore worth term loan availed by Jaiprakash Associates in 2013, was not included in this order.

ICICI Bank leads the consortium of lenders to Jaiprakash Associates, while IDBI Bank is the largest lender to Jaypee Infratech.

Anuj Jain, Jaypee Infratech’s resolution professional had filed a motion against the promoter company to return the charge on the land to Jaypee Infratech, since it did not receive any consideration from Jaiprakash Associates for these transactions.

Jaiprakash Associates had argued that these transactions could not be termed preferential or without consideration, as it had been infusing “thousands of crores” worth of capital into Jaypee Infratech due to the liquidity crunch and in effect acted as an operational creditor.

“...it is clear that the mortgage of land of JIL (Jaypee Infratech) in favour of lenders of JAL (Jaiprakash Associates), amounts to transfer of interest in property of JIL for the benefit of its creditors i.e. JAL and putting it in a beneficial position vis-a-vis other creditors in a preferential transaction,” the NCLT observed in its order.

Both Jaypee Infratech and Jaiprakash Associates are currently being resolved under the bankruptcy code.

Jaypee Infratech entered the insolvency and bankruptcy process in August 2017, when lenders followed directions from the Reserve Bank of India for immediate action. On Wednesday, an RBI lawyer informed the Supreme Court that the regulator had also shortlisted Jaiprakash Associates for insolvency action, since it had not cleared large dues it owes to its lenders.

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While potential bidders were conducting their due diligence on Jaypee Infratech, the resolution professional made a presentation to them, flagging off related party transactions, including the transfer of charge of land, BloombergQuint had reported.

As things stand now, lenders have rejected an offer made by Lakshdeep Investments & Finance Pvt Ltd.  for Jaypee Infratech, pushing the firm towards liquidation. The offer was rejected as lenders saw it as being below the liquidation value, BloombergQuint reported.

However, the Supreme Court has issued a stay order on Jaypee Infratech’s liquidation till June 15, asking the promoter of the company to deposit Rs 1,000 crore as security against home buyers’ claims. If Jaiprakash Associates is not able to bring the money in by the deadline, the liquidation proceedings would continue as scheduled. The apex court will hear the matter next on July 4.