In a landmark decision, the Supreme Court of India clarifies various facets of the Insolvency and Bankruptcy Code, 2016 while extending the corporate insolvency resolution process of Jaypee Infratech Limited.
On 24 March 2021, a three-judge bench of the Supreme Court of India in the matter of Jaypee Kensington Boulevard Apartments v NBCC India Ltd & Ors did not approve the resolution plan submitted by NBCC India Limited (NBCC) for Jaypee Infratech Limited (JIL) and remanded the matter back to the Committee of Creditors (CoC) of JIL, to complete its corporate insolvency resolution process (CIRP) (Judgement) within 45 days, by inviting fresh/modified resolution plans from the resolution applicants who had previously participated in JIL’s CIRP.
The Judgement discusses various important provisions of the Insolvency and Bankruptcy Code, 2016 (Code), including the jurisdiction of adjudicating authorities to modify a resolution plan, payments to dissenting financial creditors and also sets out guiding principles to a legally compliant resolution plan.
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- In 2003, Jaiprakash Associates Limited (JAL) was awarded the bid for development of the ‘Taj Expressway Project’ under a concession agreement (Concession Agreement) executed between Yamuna Expressway Industrial Development (YEIDA) and JAL.
- JIL was set-up as a special purpose vehicle by JAL for execution of the project and consequently all rights and obligations of JAL under the Concession Agreement were assigned to JIL.
- JIL availed loans from various banks/financial institutions for executing the expressway project. Further, as JIL was granted certain land parcels by YEIDA in lieu of the development of the project, JIL also raised monies from homebuyers for development of real estate projects on some of its land parcels.
- JIL started facing financial difficulties due to various factors. As a result, an application was filed by IDBI Bank under Section 7 of the Code for the initiation of JIL’s CIRP which was admitted by the National Company Law Tribunal (NCLT) on 9 August 2017.
- During the CIRP of JIL various issues with respect to rights of homebuyers and avoidable transactions arose which were settled by the Supreme Court from time to time through separate judgements.
- Subsequently, the resolution plan submitted by NBCC was approved by 97.36% vote of the CoC. By an order dated 3 March 2020, the NCLT approved the resolution plan submitted by NBCC with certain modifications.
- Several appeals were preferred against NCLT’s approval of the modified resolution plan before the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court by way of special leave petitions (SLPs). To expedite the process, the Supreme Court transferred all pending appeals before the NCLAT to itself and clubbed all matters relating to approval of resolution plan of NBCC. On 24 March 2021, the Supreme Court delivered its Judgement in the matter.