COC TO REVIEW NBCC OFFER FOR JAYPEE BEFORE SURAKSHA VOTE

Suraksha Group says it will withdraw from the race if COC decides to send NBCC (India) offer for voting

Even as Suraksha Group's resolution plan for Jaypee Infratech (JIL) is set to go voting from Monday, NBCC (India) has once again added an addendum to its offer, reiterating to bring in ~2,000 crore in the next three years. The committee of creditors (COC) has decided to meet again on Monday morning to review the NBCC offer before the voting on Suraksha Group's plan begins. But the Coc's flipflop has created a furore among the homeowners of JIL.

Vven as Suraksha Group’s resolution plan for Jaypee Infratech (JIL) is set to be taken up for voting from Monday, NBCC (India) has once again added an addendum to its offer, reiterating that it will bring in ~2,000 crore in the next three years.

The committee of creditors (COC) has decided to meet again on Monday morning to review the NBCC offer before the voting on Suraksha Group’s plan begins.

But the Coc’s flip-flop has created a furore among the homeowners of JIL. They have been waiting for the keys to their new homes for 11 years. “This flip-flop by public sector banks is just delaying the entire process. We don’t want any more litigation. The Jaypee resolution plan is under litigation for the past four years,” said a homeowner.

JIL was set for debt resolution in August 2017 after the firm, which owns a huge land bank on both sides of the Yamuna Vxpressway and the expressway itself, defaulted on ~22,000-crore bank loans.

Suraksha Group, which has emerged as a highest bidder, warned that it will withdraw from the race if COC decides to send NBCC (India) offer for voting. At the COC meeting on May 21, it was decided that the resolution plan of Suraksha Group would be put up for voting by the COC from Monday.

The NBCC (India) proposal was rejected as it was noncompliant with the Insolvency and Bankruptcy Code (IBC), 2016, and the previous Supreme Court (SC) orders in the Jaypee case. On the same night after the deadline to submit the offers lapsed, NBCC (India) submitted an addendum to its resolution plan before the resolution professional (RP) and the COC, thereby objecting to the views of the RP Anuj Jain’s stand on the non-compliance of its resolution plan. It amended certain covenants of its resolution plan, stating its plan was now compliant with the SC’S order and the IBC.

Homeowners said the COC decision to call another meeting to review the NBCC offer was not legal, according to the legal opinion taken by them from a former SC judge. At the same time, some private banks had already informed the COC they would not accept the zero coupon, non-convertible debentures (NCDS) of 21 years offered by NBCC since they were not in line with the provisions of the Code and the spirit of the SC judgment.

“Once the decision has been taken by the COC regarding non-compliance of the plan of NBCC and thereby putting up the resolution plan of Suraksha Group for voting, in absence of any express provision in the Code, the COC cannot now, by way of review of its decision, decide to allow the resolution plan of NBCC to be put up for voting. It is a settled principle of law as upheld by different courts, including the SC, that the review of an administrative order is impermissible unless the order is shown to have been passed on irrelevant grounds, totally unjust or contrary to law, or the order was prejudicial to a party and had been passed without giving an opportunity of hearing provided under the relevant statute,” said former SC Justice B S Chauhan.

The former judge also said the issuance of NCDS to dissenting financial creditors by NBCC was not in line with the March 24 judgment of the SC.

“In my view it is abundantly clear from the judgment of the SC that the dissenting financial creditor cannot be forced to remain attached with the corporate debtor. However, contrary to the said observation, the NBCC plan provides for NCDS to the dissenting creditors — meaning that the dissenting financial creditors would remain attached to the corporate debtor by way of subscribing to such debt instrument redeemable in 21 years. Thus, the said treatment is squarely in contravention of the observations of the SC. The addendum submitted by NBCC provides a right to the dissenting financial creditors to recover the liquidation value by way of enforcement of guarantee security interest. The same is a right which is otherwise available to the dissenting financial creditors, irrespective of the treatment being provided in the plan. The same is an independent right available to the dissenting financial creditors and the same cannot be provided in the resolution plan as an option for recovery of the liquidation value,” he said.

The SC had directed on March 24 this year that the requirement of the Code under Section 30 (2) (b) can be satisfied only by way of payment of cash or allowing enforcement of security interest. The former judge said the SC has not permitted the resolution applicant to substitute the requirement of provisions of Code by way of an option which is not even effective at the time of submission of the resolution plan.