2017-08-13
NCLT Declares Jaypee Infratech Insolvent - Home buyers tough time
NCLT Declares Jaypee Infratech Limited Insolvent - A Case Study- National company law tribunal Allahabad bench IDBI BANK LTD V/S JAYPEE INFRATECH LTD Overview:- Jaypee infratech ltd is a subsidy of Jaiprakash associates ltd. it caters Expressway, road, infrastructure, and township developments. Jaypee was supposed to build 32000 flats including Apartment’s, plot villas, penthouses in wishtown Noida, Greater noida, Yamuna expressway last but not least Agra. The investor or buyer feel looted as the projects are already delayed by 2 to 7 years. And the date of competition is still unclear. Jaypee referred to NCLT Jaypee infratech ltd was one of the companies that were referred to NCLT by R.B.I on recommendation of IDBI BANK as a total default loan of 526,11,40,827/-Idbi bank is a leading leander have a total loan of 4000 crore out of 8500/- crore on Jaypee infratech ltd The case is filled under section 7 of of bankruptcy and insolvency code 2016. Although jaypee infratech ltd (corporate debtor company) filled a objection against it but later on 04.08.2017 they withdrew their objection and Mr Manoj Gaur (Managing Director) by it attorney filled a memo that “The PARTIES TO THE APPLICATION HAD A MEETING ON 03.08.2017 THEY DISCUSSED NEED TO WITHDREW THEIR OBJECTION ON THE PRESENT PETATION AND THEY EXPRESSED THEIER DESIRE FOR EARLY APPROVEL OF THE RESOLUTION PLAN OF JAYPEE INFRATEC LTD(CORPORATE DEBTOR COMPANY) WHICH IS ALREDY UNDER CONSIDERTION OF ITS LENDERS. IN ITS MEMO FURTHER EXPLAINED THAT IT IS IN THE INTERSET OF ALL THE STAKEHOLDERS OF THE COMPANY INCLUDING THE HOME BUYERS AND DEPOSITORS . NCLT JUDGEMENT NCLT observed that Financial creditors and others lenders as well as jaypee infratech ltd (corporate debtor company) are looking for early approval of resolution plan. Mr Anuj Jain email id anujvjain@bsraffiliates.com ADD:- M/S BSRR & Co. Charted Accounts Dlf, Cyber city, Gurugram appointed as INTERIM RESOLUTION PROFESSIONAL To carry insolvency and bankruptcy code. The order is effective from 09.08.2017. Till this bench approves the resolution plan under section 31 or under section 33. Bench prohibits the institution or continuation of pending suits against Jaypee infratech ltd (corporate debtor company) including execution of any judgement decree or order in any court of law tribunal, arbitration, or any other authority. Supply of good and service for Jaypee infratech ltd will continue and shall not be terminated or interrupted. Jaypee infratech ltd will provide full support to I.R.P. Jaypee infratech ltd will continue its operation. Process of insolvency and bankruptcy code The decision is need to be taken within 180 days + grace period of 90 days. The I.R.P will replace the directors and start handling the operation. Creditors committee will be formed in 30 days’ time I.R.P will look for other financial creditors a detail working on assets and liabilities. I.R.P, creditor’s committee members and Jaypee infratech ltd will look for resolution plan. No solution in this time frame will attract liquidation. As sell of assets and settlement in following manner. Liquidation process cost and I.R.P Charges. Staff salary Cost incurred on administration. Debt from secured creditors( bank) Unsecured debt( home buyers) Government dues. Any remaing dues or debt Shareholders or partners. POSSIBLE SOLUTION Restructuring of debt. Coming of new company to run business Either Govt or housing develepoment agency intervention. Further support to jaypee infratech ltd You can guide for more solution :- rnQuestions & Answers- rnOpenion of a supreme court Lawyer on present situation and Question Answers rnPlease check the Questions 2 & 3 and get a legal opinion on the. Answers in this note ....Dear All, rnThe essence of all the issues raised is the fate of the existing projects/loans given by the banks to the purchasers of the property once the Company is taken of the books pursuant to the insolvency proceedings. These steps mentioned in the preliminary reply by one of the advising professionals are in consonance with the provisions of the erstwhile Sick Industrial Companies Act (SICA) which was applied to certain industries only. The measures proposed in the insolvency code from Section 13 to 31 are quite similar to that under the SICA. rnThe steps under the erstwhile SICA were as follows: rn1. Take into account all the debts of the Company. rn2. Prepare the list of secured and unsecured creditors. rn3. Out of the secured creditors one of the Financial institution or the Bank shall be appointed as the lead for the other bankers who have charge on the properties of the Company. rn4. The said FI and Banks (along with the Company) shall draft a rehabilitation scheme for the Company which will include giving the Company a One Time Settlement Offer for repayment of their loans. rn5. The Company has the discretion to accept the said settlement or not. rn6. The said FI and Banks shall conduct meetings to discuss the possibility of rehabilitation and any inputs on the same from any quarter. rn7. That the company also has an option to bring in the money in the company to increase its net worth. The same can be done by the Company by bringing in a strategic investor or taking over of the Company’s debt by another company. rn8. Winding up of the Company means the closure of the Company after the failure of all the resuscitation means. The said approach to wind up the company has been observed as an approach of last resort and should be taken only in circumstances where the net worth of the Company has so eroded that it is beyond repair. rnThe aforesaid steps under the provisions of SICA have now been merged into the Insolvency code covering each and every industry and company possible but the principle of "revival of company being the first resort" -still survives. rnAnswers to queries: rnQuery 1. What will happen to the loans given by the Banks as the company doesn’t exist legally. rnAnswer: rnThe banks and FI’s are generally the secured creditors who have certain charge on the properties of the Company. After the appointment of the Interim Resolution professional (Section 18), a Committee of Creditors u/w 21 of IBC will be formed. Thereunder, the Financial Creditors of the Company shall meet u/s 24 and discuss the financial standing of the Company and how to revive the same. The said committee of creditors will attempt to revive the company by forming an Insolvency Resolution Plan (Section 30). The said resolution plan shall include the following: rnintroduction of strategic investor by the Company to infuse funds into the Company and pay off the debts of the Company One time Settlement offer by the Financial creditors. rnThe Resolution plan shall be submitted by the committee of creditors to the NCLT who shall see if the said resolution is viable and agreeable to all the financial creditors. If not, then only the liquidation process of the Company starts under Section 33 of the IBC. rnPlease note that the commencement of the Insolvency resolution process does not mean the end of the Company. The so called end of the Company happens only when the Insolvency Resolution process fails and the liquidation of the company is done. If such a stage comes, then a debt distribution (proportionate to the loan disbursed by the bank) would be done out of the proceeds of disposal of the surviving assets of the Company (since the actual assets on which charge was created never came into existence). rnQuestion 2. rnWhat will happen to the existent residents of wish town? rnAnswer 2: As stated in the previous answer, the Company will try and bring a strategic investor to infuse funds or a proposal can come from other company to take over all the debts of the Company. This shall revive the Company and the whole process shall be executed under the guidance of the Committee of creditors. If no strategic investor comes up or no resolution takes place, then the residents of the said locality can approach the Courts by way of a Writ Petition or an IA before the NCLT seeking the takeover of management of the Flats by a Government Entity by way of infusion of funds. A collective approach by all the residents can be taken to join the list of creditors in the liquidation process and get a fair amount of maintenance charges as a creditor of the Company. In any case, once the matter proceeds to liquidation, the supervisory role of the company with respect to the allotted flats would have to be handed over to the Residents' Association which would be a registered co-operative society. rnQuestion 3. rnWhat will happen to the semi Built towers as they are on land owned by the Company and since the company does not exist legally what will happen to quadrilateral agreements? rnAnswer 3. Please see the answer to Question 1. The Company will not cease to exist once the IRP is appointed and it will not cease to exist unless and until its assets are liquidated after failiure of the whole procedure of Insolvency Resolution. If the resolution plan fails, the liquidation process will start and the said process shall take care of all the agreements and all the legal charges of the banks and FI’s. It must be understood that if there has been any sale of apartment/shop/unit in a semi built tower, the same would not be without a proportionate sale of land rights to the buyers. Consequently, these units and their accompanying land rights, cease to be 'assets' of the company. The liquidation process shall not treat these as the Company's Assets and only the remaining/surviving rights of the Company in the unsold portions of these towers will be treated as disposable assets. Once such portion is disposed, alongwith other surviving assets of the Company, the proportionate share of the banks would be disbursed. Please note that merely because the item of bank's specific charge has ceased to exist, there is no bar to giving a share of the proceeds of liquidation of some other asset to the bank in settlement of its loan. The contents of the quadrilateral agreement would have to be examined to give any further opinions. We need to understand that the above arrangement can be twisted and modified to protect the interests of the existing buyers on one hand and getting the maximum out of the company's surviving assets on the other. rnQuestion 4. rnFully built towers in which people are living shall also face the same fate as the quadrilateral agreement will become infructous. rnAnswer 4. Same as above. The nature of the quadrilateral agreement is to be seen. Once the company goes into liquidation, the liquidator shall take the place of the Company in all the agreements and all the obligations arising under the agreement, shall be discharged using the sale proceeds of the other surviving assets of the company. The question as to what happens to the Banks' specific charge on these assets would have to be answered after having a look at the agreement- if the buyers have the secondary responsibility of paying the EMI when the Company fails, then the buyers have to adhere to the same and pay EMI to the banks. Any losses caused to the buyers because of the same shall constitute an actionable debt which can be met by a proportionate disbursement of the sale proceeds arising out of the sale of other assets. rnQuestion 5. rnLot many banks have given loans to different flat owners of the same tower. How will the bank execute the loan agreements when the company cease to exist. rnAnswer 5: The Company does not cease to exist till the time it is wound up. Till that time the banks and FI’s shall have an active charge on the properties of the Company. These banks and FI’s will be part of the committee of creditors who will help the Company to revive by giving OTS proposals and formulate a rehabilitation scheme for the Company. All the banks who have given loan to the Company and the buyers shall have charge over the properties of the company as financial creditor and all of them will be part of the committee of creditors. Even in the liquidation process, these banks will ensure that they get their due proportionate to the loan advanced, when the disposal proceeds of other existing assets reach the liquidator. Regards, rnOpenion of a supreme court Lawyer on present situation and Question Answers rnPlease check the Questions 2 & 3 and get a legal opinion on the. Answers in this note ....Dear All, rnThe essence of all the issues raised is the fate of the existing projects/loans given by the banks to the purchasers of the property once the Company is taken of the books pursuant to the insolvency proceedings. These steps mentioned in the preliminary reply by one of the advising professionals are in consonance with the provisions of the erstwhile Sick Industrial Companies Act (SICA) which was applied to certain industries only. The measures proposed in the insolvency code from Section 13 to 31 are quite similar to that under the SICA. rnThe steps under the erstwhile SICA were as follows: rn1. Take into account all the debts of the Company. rn2. Prepare the list of secured and unsecured creditors. rn3. Out of the secured creditors one of the Financial institution or the Bank shall be appointed as the lead for the other bankers who have charge on the properties of the Company. rn4. The said FI and Banks (along with the Company) shall draft a rehabilitation scheme for the Company which will include giving the Company a One Time Settlement Offer for repayment of their loans. rn5. The Company has the discretion to accept the said settlement or not. rn6. The said FI and Banks shall conduct meetings to discuss the possibility of rehabilitation and any inputs on the same from any quarter. rn7. That the company also has an option to bring in the money in the company to increase its net worth. The same can be done by the Company by bringing in a strategic investor or taking over of the Company’s debt by another company. rn8. Winding up of the Company means the closure of the Company after the failure of all the resuscitation means. The said approach to wind up the company has been observed as an approach of last resort and should be taken only in circumstances where the net worth of the Company has so eroded that it is beyond repair. rnThe aforesaid steps under the provisions of SICA have now been merged into the Insolvency code covering each and every industry and company possible but the principle of "revival of company being the first resort" -still survives. rnAnswers to queries: rnQuery 1. What will happen to the loans given by the Banks as the company doesn’t exist legally. rnAnswer: rnThe banks and FI’s are generally the secured creditors who have certain charge on the properties of the Company. After the appointment of the Interim Resolution professional (Section 18), a Committee of Creditors u/w 21 of IBC will be formed. Thereunder, the Financial Creditors of the Company shall meet u/s 24 and discuss the financial standing of the Company and how to revive the same. The said committee of creditors will attempt to revive the company by forming an Insolvency Resolution Plan (Section 30). The said resolution plan shall include the following: rnintroduction of strategic investor by the Company to infuse funds into the Company and pay off the debts of the Company One time Settlement offer by the Financial creditors. rnThe Resolution plan shall be submitted by the committee of creditors to the NCLT who shall see if the said resolution is viable and agreeable to all the financial creditors. If not, then only the liquidation process of the Company starts under Section 33 of the IBC. rnPlease note that the commencement of the Insolvency resolution process does not mean the end of the Company. The so called end of the Company happens only when the Insolvency Resolution process fails and the liquidation of the company is done. If such a stage comes, then a debt distribution (proportionate to the loan disbursed by the bank) would be done out of the proceeds of disposal of the surviving assets of the Company (since the actual assets on which charge was created never came into existence). rnQuestion 2. rnWhat will happen to the existent residents of wish town? rnAnswer 2: As stated in the previous answer, the Company will try and bring a strategic investor to infuse funds or a proposal can come from other company to take over all the debts of the Company. This shall revive the Company and the whole process shall be executed under the guidance of the Committee of creditors. If no strategic investor comes up or no resolution takes place, then the residents of the said locality can approach the Courts by way of a Writ Petition or an IA before the NCLT seeking the takeover of management of the Flats by a Government Entity by way of infusion of funds. A collective approach by all the residents can be taken to join the list of creditors in the liquidation process and get a fair amount of maintenance charges as a creditor of the Company. In any case, once the matter proceeds to liquidation, the supervisory role of the company with respect to the allotted flats would have to be handed over to the Residents' Association which would be a registered co-operative society. rnQuestion 3. rnWhat will happen to the semi Built towers as they are on land owned by the Company and since the company does not exist legally what will happen to quadrilateral agreements? rnAnswer 3. Please see the answer to Question 1. The Company will not cease to exist once the IRP is appointed and it will not cease to exist unless and until its assets are liquidated after failiure of the whole procedure of Insolvency Resolution. If the resolution plan fails, the liquidation process will start and the said process shall take care of all the agreements and all the legal charges of the banks and FI’s. It must be understood that if there has been any sale of apartment/shop/unit in a semi built tower, the same would not be without a proportionate sale of land rights to the buyers. Consequently, these units and their accompanying land rights, cease to be 'assets' of the company. The liquidation process shall not treat these as the Company's Assets and only the remaining/surviving rights of the Company in the unsold portions of these towers will be treated as disposable assets. Once such portion is disposed, alongwith other surviving assets of the Company, the proportionate share of the banks would be disbursed. Please note that merely because the item of bank's specific charge has ceased to exist, there is no bar to giving a share of the proceeds of liquidation of some other asset to the bank in settlement of its loan. The contents of the quadrilateral agreement would have to be examined to give any further opinions. We need to understand that the above arrangement can be twisted and modified to protect the interests of the existing buyers on one hand and getting the maximum out of the company's surviving assets on the other. rnQuestion 4. rnFully built towers in which people are living shall also face the same fate as the quadrilateral agreement will become infructous. rnAnswer 4. Same as above. The nature of the quadrilateral agreement is to be seen. Once the company goes into liquidation, the liquidator shall take the place of the Company in all the agreements and all the obligations arising under the agreement, shall be discharged using the sale proceeds of the other surviving assets of the company. The question as to what happens to the Banks' specific charge on these assets would have to be answered after having a look at the agreement- if the buyers have the secondary responsibility of paying the EMI when the Company fails, then the buyers have to adhere to the same and pay EMI to the banks. Any losses caused to the buyers because of the same shall constitute an actionable debt which can be met by a proportionate disbursement of the sale proceeds arising out of the sale of other assets. rnQuestion 5. rnLot many banks have given loans to different flat owners of the same tower. How will the bank execute the loan agreements when the company cease to exist. rnAnswer 5: The Company does not cease to exist till the time it is wound up. Till that time the banks and FI’s shall have an active charge on the properties of the Company. These banks and FI’s will be part of the committee of creditors who will help the Company to revive by giving OTS proposals and formulate a rehabilitation scheme for the Company. All the banks who have given loan to the Company and the buyers shall have charge over the properties of the company as financial creditor and all of them will be part of the committee of creditors. Even in the liquidation process, these banks will ensure that they get their due proportionate to the loan advanced, when the disposal proceeds of other existing assets reach the liquidator. rntaken data from Senior Advocate-on-Record, Supreme Court of India ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Today more then 100 home buyers attended a meeting in Jaypee sector 128 office. W here Mr. Ajit Kumar confirmed that they have upload the claim form on their Website . By law We are all supposed to fill up the claim form. However all those who are not able to fill form, their interest will be safe as IRP will also take data from Jaypee's books. The confusion for the type of form is also be cleared as we should fill up form which will be uploaded by Jaypee Infratech. They also assured that no claim will be rejected due to wrong type of form being filled. So please do not worry on this part. All Forms and Press release is uploaded by Jaypee on their website. Please note the following clearly- rn1 - Jaypee is not going bankrupt now. The current process is a legal process and first Resolution will be tried as per the legal process, judicial order and statements of Jaypee Infratech and IDBI Bank in NCLT. Even the designation of IRP means Interim Resolution Professional. Mr. Jain's first priority will be to take stock of all assets, liabilities and claims and then try to work out a resolution process in discussion with all stake holders. Home buyers are unique to this case and protection of their interest has been noted in the judgement also. All political authorities are also aware of this and they cant afford to let homebuyers down. Mr Arvind Jain from DTPOWs said that bankruptcy is no solution to the problem. Only solution is completion of Wishtown. He advised all not to panic and first lodge claim till 24th August. They also confirmed that company will continue as it is and construction will also continue. Please find attached Media Release which is given by Jaypee and Mr. Anuj Jain- Following are the Important LINKS useful for Home Buyers of Jaypee Group Projects- The Creditors, Home Buyers and Employees are advised to fill and submit a proof of claim form to the Interim Resolution Professional (Mr. Anuj Jain) appointed by NCLT on following Email address, or Direct at mentioned Office address. Mr. Anuj Jain (IRP) C/o BSRR & CO. Charted Accountants Address-Building No. 10, 8th floor, Tower-B, DLF Cyber City, Phase-2, Gurugram-122002 Email - IRPJIL@BSRAFFILIATES.COM Following are important link which are useful for flat buyers, Creditors and Employees- ​ FORM B for Operational Creditors FORM C for Financial Creditors - FORM D for an Employee - Media Release by Anuj Jain(IRP) ​ Toadays Meeting Update- Jaypee Officials addressed Home Buyers- CLICK HERE
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