NEW DELHI: In a boost for public sector construction company NBCC’s bid for Jaypee Infratech, the Supreme Court has ruled that 858 acres belonging to the bankruptcy-hit company was wrongfully mortgaged by its parent Jaiprakash Associates (JAL) and said it was a “preferential” transaction.
The move is not only a setback to JAL’s lenders – including ICICI Bank, Axis Bank, SBI and Standard Chartered Bank – but has also set a precedent for other cases with the Insolvency and Bankruptcy Board of India, which has circulated it as a guidance to insolvency resolution professionals and other cases.
On February 8, 2018, TOI was first to report about Jaypee Infratech’s interim resolution professional (IRP) Anuj Jain approaching NCLT to argue that the land was “fraudulently and wrongfully” mortgaged in a “preferential transaction” to secure a loan for parent JAL. NCLT had ruled that transactions were “fraudulent, preferential and undervalued” as defined by certain provisions of the Insolvency and Bankruptcy Code. The order was subsequently quashed by NCLAT on a petition by JAL’s lenders such as ICICI Bank and Axis Bank, which stood to lose. As a result, India Infrastructure Finance Company, IRP and some home buyers approached the apex court against the NCLAT ruling.
“NCLAT, in our view, had not been right in interfering with the well considered and justified order passed by NCLT in this regard,” an SC bench of Justices A M Khanwilkar and Dinesh Maheshwari said.
It also dismissed ICICI Bank and Axis Bank’s contention that they should be treated as financial creditors of Jaypee Infratech, which is facing insolvency action for close to 30 months. The land parcels, stretching across Noida, Agra and Aligarh districts, were mortgaged between 2014 and 2017 to secure loans given to JAL, which did not have sufficient assets, compared to Jaypee Infratech that had a massive land bank.
Source- Times of India.