In a ruling which will have grave implications on how the bankruptcy process is implemented in India, the Supreme Court said it would decide whether a second shot should be taken to save Jaypee Infrastructure from liquidation, as per the existing code or outside of it, by allowing the parent company to bid for it.
Since the Insolvency and Bankruptcy Code doesn’t allow a defaulting company to bid for another, including a unit, facing insolvency proceedings, the top court may well have to go beyond the law and set up a court-appointed expert committee to deal with the issue.
It would also mean setting a new deadline to resolve the matter as the one under the IBC has already passed without any proposals being cleared by the committee of the company’s creditors.
In the alternative, the top court hinted, it would lob the issue back to the newly constituted committee of creditors, which now includes homebuyers, to invite fresh proposals of resolution.
Should the apex court decide to bypass the provision that bars defaulters from bidding under IBC, a new addition to the code, it will impact a host of other such insolvencies pending before various benches of the National Company Law Tribunal.
But the top court, which had rushed into the resolution process to protect the interests of homebuyers, has very few options.
The first round of resolution to revive the company has failed. Parent company Jaiprakash AssociatesNSE 2.02 %, which had evinced interest in buying its ailing entity, was statutorily kept out of the process in the first round even though it had submitted a bid.
But now that the process has failed, the insolvency resolution professional, through senior advocate Parag Tripathi, suggested that the court permit a second attempt at resolution with or without the parent company.
Banks, which have lent huge amounts to the company, do not seem averse to the idea of going back to the statutory scheme for a fresh round of resolution.
But creditors had opposed the court’s orders to get the parent company to cover Jaypee Infra’s debts. They said it would push Jaiprakash Associates too into liquidation.
The top court on its part lacks the expertise to deal with the process on its own, a fact the chief justice conceded in open court Thursday. “We had estimated Jaypee’s liabilities to homebuyers at `2,000-odd crore. Now its estimated at `30,000 crore. It is beyond us,” a three-judge bench led by Justice Dipak Misra said.
Tripathi suggested that in the alternative, the court could set up an expert committee to give it a reasonable estimate of whether Jaypee Infra could carry out all its projects or not, bypassing the code.
Source: Economic Times