After many years of wait, around 22,000 home buyers of Jaypee Infratech Limited (JIL) in the National Capital region (NCR) got some sigh of relief when state-owned construction company NBCC got the final approval from the National Company Law Tribunal (NCLT) to acquire debt-ridden township developer Jaypee Infratech under the insolvency process. The successful resolution of JIL will provide the much-needed relief to thousands of distressed homebuyers across the country and will help in reviving the morbid Indian real estate sector.
The state-owned company will complete the project in four years and hand over the flats to the owners, who have put in their life-time savings to invest in the property. The NCLT also pointed out that Rs 750 crore, which was deposited by the promoter of Jaiprakash Associates Ltd (JAL) in the Supreme Court, can be used to complete the stuck projects. For the record, NBCC is a public sector unit with the backing of the government and has good track record of completing projects on time and executing mega-projects.
JIL goes to NCLT
In August 2017, Jaypee Infratech went into insolvency process after the NCLT admitted an application by an IDBI Bank-led consortium. The NCLT appointed Anuj Jain as an IRP to conduct insolvency process and manage the affairs of the company. In the first round, the bankers and the home buyers rejected the Rs 7,350-crore bid of Suraksha Group. In the second round in May and June last year, the Committee of Creditors (CoC) rejected the bids of Suraksha Realty and NBCC. After that, the matter reached the National Company Law Appellate Tribunal (NCLAT) and then the apex court.
On November 6, 2019, the Supreme Court directed completion of JIL’s insolvency process within 90 days and the revised resolution plan to be invited only from NBCC and Suraksha Realty, a Mumbai-based real estate firm. Then on December 7, 2019, the CoC finally decided to put on vote simultaneously the bids of NBCC and Suraksha Realty to acquire the bankrupt realty firm. The voting process started on December 10 and ended on December 16. There were 13 banks and around 22,000 home buyers which had the voting rights in the CoC, and it was decided by CoC that home buyers and lenders would vote on both the bids, NBCC and Suraksha Realty, simultaneously.
Last year in December, the lenders and home buyers voted in favour of NBCC’s bid to acquire Jaypee Infratech as an overwhelming 97% votes went in the favour of NBCC’s bid, making the resolution successful in the third attempt. Suraksha managed to get 2.12% votes as only fixed deposit holders and two lenders — Axis Bank and The Jammu and Kashmir Bank Ltd — favoured it.
As a part of the insolvency proceedings, NBCC offered 1,526 acres of land to lenders under a land-debt swap deal. On Yamuna Expressway, NBCC has proposed to transfer the road asset to lenders but before that it would take a loan of around Rs 2,500 crore against toll revenue to fund the construction cost of completing all the flats. NBCC has sought around three months’ time to raise money, sourcing agencies for various work related to stuck housing projects and other formalities. The actual work on the project is expected to commence by the first week of May, provided the impact of coronavirus pandemic eases in the country.
After the government enacted the Insolvency and Bankruptcy Code (IBC) in May 2016, Jaypee Infratech was the first real estate company against whom insolvency cases were filed. As the case was unique involving several thousand homebuyers, the government amended clauses in the Act to benefit the homebuyers and they were given rights as financial creditors.
What went wrong with JIL
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