In a decisive move earlier this week, the National Company Law Appellate Tribunal (NCLAT) upheld the initiation of insolvency proceedings against Jaypee Cement Corporation Ltd (JCCL), rejecting an appeal filed by Alok Gaur. The ruling reinforces the growing trend of judicial clarity in cases involving group company liabilities, particularly within distressed conglomerates like the Jaypee Group.
The appeal challenged a previous order passed by the National Company Law Tribunal (NCLT), which had allowed the Corporate Insolvency Resolution Process (CIRP) to be initiated against JCCL under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016. Gaur had contested this ruling, arguing that the debt and default allegations were unsupported and that the responsibility for repayment lay with Jaiprakash Associates Ltd (JAL), JCCL’s parent entity.
However, the appellate bench comprising NCLAT Chairperson Justice Ashok Bhushan and Member Barun Mitra dismissed the appeal, noting that both the existence of debt and the occurrence of default were sufficiently established. The tribunal found no error in the NCLT’s earlier ruling and affirmed that insolvency proceedings against JCCL were justified.
One of the central points raised in the appeal was the existence of a Master Restructuring Agreement (MRA), which had been executed by JAL and its lenders in earlier years. Gaur contended that under this agreement, JAL had undertaken the responsibility of discharging JCCL’s dues, which, in his view, meant that the liability no longer rested with JCCL. The NCLAT, however, refuted this claim, stating that JCCL was not a signatory to the MRA and thus could not claim immunity from its own debts. The tribunal added that since the terms of the MRA had not been fulfilled, reliance on it to invalidate the insolvency process was misplaced.
The NCLAT also rejected the argument that the ongoing insolvency proceedings against JAL would shield JCCL from similar action. It clarified that CIRP could be initiated separately against corporate guarantors or associate entities, regardless of parallel proceedings against the principal borrower. In this case, JCCL had extended guarantees and securities for several financial facilities secured from the State Bank of India (SBI) between 2012 and 2015, which made it equally accountable.
This is not the first time that entities linked to the Jaypee Group have faced insolvency action. The NCLAT had earlier upheld insolvency proceedings against JAL itself, despite objections grounded in pending restructuring negotiations. The consistent judicial position appears to support the notion that an unresolved restructuring plan does not obstruct creditors from exercising their rights under the IBC framework.
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