NCLAT sets aside order directing return of land to Jaypee Infratech

The National Company Law Appellate Tribunal on Thursday set aside an NCLT order that directed Jaiprakash Associates Ltd to return 758 acres of land, which was pledged with several banks, to debt-laden Jaypee Infratech.

In May last year, the Allahabad bench of the National Company Law Tribunal (NCLT) had asked JAL to return 758 acres of land to its subsidiary Jaypee Infratech, declaring the transfer of the land as "fraudulent" and "undervalued". It had directed JAL to release and discharge interest created over the patch of land to lenders.

All the banks and JAL had approached the NCLAT against the NCLT order. A stay was granted to all petitioners.

In its judgement, a two-member NCLAT bench, headed by Chairman Justice S J Mukhopadhaya, allowed the pleas of all banks as well as JAL and said that the transactions were genuine and the allegation of undervaluation was not justified.

"We have held that the transactions were made in the ordinary course of business in absence of any contrary evidence to show that they were made to defraud the creditors of the Jaypee Infratech or for any fraudulent purpose, on mere allegation made by the Resolution Professional," said the NCLAT.

The appellate tribunal said that "it was not open to the NCLT to hold that mortgage deeds, in question, were made by way of transactions which come within the meaning of fraudulent trading' or wrongful trading'."
The NCLAT also said that the Allahabad bench of NCLT had passed the order "on the basis of wrong presumption and error of fact held that transactions in question amount to preferential transactions'."