In a setback to the Jaypee Group, the Supreme Court today ordered re-commencement of resolution process against Jaypee Infratech Ltd (JIL) and barred the firm, its holding company and their promoters from participating in the fresh bidding process.
The apex court also allowed the Reserve Bank of India (RBI) to direct the banks to initiate corporate insolvency resolution proceedings (CIRP) against Jaiprakash Associates Ltd (JAL), the holding company of JIL, under the Insolvency and Bankruptcy Code (IBC).
A bench headed by Chief Justice Dipak Misra said there was "no manner of doubt" that JAL and JIL lacked financial capacity and resources to complete unfinished housing projects in which 21,532 home buyers have not been given possession of their flats.
The bench, also comprising justices A M Khanwilkar and D Y Chandrachud, said that the initial period of 180 days for the conclusion of CIRP in respect of JIL would commence from today, and if it becomes necessary to apply for further extension of 90 days, the National Company Law Tribunal (NCLT), Allahabad, would pass appropriate orders in accordance with IBC provisions.
It also directed that a committee of creditors (CoC) be constituted afresh in accordance with the provisions of the Insolvency and Bankruptcy (Amendment) Ordinance, 2018 which says that home buyers should also be included in it.
The top court permitted interim resolution professional (IRP) "to invite fresh expressions of interest for the submission of resolution plans by applicants, in addition to the three short-listed bidders whose bids or, as the case may be, revised bids may also be considered".
"The amount of Rs 750 crores which has been deposited in this court by JAL/JIL shall together with the interest accrued thereon be transferred to the NCLT and continue to remain invested and shall abide by such directions as may be issued by the NCLT," the bench said while disposing of the pleas pending before it.
The court noted in its order that during the arguments, there was a unanimity of opinion that liquidation of JIL would not subserve the interests of home buyers.
"The home buyers have made valuable investments by contributing hard earned monies in the hope of obtaining a roof over their heads. A home for the family is a basic human yearning. In diverse contexts it has been held by this Court to be a part of the right to life, as a fundamental constitutional guarantee," the bench noted in its 46-page judgement.
Referring to section 29A of the IBC, which deals with the issue of persons not eligible to be resolution applicant, the court said that Parliament had introduced this provision to ensure that those responsible for insolvency of corporate debtor do not participate in the resolution process.
"The bar under section 29A would preclude JAL/JIL from being allowed to participate in the resolution process. Moreover, the facts which have been drawn to the attention of the court leave no manner of doubt that JAL/JIL lack the financial capacity and resources to complete the unfinished projects," it said.
"To allow them to participate in the process of resolution will render the provisions of the Act nugatory. This cannot be permitted by the court," the bench said.
The top court also dealt with the issue related to claim of the home buyers, who want refund of their money, and said that though this deserves to be considered with "empathy", the same cannot be acceded to.
It referred to the data placed before it by an advocate, assisting the court as an amicus curiae, which indicated that eight per cent of home buyers have sought a refund while 92 per cent of them preferred possession of homes.
"Directing disbursement of the amount of Rs 750 crore to the home buyers who seek refund would be manifestly improper and cause injustice to the secured creditors since it would amount to a preferential disbursement to a class of creditors," it said.
"Once we have taken recourse to the discipline of the IBC, it is necessary that its statutory provisions be followed to facilitate the conclusion of the resolution process," the court said.
It said that court should follow the "discipline of the IBC" which has been enacted by Parliament specifically to streamline the resolution of corporate insolvencies.
"Matters involving corporate insolvencies require expert determination," it said, adding, "The legislature has made specific provisions which are conceived in public interest and to facilitate good corporate governance. The Court should not take upon itself the burden of supervising the intricacies of the resolution process."
The court agreed with RBI's submissions that further delay in resolution would adversely impact a viable resolution being found for JAL and JIL.
It noted that in June 2017, RBI had published a list of top 12 defaulters, including JIL, which was declared to be in default of amount of approximately Rs 8,000 crore to its lenders.
It also noted that total financial debt due to financial creditors on the date of commencement of corporate insolvency earlier on August 9 last year stood at Rs 9,984.70 crore.
IDBI Bank had moved the Corporate Insolvency Resolution application before the NCLT against JIL after it allegedly defaulted in paying back a loan of Rs 526 crore.
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