CoC to review NBCC offer for Jaypee Infra on Monday before vote on Suraksha

Homeowners, Suraksha cry foul; say move illegal as per SC order

Even as Suraksha group's resolution plan for Jaypee Infratech is set to go voting from Monday, NBCC India has once again added an addendum to its offer reiterating to bring in Rs 2,000 crore in the next three years. The Committee of Creditors has decided to meet again on Monday morning to review NBCC offer before the voting on Suraksha group's plan begins.

But the CoC's flip-flop has created a furore among the homeowners of Jaypee Infra, who have been waiting for the keys to their houses for the past 11 years. “This flip-flop by the public sector banks is just delaying the entire process. We don’t want any more litigation as the Jaypee debt resolution plan has been in litigation for the past four years, delaying the entire process,” said a homeowner.

Jaypee Infratech was set for debt resolution in August 2017 after the company, which owns huge land bank on both sides of Yamuna Expressway and expressway itself, defaulted on bank loans of Rs 22,000 crore.  

In the meeting of the CoC on May 21, the CoC had decided revised resolution plan of the Suraksha Group be put up for voting by the CoC from Monday and rejected the NBCC India proposal as it was non-compliant with the IBC 2016 and previous SC orders in Jaypee case. 

Fresh Hurdles

• CoC sends Suraksha Group plan for voting from Monday
• NBCC India sends fresh plan post deadline
• CoC to meet again to review NBCC India plan
• Pvt banks not in favour of zero coupon, 21-year NCDs offered by NBCC India
• Suraksha has offered Rs 6,984 cr to CoC vs Rs 5,248 cr by NBCC India

On the same night after the deadline to submit offers lapsed, NBCC India submitted an addendum to its resolution plan before the IRP and the CoC, thereby objecting to the views of the resolution professional, Anuj Jain stand on the non-compliance of its resolution plan. It amended certain covenants of its resolution plan and said with this, its plan has become compliant with the SC's order and the IBC.

Homeowners said the CoC decision to call another meeting to review NBCC offer is not legal, as per legal opinion taken by them from former Supreme Court judge.  At the same time, some of the private banks have already informed the CoC that they would not accept zero coupon, non-convertible debentures (NCD) of 21 years offered by NBCC as it’s not in line with provisions of code and spirit of the Supreme Court judgement.

"Once the decision has been taken by the CoC regarding non-compliance of the plan of NBCC and thereby putting up the resolution plan of Suraksha Group for voting, in absence of any express provision in the Code, the CoC cannot now, by way of review of its decision, decide to allow the resolution plan of NBCC to be put up for voting. It is a settled principle of law as upheld by different courts, including the  Supreme Court that review of an administrative order is impermissible unless the order is shown to have been passed on irrelevant grounds, totally unjust or contrary to law, or the order was prejudicial to a party and had been passed without giving an opportunity of hearing provided under the relevant statute,” said  former Supreme Court justice, B S Chauhan in his legal opinion to homeowners fighting a pitched battle to get their homes.

The former judge further said the issuance of NCDs to dissenting financial creditors by NBCC is not in line with the  March 24th judgement of the Supreme Court. "'In my view it is abundantly clear from the judgment of the Supreme Court that the dissenting financial creditor cannot be forced to remain attached with the corporate debtor, however, contrary to the said observation, the NBCC plan provides for NCDs to the dissenting creditors meaning thereby that the dissenting financial creditors would remain attached to the corporate debtor by way of subscribing to such debt instrument redeemable in 21 years. Thus, the said treatment is squarely in contravention of the observations of the Supreme Court. The addendum submitted by NBCC same provides a right to the dissenting financial creditors to recover the liquidation value by way of enforcement of guarantee security interest. The same is a right which is otherwise available to the dissenting financial creditors irrespective of treatment being provided in the plan. The same is an independent right available to the dissenting financial creditors and the same cannot be provided in the resolution plan as an option for recovery of the liquidation value," he said.

The Supreme Court had directed on March 24 this year that the requirement of the Code under section 30 (2) (b) can be satisfied only by way of payment of cash or allowing enforcement of security interest. The former judge said the Supreme Court has not permitted the resolution applicant to substitute the requirement of provisions of Code by way of an option which is not even effective at the time of submission of the resolution plan. "Such option which is contrary to provisions of the Code and directions and findings of the Supreme Court can only an option over and above the treatment as required under the provisions of the Code and directions and findings of the Supreme Court judgement for all the 34 per cent dissenting financial creditors permissible under the provisions of the Code and can never substitute the treatment as required under the provisions of the Code and directions and findings of the Supreme Court judgement for all the 34 per cent dissenting financial creditors permissible under the provisions of the Code," he wrote.

With NBCC creating fresh hurdles in the resolution of NBCC India, home owners said they do not want another litigation when SC has made it very clear that the entire process should be wrapped up in 45 days.

"I am waiting for keys for the last one decade and even paid off my entire loan for the flat booked at Jaypee. We just hope this nightmare to end as soon as possible," said a homeowner who booked the flat in 2010 that is still not ready.