NCLAT quashes NCLT order directing return of land to Jaypee Infratech

Jaiprakash Associates was ordered to return 858 acres to Jaypee Infratech

The National Company Law Appellate Tribunal (NCLAT) on Thursday set aside a National Company Law Tribunal’s (NCLT) Allahabad Bench’s May 18, 2018, order, which had directed Jaiprakash Associates (JAL) to return a land bank of 858 acres to Jaypee Infratech (JIL). The land pool, which belonged to JIL, was pledged by JAL with various banks as collateral for the loans it took.

The NCLT Allahabad Bench had on May 18 last year set aside the deal and said the transaction was “fraudulent” and “undervalued”. It had then also asked the parent company JAL to release and discharge the interest created over the patch of land to lenders.

Challenging the NCLT order, a consortium of banks, including the State Bank of India, Axis Bank, ICICI Bank, among others, as well as JAL had subsequently approached the NCLAT, which on Thursday said “the transactions were made in the ordinary course of business”.

“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,” a two-member Bench said.

In its judgment, the appellate tribunal also said it was not open to the NCLT to hold that the said mortgage deeds were made by way of transactions which come within the meaning of fraudulent trading or wrongful trading. JAL had created these mortgages to secure a total loan of Rs 20,510 crore.

On Thursday, JAL separately approached the Supreme Court against a NCLAT’s July 30 order that barred it from placing fresh bids for JIL. The top court will hear the case on Friday. The NCLAT had on July 30 extended the Corporate Insolvency Resolution Process (CIRP) period of Jaypee Infratech for 90 days during which fresh bids for the company can be submitted. Though fresh bids can be submitted by NBCC, Adani Infrastructure and Development, among others, the NCLAT had said JAL would not be eligible to place new bids.

JIL was taken to the NCLT by an IDBI Bank-led consortium for failing to repay debt worth Rs 24,000 crore. In the first round of insolvency proceedings conducted last year, the Rs 7,350-crore bid of Lakshdeep, part of Suraksha Group, was rejected by lenders. 

In October 2018, the RP of the company started a second round of bidding to revive the firm.