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Jaypee Infra: NBCC bid found non-complaint, voting on Suraksha's plan next week

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State-owned NBCC Limited’s resolution plan was found to be non-compliant with the provisions of the Insolvency and Bankruptcy Code.

State-owned NBCC Limited’s resolution plan was found to be non-compliant with the provisions of the Insolvency and Bankruptcy Code, and will not be considered by the Jaypee Infratech creditors committee, three people aware of the matter told CNBC-TV18. This leaves a sole contender in the fray- a consortium comprising of Suraksha Realty and Lakshdeep Investments.
The committee of creditors, acting on the advice of the insolvency resolution professional of the company- Anuj Jain- will now put the only compliant bid to vote next week, according to people in the know. “We will vote on Suraksha’s plan only, as NBCC’s bid is non-compliant. The voting will begin on May 24, and last until May 27,” said a financial creditor to the company. CNBC-TV18 was the first to report the development on May 20.
NBCC’s bid was found non-compliant as interpreted by Supreme Court’s recent Jaypee Kensington judgment with regards to payment options for dissenting creditors, said one of the people quoted earlier.
“The dissenting financial creditors (“DFCs”) shall be allowed to enforce following security interest forming part of Institutional Financial Creditors Security Interest (“LFD Security Interest”) only to the extent of liquidation value owed to them: LFD Security Interest; Guarantee Security Interest; and Promoter Security Interest. The Resolution Applicant has further provided that in the unlikely event that the entire LV payable to DFCs is not realized from enforcement of the aforesaid security interest (exhaustion of all possible legal remedies), then the shortfall (if any) shall be paid out of the DFC NCDs (i.e. issuance of non-convertible Debentures by Expressway SPV to JIL up to Rs 2000 crore as per Annexure V of the Resolution Plan) and/or by making available additional lands of the Corporate Debtor (i.e. lands in addition to 1903 acres), mandatorily in the following order of priority- (i) DFCs NCDs up to Rs. 2000 Cr) and (ii) additional lands of JIL,” NBCC had proposed.
“In view of the findings given by the Hon’ble Supreme Court, the Resolution Applicant’s proposal offering DFCs NCDs to DFCs for payment of LV is not compliant with the provisions of the Code. It is also pertinent to mention that DFCs NCDs are proposed to be issued of Expressway SPV and not from the Corporate Debtor. Moreover, the redemption period for NCDs is proposed as 21 years. Regulation 38(1)(b) of CIRP Regulations specifies that DFCs shall be paid before any payment is made to DFC,” the IRA concluded in his note to the creditors committee.
CNBC-TV18 has reviewed the document written by the Insolvency Resolution Professional citing reasons why NBCC’s bid was non-compliant with the provisions of the insolvency law.
This is the fourth round of bidding for Jaypee Infratech, almost four years after the company was first admitted into the bankruptcy court in August of 2017. More than 20,000 homebuyers have been left in the lurch, with resolution delayed.
Suraksha group’s latest resolution plan proposed to give 2,651 acres of land parcels to financial creditors of the company. This includes 1,486 acres of land earmarked for dissenting lenders, CNBC-TV18 had earlier reported. The land-debt swap is expected to settle Rs 7116 crore of debt, according to the plan. Suraksha group also proposes to infuse Rs 3,000 crores as working capital into the company and complete the projects over a 42 month period. It has proposed to pay Rs 38.38 crores to FD holders, Rs 40 lakhs to operational creditors, and Rs 65 crores for refund seekers. Separately, land worth Rs 400 crores at circle rate is proposed to be transferred by the consortium in trust for the welfare of homebuyers. It has also proposed to pay homebuyers a penalty of Rs 5 per square foot per month in case of a delay in the completion of the project beyond stated deadlines.
NBCC, on the other hand, had offered 1,903 acres of land to financial creditors in lieu of a debt settlement of Rs 9,782 crores. This included 377 acres earmarked for dissenting creditors. NBCC offered an additional 200 acres for assenting creditors, besides the Yamuna Expressway road project that connects Noida and Agra in Uttar Pradesh. It had proposed to transfer over 85 percent of its stake in the road projects to banks and financial institutions. It had also offered a delivery timeline of 42 months to complete the projects and a delay penalty of Rs 5 per sq ft per month.
Homebuyers CNBC-TV18 spoke to expressed relief at the outcome of the last creditors meeting held on Thursday, and are hopeful of a resolution soon. However, while the 21,000 odd homebuyers have a chance of getting their flats or refunds under IBC, about 2,018 homebuyers who had not filed any claims with the IRP will get nothing at all. Many of these homebuyers are senior citizens who could not be reached, or found the process too complex and thus missed out.
In December 2019, the CoC had approved NBCC’s resolution plan with 97.36 percent votes in favour under the third round of the bidding, and this was later approved by NCLT in March 2020. However, the Supreme Court later overturned the order and called for a new round of bids. On March 26, 2021, the apex court had given 45 days to complete the resolution plan, which has already lapsed.
Jaypee Infratech is facing claims of Rs 9,782 crore from institutional financial creditors, Rs 12,711 crore from homebuyers and Rs 464 crore from operational creditors under IBC.

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