Relief To Home Buyers, NCLAT Upholds Resolution Plan Outlining Provisions For Completion Of 96 Residential Towers By Jaypee Infratech Pending Since 2011

The NCLAT recently upheld a Resolution Plan which outlined provisions for the completion of approximately 96 residential towers that had remained under construction since 2011 by Jaypee Infratech Limited. The homebuyers' plea revolved around the delay in the implementation of the Resolution Plan and their earnest desire to acquire possession of their units. Brief Facts: Jaypee Infratech Limited (“JIL”) was formed as a Special Purpose Vehicle (“SPV”) for a project involving the development of an expressway under a Concession Agreement with Taj Expressway Industrial Development Authority, later renamed Yamuna Expressway Industrial Development Authority (“YEIDA”). Financing for the project was secured from a consortium of banks, including IDBI Bank. The initiation of the Corporate Insolvency Resolution Process (CIRP) occurred when IDBI Bank filed a Section 7 application against JIL, which was admitted by the National Company Law Tribunal (NCLT), Allahabad Bench. Certain people (“Homebuyers”), who had bought homes from JIL, filed various writ petitions in the Supreme Court by homebuyers seeking protection of their interests. The Supreme Court, in the case of Chitra Sharma & Ors. vs. Union Of India & Ors., ruled that the promoters of JIL cannot participate in the Resolution Process under Section 29A of the Insolvency and Bankruptcy Code. Consequently, the CIRP process was revived by the Supreme Court under Article 142 of the Constitution, with directions to consider Resolution Plans only from Suraksha Realty Limited and Lakshdeep Investment and Finance Private Limited (“Suraksha Realty”) and National Buildings Construction Corporation (“NBCC”). Suraksha Realty submitted its Resolution Plan, which was subsequently approved by the Committee of Creditors (CoC). However, objections were filed by Jaiprakash Associates Limited (“JAL”), the holding company of JIL and Manoj Gaur, the erstwhile Managing Director of JIL, against Suraksha Realty's Resolution Plan, in the National Company Law Tribunal (“NCLT”). The NCLT approved Suraksha Realty's Resolution Plan, leading to the filing of appeals by JAL and Manoj Gaur in the National Company Law Appellate Tribunal (“NCLAT”). The appeal was filed on various grounds including that the claims of the Income Tax Department and YEIDA were not properly dealt with in the resolution plan. The resolution plan violated the provision of Section 30(2)(e) of the Insolvency and Bankruptcy Code, 2016 in removing the right of subrogation to the guarantors. Further, the NCLT's approval of reliefs and concessions granted to Suraksha was beyond its jurisdiction and the Resolution Plan failed to consider the 758 acres of land belonging to JIL. Observations of the NCLAT: Regarding the grounds concerning the Income Tax Department's claim, NCLAT determined that JAL lacked the entitlement to contest issues related to the dues of the Income Tax Department, as those matters had already been concluded in the department's appeal. NCLAT disposed of the Income Tax Department's appeal and an appeal challenging that decision was pending before the Supreme Court. In regards to the concerns raised regarding the claim of the YEIDA, the NCLAT ruled that YEIDA had initiated a separate appeal against the order endorsing the resolution plan, and their rights would be adjudicated in their pending appeal before the NCLAT. Regarding the extinguishment of the right to subrogation of guarantors, the NCLAT reaffirmed the well-established legal principle that post-approval of a resolution plan, both personal and corporate guarantors forfeit their right of subrogation, especially when, as in this case, the right of subrogation is explicitly nullified. Furthermore, the NCLAT concluded that the NCLT had acted within its jurisdiction in granting reliefs and concessions to Suraksha Realty and that the resolution plan comprehensively addressed the 758 acres of land owned by JIL. Consequently, the NCLAT declined to intervene with the NCLT's order. The resolution plan outlined provisions for the completion of approximately 96 residential towers that had remained under construction since 2011. Thus, the NCLAT's decision went in favour of the homebuyers. Case Title: Jaiprakash Associates Ltd. vs Jaypee Infratech Ltd. and Others Case No.: Company Appeal (AT) (Insolvency) No. 548 of 2023 & I.A. No. 2643, 3702 of 2023 Counsel for the Appellants: Mr Krishnan Venugopal, along with Mr Anupam Chaudhary, Mr Sarvesh Mehra, Mr Krishnan Aggarwal and Mr Avinash Mathews Counsel for Suraksha Realty: Mr Krishnendu Dutta, along with Mr Mahesh Agarwal, Ms Geetika Sharma, Mr Eshna Kumar, Mr Sagar Bansal, Ms Varsha Himatsingka and Mr Rajat Sinha Counsel for Homebuyers: Mr Amit Kumar Mishra, Ms Mitakshara Goyal, Mr Akshat Hansaria, Mr Shubham Raj and Mr Shivam Singh Click Here To Read/Download Order

Relief To Home Buyers, NCLAT Upholds Resolution Plan Outlining Provisions For Completion Of 96 Residential Towers By Jaypee Infratech Pending Since 2011

Smita Singh

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