NCLAT upholds insolvency order against Jaiprakash Associates
- As of 10 November, the company reported provisional outstanding borrowings of ₹55,525.89 crore. Admitted claims stand at ₹57,190 crore, making it one of India’s largest unresolved insolvency cases.
In a significant blow to Jaiprakash Associates Ltd (JAL), the debt-ridden parent company of the distressed Jaypee Group, the National Company Law Appellate Tribunal (NCLAT) on Friday dismissed its appeal challenging the company's admission into insolvency.
This decision affirms the National Company Law Tribunal’s (NCLT) 3 June order, which admitted JAL into insolvency proceedings based on a plea by ICICI Bank.
The NCLAT bench, comprising chairperson Justice Ashok Bhushan and technical members Barun Mitra and Arun Baroka, upheld the NCLT’s decision, saying, “After answering all the issues, we are of the view that no grounds have been made out to interfere in the NCLT order dated 3 June.”
The insolvency proceedings stem from a ₹1,269 crore default by JAL on loans extended by ICICI Bank. Between 2011 and 2015, ICICI Bank had sanctioned loans amounting to ₹4,750 crore under six facilities, which JAL failed to repay.
JAL attributed its financial distress to delays in government approvals, prolonged land acquisition litigation for the Yamuna Expressway project, and policy changes. However, these arguments failed to convince the NCLT, which initiated the Corporate Insolvency Resolution Process (CIRP) and dismissed JAL’s settlement offer. The proposal had included an upfront payment of ₹200 crore and a commitment to repay ₹16,000 crore within 18 weeks.
JAL’s financial woes are staggering. As of 10 November, the company reported provisional outstanding borrowings of ₹55,525.89 crore. Admitted claims stand at ₹57,190 crore, making it one of India’s largest unresolved insolvency cases, second only to Videocon Industries’ ₹65,000 crore debt.
The State Bank of India (SBI) is JAL’s largest creditor, with claims of ₹15,500 crore, followed by ICICI Bank at ₹10,500 crore, which has been designated as the lead lender.
Settlement efforts
JAL has made multiple attempts to avoid bankruptcy. Last week, the company proposed a ₹16,000-crore settlement plan, including an upfront payment of ₹4,000 crore, to be disbursed nine months after lenders’ approval. However, this plan failed to gain traction.
Earlier in June, lenders rejected a modified one-time settlement proposal that included a higher upfront payment and the sale of JAL’s cement assets to address its debt burden. Similarly, a ₹10,000-crore bid by the National Asset Reconstruction Co. of India Ltd (NARCL) in March-April was deemed unsatisfactory by lenders.
Over the years, JAL has sold several cement plants in efforts to reduce its mounting debt, but these measures have proven insufficient.
During insolvency proceedings, the interim resolution professional assured the NCLAT that JAL’s 25,000 employees and ongoing projects would remain unaffected, with the company continuing to operate as a going concern. Despite these assurances, Sunil Kumar Sharma, a suspended director of JAL, sought a stay on the insolvency process, arguing that it could jeopardize critical infrastructure projects in India and abroad.
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First Published:6 Dec 2024, 07:02 PM IST
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