The National Company Law Appellate Tribunal on Thursday set aside an NCLT order that directed Jaiprakash Associates Ltd to return 758 acres of land, which was pledged with several banks, to debt-laden Jaypee Infratech.
In May last year, the Allahabad bench of the National Company Law Tribunal (NCLT) had asked JAL to return 758 acres of land to its subsidiary Jaypee Infratech, declaring the transfer of the land as "fraudulent" and "undervalued". It had directed JAL to release and discharge interest created over the patch of land to lenders.
All the banks and JAL had approached the NCLAT against the NCLT order. A stay was granted to all petitioners.
In its judgement, a two-member NCLAT bench, headed by Chairman Justice S J Mukhopadhaya, allowed the pleas of all banks as well as JAL and said that the transactions were genuine and the allegation of undervaluation was not justified.
"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," said the NCLAT.
The appellate tribunal said that "it was not open to the NCLT to hold that mortgage deeds, in question, were made by way of transactions which come within the meaning of ‘fraudulent trading’ or ‘wrongful trading’."
The NCLAT also said that the Allahabad bench of NCLT had passed the order "on the basis of wrong presumption and error of fact held that transactions in question amount to ‘preferential transactions’."
"All the appeals are allowed," said the NCLAT, adding "we set aside the impugned order dated May 16, 2018".
The petitioner banks are: Axis Bank, Standard Chartered, ICICI Bank, SBI, Bank of Maharashtra, United Bank of India, Central Bank of India’, ‘UCO Bank’, ‘Karur Vyasa Bank , L&T Infrastructure Finance Company, ‘Canara Bank, Karnataka Bank, IFCI, Allahabad Bank, Jammu & Kashmir Bank and The South Indian Bank Ltd.
Meanwhile, the NCLAT clarified that it has made no observations against JAL, against whom some lenders have approached the NCLT to initiate insolvency proceedings.
"However, we make it clear that we have not made any observations with regard to the Promoters or Directors in absence of any appeal preferred on their behalf," said NCLAT.
Banks have given loans to Jaiprakash Associates, JP Group's flagship firm against the land bank owned by Jaypee Infratech.