Max Square Exposé

Max Square www.infralive.com 19 Infra LIVE June 15, 2022 JAL under which it took over a few parcels of lands from JIL and reduced the debt of JAL to that extent. The modus operandi fol- lowed in this case is as follows. On March 23, 2017, Axis Trust- ees Services Ltd (ATSL), JIL and its holding company Jai Prakash Associates Ltd (JAL) executed released deed of registered mort- gage of 10.84 acre land. On March 24, 2017, a charge deed was exe- cuted for a sub-set of land parcels. On March 25, 2017, a release deed was executed to release charge of the following three plots at Sector 129, Noida: (i) C3-C (2.60 acre), (ii) C3-B1 (1.96 acres), and (iii) C3-B2 (1.96 acres), with a condi- tion that JIL/ JAL will execute a sub-lease deed in favour of Axis Bank. JIL/JAL executed the sub- lease deed on the same date. The extraordinary hurry of Axis Bank to adjust the outstanding amount of loans of JAL during 23- 25 March 2017 was primarily aimed to get out of the impending Corporate Insolvency Resolution Process (CIRP) under IBC 2016 as their dues would occupy a lower rank in the list of priority of credi- tors under Section 53 of the Code, if the CIRP of the Corporate Debtor JIL were to commence. Thus, Axis Bank acquired these three prime commercial plots under patently questionable cir- cumstances from JIL in March 2017, well after declaration of bank loans of JIL as NPA in 2015- 2016 and commencement of the operation of IBC 2016 which came into effect from December 1, 2016. It was evident that Axis Bank as a lender had deliberately taken pre-emptive action to protect its interest as IBC Act had already come into operation in December 2016 and there was every likeli- hood that Jaypee Group would go under insolvency proceedings as their loans had become NPA more than a year earlier. Since JIL came under insolvency proceedings with effect from August 9, 2017, this transaction of corporate Debtor JIL to sub-lease the plot of land to Axis Bank was within the look-back period of one year pre- ceding the date of commencement of CIRP and therefore covered under Sections 44 & 46 of IBC 2016. JIL taken to NCLT in August 2017 In August 2017, the IDBI Bank, the prime lender to JIL, petitioned the National Company Law Tribu- nal (NCLT), Allahabad to initiate insolvency proceedings against JIL for defaulting on Rs 526 crore loans. NCLT Allahabad admitted the IDBI Bank's application under Insolvency Bankruptcy Code (IBC) against corporate debtor JIL and initiated the Corporate Insolvency Resolution Process (CIRP) under IBC with effect from August 9, 2017 and appointed an Insolvency Resolution Professional (IRP). NCLT further directed commence- ment of moratorium under Sec- tion 14 of the IBC with immediate effect, until completion of CIRP process or until the approval of resolution plan under sub-section (1) or order for liquidation of Cor- porate Debtor JIL under Section 33. The matter has since been heard and decided at various lev- els - by NCLT, NCLAT and the Supreme Court several times. The apex court has passed several orders on the subject. However, the CIRP has not yet been com- pleted. Further the resolution plan submitted by the selected bidder has not yet been approved. There- fore, the moratorium on JIL under Section 14 of IBC still continues. It is therefore evident that there is moratorium for prohibiting all of the following, namely: - a. the institution of suits or con- tinuation of pending suits or proceedings against the corpo- rate debtor (JIL) including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority; b. transferring, encumbering, alienating or disposing off by the corporate debtor (JIL) any of its assets or any legal right hit by Section 43 of the Code and the Adjudi- cating Author- ity, having rightly held so, had been justi- fied in issuing necessary directions in terms of Sec- tion 44 of the Code in rela- tion to the transactions concerning Property Nos. 1 to 6. NCLAT, in our view, had not been right in interfering with the well- considered and justified order passed by NCLT in this regard. In the instant case, Jaypee Asso- ciate Ltd (JAL), the holding company of Jaypee Infratech Ltd (JIL) had bor- rowed money from a host of bankers including Axis Bank and individuals flat allottees of JAL/ JIL from whom JAL/ JIL took substantial booking amounts but did not deliver them the flats. There were hundreds of deposi- tors also who had invested their life-savings in the Jaypee group but were not getting their refunds/ interests. Recently, the Supreme Court has held that homebuyers are also to be treated as financial creditors at par with secured lenders such as banks. On September 30, 2015 LIC of India Ltd had declared the bank loans of JIL as non-performing assets (NPA), and by March 31, 2016, several other banks too had declared the bank loans of JIL as NPA. Sensing trouble in realising its dues, Axis Bank entered into a debt-swap arrangement with JIL/