In what could bring relief to thousands of homebuyers stuck with incomplete houses in Jaypee projects, the government-backed resolution plan is expected to be submitted before the Supreme Court shortly, sources told Moneycontrol.
"We have been directed by the court to come up with a comprehensive resolution plan and it is in the works. It is expected to be submitted before the Supreme Court soon," sources said.
The government is keen to resolve the issue. It is with this intention that amendments were made to the Insolvency and Bankruptcy Code recently. By allowing for mergers and demergers and treating statutory demands as operational creditors, two deal-breakers in the resolution plan submitted by NBCC earlier have been dealt with by the recent amendments, sources said.
The third deal-breaker to do with unsold inventory is likely to be addressed in the fresh resolution plan that the government's construction arm - NBCC - is expected to submit before the Supreme Court soon, sources said.
NBCC had earlier agreed to reduce the value of unsold inventories offered to lenders by 25 percent. It had proposed that it would reduce the value of unsold inventories offered to lenders to Rs 1,300 crore from earlier Rs 1,750 crore but banks were reluctant to acquire over 2000 unsold flats as proposed by NBCC in its previous offer and the plan did not go through.
The IBC amendments in August allowed for mergers and demergers. NBCC in its resolution plan submitted earlier had proposed creation of a separate company for the Yamuna Expressway to unlock revenue.
NBCC participated in the second round of bidding for the stalled projects. It proposed infusion of Rs 200 crore as equity and transfer of 950 acres of land worth Rs 5,000 crore to the banks towards settling claims of Rs 23,723 crore. It also promised to complete all the 24,000 units by July 2023.
But, the offer came with several conditions, including a demand to extinguish an estimated tax liability of Rs 33,000 crore over a period of 30 years arising out of the transfer of land parcels from Yamuna Expressway Industrial Development Authority to Jaypee Group and seeking permission from YEIDA for a business transfer. NBCC's bid was rejected due to these "rigid conditions" by the committee of creditors.
The IBC amendment has made it clear that comprehensive corporate restructuring is permitted through merger, amalgamation and demerger under a resolution plan. Earlier, it was not clear if the resolution plans could include restructuring provisions such as mergers, demergers or amalgamations, IBC experts told Moneycontrol.
The second deal breaker (in the NBCC resolution plan submitted earlier) was to do with the income tax demand of Rs 33,000 crore. The recent IBC amendment has made it clear that income tax demand and demand from authorities should be dealt like any other operational creditor. Post the amendments, there is now clarity that any statutory demand is an operational creditor. This problem too seems to have been resolved, experts said.
The amendment also states that bankruptcy resolution or liquidation arrived at under IBC is binding on central, state and local governments, to whom the bankrupt firm may owe dues. This will prevent state authorities including income tax officials from questioning a rescue plan adopted in a court-monitored process.
Under the IBC’s waterfall mechanism, during liquidation debts to secured financial creditors and workmen are to be paid fully before payments to unsecured financial creditors and operational creditors, experts said.
On September 5, NBCC had agreed to submit a revised proposal to take over the embattled company’s unfinished units.
A bench of justices AM Khanwilkar and Dinesh Maheshwari directed NBCC to submit its proposal in a sealed envelope within three weeks. In the meantime interim arrangement would continue, it had said.
On September 3, the bench had said that "We are issuing notice to the NBCC returnable by Thursday. Let us see what it has to offer. In view of the suggestions made we would like to know from the NBCC whether it would be in a position to submit a revised plan to address the aspirations of various stakeholders."
The bench said it will first look what NBCC has to offer and only then it may look into Jaypee group's fresh proposal.
"We will look into it but only after this (NBCC offer) option is exhausted. We will consider all aspects but too many offers will complicate the case. Although the best way is winding up the company but many of you don't want any such steps to be taken. We think first let NBCC give its proposal," the bench had said.
During the hearing, the Centre had told the court that it would waive taxes, running into crores, due to Jaypee Infratech, if NBCC was to take over the embattled real-estate firm.
Additional solicitor general Madhavi Divan had said on September 3 that the government has had three meetings with the stakeholders. The Centre was willing to give tax concession to Jaypee Group and enhance farmers’ compensation, provided NBCC was allowed to complete the projects, Divan had said.
During the same hearing, Jaypee Group had told the court that it should also be given a chance to revive Jaypee Infratech and was willing to pay back its banks. It also promised to complete all the 27 projects within three years.
On August 22, the court had ordered status quo for a week on the insolvency proceeding after the Jaypee Group challenged an order of the National Company Law Appellate Tribunal (NCLAT) that allowed fresh bidding for Jaypee Infratech. The NCLAT had barred the parent company, Jaypee Associates, from bidding.
A group of homebuyers moved the apex court in 2017, saying around 23,000 people had booked flats and were paying installments, but their homes were not ready.
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