Tracing the Insolvency Resolution of Jaypee Infratech Limited.

It has been famously expressed that “There is no question that bankruptcy is the most critical indicator of the culture of a legal system in its business law.” Therefore any attention to a bankruptcy regime requires nuance and the instant case would show the intricacies attached with the Corporate Insolvency Resolution Process of the Jaypee Infratech Limited.

The insolvency resolution of the Jaypee Infratech Limited is one of the most discussed resolution of an entity after the Essar Steel and Bhushan Steel. This case has garnered much attention because of the involvement of the homebuyers which resulted in the amendment of the Insolvency and Bankruptcy Code, 2016 two times i.e in 2018 and 2020. But this a topic of discussion another time. Apart from the homebuyers, the involvemnet of a statutory authority namely Yamuna Expressway Industrial Development Authority (YEIDA) also made the resolution a complex process which I will address below.

In this post I would explore the insolvency resolution of the Jaypee Infratech Limited which took almost seven years to get completed. Throughout this period, several judgements were rendered enriching the insolvency jurisprudence which I will also discuss in this post.

Background:

Yamuna Expressway Industrial Development Authority , earlier named as Taj Expressway Industrial Development Authority was constituted under Notification issued under Uttar Pradesh Industrial Area Development Act, 1976 (“the 1976 Act”). This name was changed from Taj Expressway Industrial Development Authority to Yamuna Expressway Industrial Development Authority (“YEIDA”) vide notification dated 11th July, 2008. The 1976 Act was to provide for the constitution of an Authority for the development of certain areas in the State into industrial and urban township and for matters connected therewith. The object and function of the YEIDA included, to acquire land in the industrial development area; to prepare a plan for the development of the industrial development area; and to allocate and transfer either by way of sale or lease or otherwise plots of land for industrial commercial or residential purposes and such other land uses as per master plan etc.

In exercise of its function under the 1976 Act, the Taj Expressway Industrial Development Authority (“Authority) entered into a Concession Agreement executed on 07.02.2003 between Authority and Jaiprakash Associates Limited (“JAL”) (then known as Jaiprakash Industries Limited) for construction of six-lane 160 km long super expressway, connecting NOIDA and Agra along with service roads and allied facilities. Under the Concession Agreement, Concessionaire had to bear all the costs of acquiring and developing of the land leased to it. In return, it was granted the rights to collect toll on the Yamuna Expressway for 36 years and to commercially exploit the land for development, i.e., 6,177 acres of land abutting the Yamuna Expressway. The land, which was leased to the Concessionaire had been acquired by the YEIDA between year 2007-2014. The Concession Agreement was assigned to the Corporate Debtor (CD) – Jaypee Infratech Ltd. on 19.10.2007.

There were several acquisitions of land by two other Industrial Development Authority constituted under the 1976 Act, i.e. NOIDA and Greater Noida. Acquisitions made by NOIDA and Greater Noida were challenged before the Allahabad High Court by means of several writ petitions. The Allahabad High Court vide its judgment dated 21.10.2011 in Gajraj Singh vs. State of Uttar Pradesh decided all the writ petitions upholding the acquisition, except for acquisitions in few villages, where no development was carried out by the NOIDA. Full Bench of the High Court, although found the invocation of urgency clause not in accordance with law, but to balance the equities, of the farmers, whose lands were acquired and the developments carried out by NOIDA, directed for payment of additional compensation to the farmers of 64.7%, with certain other reliefs. The judgment of Allahabad High Court in Gajraj Singh came to be challenged before the Hon’ble Supreme Court. The Hon’ble Supreme Court vide its order dated 14.05.2015 in Savitri Devi vs. State of Uttar Pradesh and Ors. – (2015) 7 SCC 21 affirmed the judgment of Allahabad High Court directing for additional compensation of 64.7%.

After the decision of Allahabad High Court in Gajraj Singh, other farmers, whose land was acquired by YEIDA also begun agitation and demanded additional compensation. In order to quell the farmers’ agitation and demands, the State of UP constituted an Expert Committee, under the Chairmanship of Shri Rajendra Chaudhary, which submitted a Report to the State Government. The State Government vide Government Order dated 29.08.2014 issued a policy, providing for payment of additional compensation as ‘no litigation incentive’ to farmers who withdrew their challenge to the acquisitions.

The YEIDA accepted the UP Government Order and resolved to implement it through its Resolution dated 15.09.2014. After the above Government Order, YEIDA demanded additional compensation from the Lessees of land including the Corporate Debtor. The Corporate Debtor aggrieved by the demand made by YEIDA initiated arbitration proceedings in accordance with Concession Agreement. An arbitration award was made in favour of the Corporate Debtor, which award was challenged by YEIDA under Section 34 of the Arbitration and Conciliation Act, 1996, which proceedings still remain pending.

THE CIRP

It all began when an Application under Section 7 of the IBC was filed by IDBI Bank against the Corporate Debtor before the National Company Law Tribunal, Allahabad Bench. An order dated 07.08.2017 was passed by NCLT Allahabad Bench admitting Section 7 Application. Shri Anuj Jain was appointed as IRP. On 12.08.2017, the IRP invited the creditors to submit their claims. On 23.08.2018, Yamuna Expressway Infrastructure Development Authority (YEIDA) submitted its claim in Form-B (Proof of Claim by Operational Creditors except workmen and employees) of Rs.6111.591 crores. This specific mention of YEIDA is necessary to understand the whole process.

The Homebuyers of Jaypee Infratech Limited filed a writ petition in the Hon’ble Supreme Court and the apex court vide order dated 09.08.2018 in Chitra Sharma & Ors. vs. Union of India – Writ Petition (C) 744/2017 directed reconstitution of Committee of Creditors (“CoC”) and to include the Homebuyers.

The IRP applied for exclusion of time period and by order dated 06.05.2019, the NCLT Allahabad Bench directed the IRP and CoC to proceed with the CIRP subject to outcome of the pending applications. An Appeal was filed by IDBI Bank before NCLAT, challenging the order dated 06.05.2019. The Appellate Tribunal passed an order on 30.07.2019 granting certain exclusion of time and IRP and CoC were directed to call for and consider fresh Resolution Plans, which order was challenged by JAL before the Hon’ble Supreme Court. On 06.11.2019, the Hon’ble Supreme Court in the appeal filed by JAL, directed the completion of CIRP within 90 days. It was further directed that only revised Plans of Suraksha and NBCC should be invited and considered by the CoC.

Revised Resolution Plans were submitted and NBCC Resolution Plan was approved by 97.36% vote share of the CoC. An Application was filed by the IRP on 19.12.2019 before the NCLT Allahabad Bench, seeking approval of the Plan. The Principal Bench of NCLT, vide order dated 13.01.2020 transferred the proceedings from NCLT Allahabad Bench to NCLT Principal Bench.

On 23.01.2020, YEIDA filed an Application before the Adjudicating Authority, challenging the treatment of its claim and raising objections against the First Plan. On 03.03.2020, the First Plan was approved by the Adjudicating Authority with certain modifications. The approval of Plan order was challenged by the NBCC by way of an Appeal before the NCLAT. On 22.04.2020, NCLAT refused to grant stay on the approval order. Various Homebuyers/ Associations challenged the order dated 22.04.2020 before the Hon’ble Supreme Court. The Hon’ble Supreme Court withdrew all the Appeals pending before the NCLAT and heard the matters and by a detailed judgment dated 24.03.2021, in Jaypee Kensington Boulevard Apartments Welfare Association vs. NBCC (India) Ltd. – Civil Appeal No.3395/2020 set aside the approval order, extended the time period for completion of the Corporate Debtor’s CIRP and directed Suraksha and NBCC to submit revised Resolution Plans in conformity with its observations and findings in the Jaypee Kensington judgment. The Hon’ble Supreme Court in its judgment dated 24.03.2021, also dealt with claims of YEIDA.

Revised Resolution Plans were submitted by Suraksha and NBCC with addendum. The Resolution Plan of Suraksha was approved by CoC in June 2021 with 98.66% votes. The IRP filed an IA No.2836 of 2021 before the Adjudicating Authority seeking approval of Suraksha Resolution Plan. YEIDA filed an IA No.3306 of 2021 objecting to Suraksha Resolution Plan on various grounds. The objections by YEIDA were replied by IRP and Suraksha. Suraksha also filed its rejoinder to the objections raised by YEIDA

It is also relevant to note that against Government order dated 29.08.2014, directing the additional compensation of 64.7%, the farmers, whose land were acquired by YEIDA writ petitions in the High Court were filed by several allottees including the Corporate Debtor, which writ petitions were allowed by Allahabad High Court vide its judgment dated 28.05.2020 by quashing the Government Order dated 29.08.2014. YEIDA aggrieved by the judgment dated 28.05.2020, filed Civil Appeal Nos.4178-4197 of 2022 – Yamuna Expressway Industrial Development Authority Etc. vs. Shakuntla Education and Welfare Society & Ors. Etc. – (2022) SCC OnLine SC 655, which was allowed by the Hon’ble Supreme Court vide its judgment dated 19.05.2022. The Hon’ble Supreme Court in the above judgment upheld the Government Order dated 29.08.2014 and held that State Government order was in larger public interest taking care of the concerns of the allottees as well as the farmers.

The Adjudicating Authority heard the learned Counsel for the YEIDA, IRP, SRA, CoC, JAL, Homebuyers and others and by judgment dated 07.03.2023, approved the Suraksha Resolution Plan. The objections filed by the YEIDA were dismissed. In the impugned order dated 07.03.2023, the objections filed by YEIDA were dealt with in Part-VIII – IA No.3306/PB/2021 under the heading ‘Objections of YEIDA’ from paragraphs-51 to paragraph-92 of the judgment. In the Resolution Plan with regard to claim towards External Development Charges, the SRA has proposed payment of an amount of Rs.10 lakhs, against the admitted claim of Rs.6,111.591/- crores, which allocation was upheld by the impugned order. Coming to the issue of claim of additional compensation payable to farmers, the Adjudicating Authority upheld the allocation of Rs.10 lakhs to the YEIDA. The payment of Rs.10 lakhs towards the additional compensation, which was treated to be contingent liability was held to be sufficient, YEIDA having been held to be Operational Creditor, whose liquidation value being Nil. The Adjudicating Authority also rejected the objection of YEIDA that it is a Secured Creditor and held that it is only Operational Creditor and entitled to be treated as Operational Creditor according to the Scheme of Code.

The Completion of the CIRP

The YEIDA aggrieved by rejection of its objection raised to the Resolution Plan appealed the order dated 07.03.2023 under Section 61 to the NCLAT. The NCLAT vide its order May 24, 2024 allowed the appeal and thus held that YEIDA is a secured operational creditor by virtue of Section 13 and 13A of the 1976 Act. The NCLAT also cited Greater NOIDA vs Prabhajit Singh to bolster its argument and held that it must be treated at par with other secured financial creditors. The claims related to additional compensation award must be given to it. During this appellate proceedings, the SRA, Suraksha Reality accepted this observations and conceded to pay the 1400 crore rupees to YEIDA.

So, it was in this way that a corporate insolvency resolution which began in 2017 came to a conclusion in 2024 with an order of the NCLAT.

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