Jaypee Infratech Lenders To Vote On Suraksha Plan After Rejecting NBCC

Financial creditors to Jaypee Infratech Ltd. deemed a resolution plan by government owned NBCC Ltd. as non-compliant with the provisions of the Insolvency and Bankruptcy Code, two people with direct knowledge of the matter confirmed.

The committee will now only move ahead with a vote on a rival plan submitted by Suraksha Asset Reconstruction Company Ltd., the people said. The committee of creditors followed advice by the resolution professional Anuj Jain to come to a decision on the two bidders.

On Wednesday, BloombergQuint reported that Suraksha ARC’s plan had scored higher in the evaluation matrix than NBCC’s.

Jain declined to comment. NBCC could not be reached for a comment. An email sent to IDBI Bank Ltd. wasn’t immediately answered.

NBCC’s plan was deemed non-compliant due to the way it had structured payments to dissenting creditors.

As part of its plan, NBCC had proposed to allow dissenting creditors to enforce securities to the extent of liquidation value owed to them. But if the enforcement of security did not cover the liquidation value, NBCC proposed to issue non-convertible debentures with a 21-year tenor. The NCDs would be issued by a special purpose vehicle which holds the Yamuna Expressway, as per the plan. The proposal also included promoter guarantees provided by Jaiprakash Associates Ltd. as securities, which could be enforced by the dissenting financial creditors.

The resolution professional, in a recommendation note issued on May 20, said that these proposals are not in compliance with existing rules as NBCC does not have legal rights to enforce promoter guarantee and issue securities against the Yumana Expressway project. BloombergQuint has reviewed the note.

In comparison, Suraksha ARC’s plan allowed dissenting financial creditors to enforce securities up to the liquidation value owed to them, without any conditions. It, however, sought relief on multiple claims filed by the Yamuna Expressway Industrial Development Authority and compensation to farmers who were impacted by the construction of the expressway.

The resolution professional found that the ARC’s resolution plan was in compliance with the IBC. In terms of the reliefs sought by the bidder, the resolution professional found that the plan promises to implement the resolution scheme, whether the relief is given or not.

The two resolution plans were submitted on May 18 after multiple revisions over the last few weeks.

To be sure, a plan receiving approval from the committee of creditors or majority votes from financial creditors and homebuyers is not enough for the resolution to be implemented. Previously, lenders had approved a resolution by NBCC, which was then rejected by the Supreme Court.

The bankruptcy process at Jaypee Infratech has been underway since June 2017, when the Reserve Bank of India had created a list of 12 large corporate accounts for immediate insolvency proceedings. This is now the fourth round of bids for resolution of the company.