NCLT directs Jaiprakash Associates to continue with single resolution plan option
In a significant development, the National Company Law Tribunal (NCLT), Allahabad Bench, has directed Jaiprakash Associates Limited (JAL) to continue with the process of inviting Expression of Interest (EOI) for the company as a whole, setting aside the option of inviting EOIs for individual business clusters. The order, pronounced on March 6, 2025, comes in response to an application filed by Sunil Kumar Sharma, a suspended director of JAL, challenging the dual-option approach adopted by the Resolution Professional (RP).
Background
Jaiprakash Associates Limited, a prominent infrastructure company, has been undergoing Corporate Insolvency Resolution Process (CIRP) since June 2024. The RP had initially proposed two options for potential resolution applicants:
- Option I: Submission of EOI for JAL as a whole, treating it as a going concern.
- Option II: Submission of EOI for one or more of the 12 business clusters identified by the RP, which included real estate, cement, hospitality, and other segments.
The RP argued that the dual-option approach would maximize the value of the corporate debtor and expedite the resolution process. However, Sunil Kumar Sharma, representing the suspended board of directors, contended that this approach violated the provisions of the Insolvency and Bankruptcy Code (IBC), 2016, and the associated regulations.
NCLT’s Ruling
The NCLT, after hearing arguments from both sides, ruled that the RP’s decision to simultaneously invite EOIs for both the entire company and its individual clusters was not in compliance with the IBC. The tribunal emphasized that the Code mandates a sequential approach: first, the RP must invite resolution plans for the corporate debtor as a whole, and only if no viable plan is received, can the RP then consider selling individual assets or clusters.
The tribunal cited Regulation 36B(6A) of the CIRP Regulations, which states that if no resolution plan is received for the corporate debtor as a whole, the RP may, with the approval of the Committee of Creditors (CoC), invite plans for the sale of one or more assets. The NCLT held that the RP cannot bypass this sequential process by offering both options simultaneously.
Key Observations
- Sequential Process: The NCLT reiterated that the IBC requires a step-by-step approach. The RP must first attempt to resolve the corporate debtor as a going concern before considering the sale of individual assets or clusters.
- Commercial Wisdom of CoC: While the tribunal acknowledged the commercial wisdom of the CoC in maximizing the value of the corporate debtor, it emphasized that such wisdom cannot override the statutory provisions of the IBC.
- Form G: The tribunal ruled that the publication of Form G, which invited EOIs for both the entire company and its clusters, was in violation of the IBC. However, the process for Option I (inviting EOIs for the company as a whole) can continue, while Option II (cluster-wise EOIs) has been set aside.
Implications
The NCLT’s decision has significant implications for the ongoing resolution process of Jaiprakash Associates. The RP will now have to proceed with inviting EOIs for the company as a whole, and only if no viable resolution plan is received, can the RP then consider the sale of individual clusters. This ruling ensures that the resolution process adheres to the statutory framework of the IBC, prioritizing the resolution of the corporate debtor as a going concern.
Next Steps
The RP has been directed to continue with the process of inviting EOIs for JAL as a whole. If no resolution plan is received, the RP may, with the approval of the CoC, publish a fresh Form G inviting EOIs for individual clusters. The tribunal’s decision underscores the importance of adhering to the IBC’s provisions, even in complex cases involving large corporate debtors with multiple business segments.
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