Significance of Jaypee Infratech insolvency resolution process
The approval of Suraksha Realty’s resolution plan for Jaypee Infratech by NCLT marks the end of a long, tortuous plan that saw unfortunate 20,000 homebuyers waiting for almost six years for the final closure of the case.
The corporate insolvency resolution plan of Jaypee Infratech was a landmark case that saw the Supreme Court going out of the way to force the authorities to include create a new category of financial creditors – the homebuyers. Before that homebuyers were categorised as operational creditors.
It was also landmark case in a sense that Jaypee Infratech was one of the first set of large NPA cases that were sent for resolution under the newly implemented Insolvency and Bankruptcy Code in 2017. While most other cases got resolved within a couple of years, Jaypee Infratech remained unresolved for over five years.
MS Sahoo, who was at the helm of insolvency regulator for the fist five years, shared his view on the case after the news of the NCLT approval came.
“This insolvency resolution journey spanning nearly six years has been the most tortuous and torturous,” says Sahoo in a LinkedIn post.
He goes on: “This was one of the first set of 12 large cases initiated by banks at the direction of the Reserve Bank of India. This necessitated amendment of the statute a few times and amendment of regulations several times to facilitate resolution. One of the amendments treated home buyers as financial creditors, making them eligible to sit on the committee of creditors to decide matters for themselves. This travelled to the Apex Court several times, often requiring the exercise of powers under Article 142 of the Constitution for doing complete justice. This retrieved 758 acres of land valued at over Rs.5000 crore, which was lost through avoidance transactions.”
He also mentioned in his LinkedIn post about the incident when the resolution professional was arrested only to be released by the Supreme Court within hours of arrest.
(Resolution professional Anuj Jain was arrested from Mumbai by the Greater Noida police in March 2021 in connection with an FIR alleging that the Jaypee Infratech, the operator of the 165-kilometer long Yamuna Expressway, and its RP Anuj Jain have not taken up safety measures suggested by the IIT in its safety audit conducted in 2018 to reduce road accidents.)
The importance of the resolution of the Jaypee Infratech case was succinctly summarised by Sahoo, the former chairman of if Insolvency and Bankruptcy Board of India (IBBI), in the following words: “This will go down as the most significant insolvency proceeding in the annals of history. Given its uniqueness and several lessons on the way, this will be the most interesting case study for insolvency courses that I teach at National Law University Delhi.”
Also read: No end to Jaypee Infratech CIRP as NBCC submits revised bid
