Jyoti Structures fate hangs in balance as successful bidder fails to make timely payments
More than four years after the NCLT approved the resolution plan of Jyoti Structures, the company is again facing the possibilities of liquidation after the successful resolution applicants – a group of HNIs led by Sharad Sanghi – failed to make requisite payments as promised under the resolution plan.
The latest setback to the new management of Jyoti Structures, however, came after the Mumbai bench of the NCLT rejected its plea to extend the timeline for payments stipulated under the approved resolution plan. The NCLT has said that it is up to the lenders to decide the fate of Jyoti Structures, and that it has no role to play in the matter.
The new owners of Jyoti Structures failed to make a payment due in November 2022. The successful resolution applicant made a submission in the NCLT that a delay in executing a tripartite agreement between the lenders, Maharashtra Industrial Development Corporation (MIDC) and the Jyoti Structures led to disbursement of Non-Fund-based facilities (bank guarantee/letter of credit limits). This led to the default of the first installment of payment due in November 2022.
The approved resolution plan contemplated payment of Rs 3674 Crores over the course of 12 years out of cash flows of the company to the financial creditors of the company. Further, an amount of Rs.147.43 crores was proposed to be paid to employees and workmen over the span of first 5 years after the approval of the plan.
Jyoti Structures paid the upfront amount of Rs.25 Crore on 09 November 2021, but the first instalment of Rs 40 crore, which was due in November 2022, has not been paid.
However, the NCLT opined that it is the lenders who are withholding the disbursal of the NFB facilities. Therefore, the dispute is between the lenders and the successful resolution applicant, and that the adjudicating authority has no role to play.
“It is in the commercial decision and the discretion of the Monitoring Committee to either disburse the NFB facilities and give the successful resolution applicant a chance to make good its default factoring in the financial aspects, possibility of turnaround of business of the corporate debtor or opt of liquidation of the corporate debtor pursuant to default in repayment schedule.
The corporate insolvency resolution process (CIRP) of Jyoti Structures was initiated on basis of the order dated 4 July 2017 by National Company Law Tribunal (NCLT), Mumbai Bench on the company application made by SBI under the provisions of Insolvency and Bankruptcy Code, 2016 (IBC).
The resolution plan submitted by the successful resolution application was accepted by the committee of creditors in March-April 2018 and has finally been approved by NCLT through the order dated 27 March 2019.
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