NCLT Initiates Insolvency Proceedings Against Jaiprakash Associates
On Monday, the National Company Law Tribunal (NCLT) directed the initiation of insolvency proceedings against Jaiprakash Associates Ltd (JAL), admitting a plea from private lender ICICI Bank. JAL, the flagship firm of the Jaypee Group, operates primarily in the construction, cement, and hospitality sectors and has sold several cement plants in recent years to reduce its debt.
A two-member bench at National Company Law Tribunal, Allahabad, comprising Members Praveen Gupta and Ashish Verma, issued the order. The tribunal also appointed an interim resolution professional (IRP) and initiated a Corporate Insolvency Resolution Process (CIRP) against JAL. Additionally, the tribunal dismissed the merger of Jaiprakash Associates Ltd with Jaypee Infrastructure Development Ltd, with a detailed order pending upload on the NCLT website.
In September 2018, ICICI Bank filed an insolvency petition against JAL under section 7 of the Insolvency and Bankruptcy Code (IBC). The State Bank of India (SBI) also approached NCLT against JAL, claiming a default of Rs 6,893.15 crore as of September 15, 2022. JAL was part of the Reserve Bank of India’s list of 26 major loan defaulters for initiating bankruptcy proceedings in August 2017.
Several Jaypee Group companies, including Jaypee Cement Corporation, are undergoing insolvency proceedings before NCLT. Jaypee Infratech, another group company, is also in insolvency proceedings, with the appellate tribunal NCLAT recently upholding the bid of Mumbai-based Suraksha group.
Last month, JAL reported a default on repayments of a principal amount of Rs 1,751 crore and interest of Rs 2,865 crore as of April 30, 2024. The company’s total borrowing, including interest, stands at Rs 29,805 crore, repayable by 2037, with Rs 4,616 crore overdue as of April 30, 2024. These loans include fund-based and non-fund-based working capital, term loans, and foreign currency convertible bonds (FCCBs).
JAL stated that Rs 18,955 crore of the total borrowing would be transferred to a proposed Special Purpose Vehicle, pending approval from the National Company Law Tribunal. The company emphasized its efforts to reduce borrowings, noting that divestment of its cement business and restructuring would significantly lower its debt.
“As a responsible borrower, the company has been taking tangible steps to reduce borrowings. After the proposed divestment of the cement business and restructuring are considered, the borrowing will be nearly nil,” JAL stated.
