Despite an ongoing resolution process to find a company that can complete 22,000 under-construction flats of Jaypee Infratech in Noida, uncertainty still looms large for the buyers.
This is because, of late, NBCC (India) Ltd, a government enterprise, one of the bidding companies, doesn’t seem to be as enthusiastic as it was in March 2019 when it had come up with its first proposal to take over the company and complete the unfinished flats within three to four years.
Now, NBCC, formerly known as National Buildings Construction Corporation Limited, wants to submit a new proposal for which it has sought time till April 24.
The challenge is that the deadline for the resolution process will expire on May 6 and the law says that in case the resolution process doesn't work out, the company will go into liquidation. Besides NBCC, another company Suraksha is also in the fray.
In July 2017, RBI for the first time referred 12 companies, one of which was Jaypee Infratech, to the National Company Law Tribunal (NCLT) as it allegedly defaulted in repayment of bank loan.
A fortnight later, NCLT took up the case amidst Jaypee’s resistance that it was not a defaulter and its assets were in excess of its debt, hence it was not a fit case to go under a resolution process.
Despite that, NCLT appointed an Interim Resolution Professional (IRP) who invited proposals from companies to take over Jaypee Infratech and complete its unfinished projects.
Under the insolvency law, once all companies’ proposals come in, an evaluation expert is appointed to select the best proposal out of all. If the company with the best proposal gets 66% vote in the Committee of Creditors (CoC), which includes homebuyers and banks, it gets the ownership right.
If it fails, the other company’s proposal is put to vote and the process continues till a proposal gets approved.
Homebuyers’ worry is that if the whole process is not wrapped up by May 6, the company will go into liquidation as the possibility of the extension of the deadline is quite dim.
“In the case of certain companies, the Supreme Court has allowed the extension of the stipulated time period of 270 days so we hope that similar thing will happen in this case also,” ML Lahoty, a Supreme Court lawyer told Outlook, adding that the apex court had insisted during one of the hearings of the case that real estate companies shouldn’t go into liquidation and all options should be explored to resolve the financial challenge.
Interestingly, Jaypee Associates Ltd, the parent company of Jaypee Infratech, which is under resolution proceedings, has also given its proposal to get back the company’s management. Under the existing law, a company can make such proposal.
“In case, NBCC and Suraksha both fail to get the required vote, Jaypee Infratech’s proposal can be taken up,” says Jasbir Mallik, an SC lawyer, adding that it will need 90% vote in the CoC to get back the ownership.
To win over buyers, it has offered several benefits such as payment of penalty to buyers for the delay in delivery, 2,000 company’s share to each flat buyer, payment of 50% stamp duty at the time of registry and waiver of the first year’s maintenance charges.
Many buyers are of the view that as long as NBCC’s new proposal is not on the table, Jaypee’s offer looks quite attractive and profitable.
For instance, NBCC’s first proposal said that it would only pay 25% of the total amount due to homebuyers as a penalty for the late delivery of flats.
The most interesting aspect of the whole resolution process is that both NBCC’s and Suraksha’s financial proposals are almost similar to Jaypee Infratech’s March 2017 proposal to banks in which the company had offered land to pay off its debt and generate working capital for the construction of home buyers flats.
“It had again proposed to sell off its assets such as the Yamuna Expressway, its cement plants, and other land assets, to raise funds in SC in 2018 but it was not allowed then,” Atul Khanna, a homebuyer told Outlook, adding that had it been accepted then, things wouldn’t have been delayed for so long.
Jaypee Infratech launched close to 50,000 flats around 2011 in various ambitious real estate projects in Noida and along the Yamuna Expressway area. However, the slowdown in real estate sector and various other factors affected the financials of the company's and shattered its buyers' hopes.