NCLAT rejects appeal against Jaiprakash Associates' admission to insolvency

The National Company Law Appellate Tribunal (NCLAT) on Friday upheld the order of National Company Law Tribunal (NCLT) admitting real estate giant Jaiprakash Associates Limited (JAL) to Corporate Insolvency Resolution Process (CIRP). (Sunil Kumar Sharma, Suspended Board of Directors of Jaiprakash Associates Ltd. Vs. ICICI Bank Ltd. & Anr.).A bench of NCLAT led by Chairperson Justice Ashok Bhushan and Technical Members Barun Mitra, Member and Arun Baroka said "After answering all the issues, we are of the view that no grounds have been made out to interfere in order of NCLT dated June 3.".The NCLT admitted JAL to CIRP on June 3 on pleas filed by ICICI Bank and the State Bank of India (SBI). The tribunal cited the company’s significant debt burden as ground to admit the pleas.JAL faces a total debt of over ₹50,00 crore with multiple lenders having exposure. ICICI Bank alone claims over ₹3,000 crore including interest in dues.The insolvency process stems from an initial plea filed by ICICI Bank in 2018 followed by a similar plea filed by SBI in 2022.Efforts to reduce debt have included the sale of cement plants including a proposed ₹5,666 crore deal with Dalmia Bharat. However, the transaction remains incomplete, raising uncertainties.In March-April 2024, the National Asset Reconstruction Company of India (NARCL) made a ₹10,000 crore bid for JAL's debt but lenders deemed the valuation unsatisfactory..The case subsequently reached NCLAT a week thereafter.On June 11, NCLAT while refusing to pass an interim halting the CIRP, urged the banks to consider the erstwhile management's One Time Settlement (OTS) plan. However, the talks did not yield any fruitful outcome as a result of which the appellate tribunal continued hearing the appeal.The Interim Resolution Professional (IRP) assured the NCLAT on June 10 that JAL’s 25,000 employees and ongoing projects would not be affected as the company would operate as a going concern during the process.Despite this, Sunil Kumar Sharma, a suspended director of JAL, sought a stay, arguing that the insolvency process threatens multiple infrastructure projects in India and abroad. It was further contended that there was no acknowledgement of debt to ICICI Bank as an OTS proposal was made and even an upfront amount was paid before NCLT pronounced its judgment. .In the judgment, NCLAT found that JAL had made an OTS offer after the NCLT reserved its judgment in May 2024, and also paid ₹ 200 Crores as upfront. Furthermore, even during pendency of this appeal, a revised OTS proposal was submitted, however the same came to be rejected by the lenders. "The OTS having been submitted by the Corporate Debtor offering upfront amount and the total amount, it does not lie in the mouth of the Corporate Debtor (JAL) to contend that no default has been committed," the judgment said. According to the judgment, the OTS proposal submitted in June to the ICICI Bank, lenders have offered to give upfront payment of ₹500 Crore. (200+300) and total amount of ₹16,016 Crore, which in itself constitutes a clear acknowledgement of debt. "Hence, we are of the view that the findings returned by the Adjudicating Authority on the debt and default are based on materials on record and are affirmed by us," the order said. .JAL was represented by Senior Advocates Dr Abhishek Manju Singhvi, Senior Advocate and Abhijeet Sinha.ICICI Bank was represented by Senior Advocates Krishnendu Datta and Sanjiv Sen with Madhav Kanoria, Srideepa Bhattacharyya, Aishwarya Gupta and Neha Shivhare from Cyril Amarchand Mangaldas.