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The National Company Law Appellate Tribunal (NCLAT) dismissed Jaiprakash Associates Ltd's (JAL) appeal against insolvency proceedings initiated by ICICI Bank. The tribunal upheld the National Company Law Tribunal's (NCLT) ruling, confirming that ongoing loan restructuring does not block insolvency filings under Section 7 of the Insolvency and Bankruptcy Code. NCLAT highlighted JAL's recognition of its debt and default in its One-Time Settlement (OTS) proposal. It also backed the Reserve Bank of India's directive to ICICI Bank to begin the Corporate Insolvency Resolution Process in 2018. With defaults exceeding INR 22,000 crore and lenders rejecting JAL's revised OTS, the ruling prioritizes insolvency resolution over pending settlements.
The National Company Law Appellate Tribunal (NCLAT) has recently dismissed Jaiprakash Associates Ltd's (JAL) petition challenging the initiation of insolvency proceedings against the company. The appellate body upheld an earlier decision by the National Company Law Tribunal (NCLT), affirming that the mere pending of a loan restructuring arrangement with the lender does not prevent creditors from filing insolvency proceedings under Section 7 of the Insolvency and Bankruptcy Code 2016. Advertisement
According to a report by PTI, a three-member bench, led by Chairperson Justice Ashok Bhushan, stated that there were no grounds to interfere with the NCLT's order. The appellate tribunal acknowledged that the One-Time Settlement (OTS) proposal submitted by JAL contained a clear recognition of the debt and default, with the findings based on materials available in the records.
NCLAT also supported the Reserve Bank of India's (RBI) statutory authority, which had directed ICICI Bank to initiate Corporate Insolvency Resolution Process (CIRP) against JAL in August 2018, as it noted that the pending restructuring scheme could not halt the insolvency proceedings. The tribunal confirmed that the proceedings under Section 7 of the Insolvency and Bankruptcy Code would take precedence.
Earlier this year, ICICI Bank had filed the insolvency petition, claiming a default of more than INR 16,000 crore. The State Bank of India (SBI) also moved NCLT against JAL, with a default claim of INR 6,893.15 crore.
JAL, part of the debt-ridden Jaypee Group, had been identified in the Reserve Bank of India's list of 26 major loan defaulters in 2017. A modified OTS proposal, which included an increased upfront payment, was rejected by the consortium of JAL's lenders, led by ICICI Bank.
In conclusion, the NCLAT ruling confirms that insolvency proceedings against JAL will proceed despite the pending restructuring proposal. This decision strengthens the precedence of insolvency over loan settlements, impacting the debt-ridden company's resolution process.
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