Lenders Question Viability of Jaiprakash Associates' Settlement Proposal

Lenders of Jaiprakash Associates Ltd (JAL) expressed doubts about the one-time settlement (OTS) proposal from the debt-ridden group on Monday. They stated they were not convinced by it. During the National Company Law Appellate Tribunal (NCLAT) proceedings, lenders' counsel mentioned that the insolvency plea against JAL was filed in 2017 and has been delayed for seven years under the guise of a settlement.

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On June 10, 2024, during a previous hearing, NCLAT had instructed banks to review JAL's OTS proposal by June 24, the next scheduled hearing date. However, during Monday's hearing, a two-member vacation bench noted that banks had not yet responded to the OTS proposal. The appellate tribunal was informed that JAL issued a last-minute clarification on the OTS the previous night, and lenders needed time to review it.

Debt Settlement Proposal

Earlier, JAL had submitted an OTS proposal to creditors before the National Company Law Tribunal (NCLT). This proposal included an upfront payment of Rs 200 crore and the remaining Rs 16,000 crore to be paid within 18 weeks of acceptance. However, this proposal was rejected by the Allahabad bench of NCLT, which directed the initiation of Corporate Insolvency Resolution Process (CIRP) against JAL.

During the last hearing, JAL's counsel stated that if the bank accepted the OTS, the company would make full payment within 18 weeks. Despite this assurance, lenders remained sceptical about JAL's ability to fulfil its commitments.

Legal Proceedings and Delays

The NCLAT was hearing an appeal filed by Sunil Kumar Sharma, a member of JAL's suspended board. He challenged the Allahabad bench of NCLT's order. On June 3, the Allahabad bench admitted ICICI Bank's six-year-old petition filed in September 2018. It appointed Bhuvan Madan as interim resolution professional after suspending JAL's board.

After a brief hearing on Monday, NCLAT scheduled the next hearing for July 3 and directed JAL's lenders to consider the OTS and file a response. The appellate tribunal suggested that JAL might also consider depositing a larger amount by the next hearing date.

The lenders' counsel argued that for seven years, JAL has delayed proceedings under the pretext of settlements. They emphasised that despite multiple opportunities, JAL has not provided a satisfactory resolution plan.

The ongoing legal battle highlights the challenges faced by both creditors and debtors in resolving insolvency cases in India. The outcome of this case will be closely watched by stakeholders in similar financial distress situations.

The NCLAT's directive for lenders to review and respond to JAL's OTS proposal indicates a continued effort to find an amicable solution. However, lenders' scepticism suggests that achieving consensus may be challenging.

This case underscores the importance of timely and transparent communication between debtors and creditors in resolving financial disputes. As both parties prepare for the next hearing on July 3, all eyes will be on whether a viable settlement can be reached or if further legal action will ensue.