The NCLT, which on June 3 ordered initiation of insolvency proceedings against Jaiprakash Associates Ltd (JAL), rejected the company’s contention that it faced a liquidity crunch and defaulted on debt repayments mainly due to delays in government approvals and prolonged litigation concerning land acquisition for Yamuna Expressway and change in government policies.

It has been held by the Supreme Court that if there is a debt and default in repayment of debt and application filed by a financial creditor under section 7 of Insolvency & Bankruptcy Code, then the insolvency plea is to be admitted, the NCLT’s Allahabad bench said.

The insolvency tribunal also rejected the submissions of JAL pleading not to initiate insolvency on grounds such as the feasibility of initiating CIRP, overall financial health and viability of the company and receivables which may go to meet the outstanding debts.

“The reason cited by the counsel of JAL is liquidity crunch due to delays in government sanctions /approvals, prolonged litigation with respect to land acquisition for Yamuna Expressway, economic slowdown, change in government policies, etc. which is always present when a business is carried out and that cannot have any bearing on initiation of proceeding under Section 7 of IBC, when there is a debt and default in repayment of such debt as provided under Section 7 of IBC,” said NCLT in its 120-page order.

JAL has submitted that it is an “asset rich company”, even after sale of cement plants to resolve the loans under Bucket 1 and Bucket 2A, assets like Real Estate Business – Noida and Greater Noida (about 11,000 flats) will remain with the company Besides, it had other assets such as two 5 Five Star Hotels/Resort in Delhi, and one in Agra, two Golf Courses in Noida and Greater Noida, a Formula One Sports Complex and Cricket Stadium with Real Estate.

JAL had also argued that sale of its cement business will not only improve liquidity but will also improve the financial performance of the company.

The company has a total receivables of Rs 7,242 crore, which include Rs 5,586 crore from sale of the cement business to Dalmias.

Rejecting its contention, the Allahabad bench of NCLT said, “If the Corporate Debtor (JAL) feels about its viability, feasibility and financial health , it would be more beneficial for it after its resolution under IBC is done expeditiously before its assets get depleted.” “Therefore, we are of the opinion that its fast resolution would be in its best of interest to put it back on feet to enable it to pay its debt fast and revive its business. Therefore , we are not inclined to accept the contention of Feasibility , Viability and Financial Health being good reasons to apply our discretion for not admitting the application under section 7(5) after we have determined that default has occurred,” it said.

The NCLT order also recorded ICICI Bank submission, which said that sale proceeds shown on account of sale of the cement plant by JAL to pair its debts Bucket 2A and such sale proceed will not help in settling the debt of Bucket 2B.

Under Bucket 2A, JAL had an overall debt of Rs 6,367 crore, which included Rs 5,072 crore owed to the lenders.

The Master Restructuring Agreement (MRA) for JAL’s sustainable debt was signed by all 32 relevant lenders before December 13, 2017.

Under Bucket 2B, transfer of assets and liabilities pertaining to a debt of Rs 11,833.55 crore was to be completed through a Scheme of Arrangement.

This involved transferring the remaining debt and land of JAL to a 100 per cent real estate Special Purpose Vehicle (SPV), namely Jaypee Infrastructure Development Ltd.

However, ICICI Bank had submitted that receivable shown on account of arbitration is still not finally determined and it is not certain as to when it will be received.

Moreover, 75 per cent of the amounts which are claimed to be received as per the scheme of Niti Aayog, is also subject to giving bank guarantee.

“Applicant Bank (ICICI) has stated that as per the decision taken by it taking into account the commercial consideration , giving of bank guarantee for an amount which is under dispute and might be required to be refunded later, has not been considered to be prudent and also the amount of Rs 750 crore which the Corporate Debtor may get, will not be sufficient to pay for its entire amount of debt that is about Rs 11,000 crore lying in Bucket 2B,” the NCLT order recorded.

ICICI had moved insolvency plea before NCLT in September 2018, claiming a default of Rs 1,269 crore between April 2016 and May 2016.

The NCLT has appointed Bhuvan Madan as Interim Resolution Professional of JAL after suspending the board of the company.

Moreover, the tribunal has also dismissed the merger of JAL with Jaypee Infrastructure Development Ltd.

“This matter has come up for consideration and after examining the factual matrix, we are of the opinion that since the asset in question is under dispute, the viability of the scheme has also been prejudiced. Therefore, we are not inclined to approve this scheme,” it said.

Last month, the JAL had informed that the company had on April 30, defaulted on repayments of a principal amount of Rs 1,751 crore and interest of Rs 2,865 crore.

“Total borrowing (including interest) of the company is Rs 29,805 crore, repayable by 2037, against which only Rs 4,616 crore is overdue as of April 30, 2024,” JAL had said.

Zee Entertainment logo
| Photo Credit: Reuters

ZEE Entertainment Enterprises Ltd on Tuesday said it has withdrawn its application, seeking implementation of the merger with Sony, filed before the National Company Law Tribunal Mumbai bench.

The company filed an application with the NCLT on January 24, 2024, seeking directions on the implementation of a composite scheme of arrangement between ZEE Entertainment Enterprises Ltd (ZEEL) and Sony group firms Culver Max Entertainment Pvt Ltd and Bangla Entertainment Pvt Ltd.

Earlier on January 22, Sony Group Corp called off a $10 billion merger of its India unit with ZEEL, following a stalemate over who will lead the merged entity. The deal was announced more than two years back. Sony had sought USD 90 million as break-up fees for violating the terms of the merger pact and invoked arbitration.

In a statement on Tuesday, ZEEL said the steps taken by it to withdraw the implementation application from NCLT are based on the legal advice received by the board.

“This decision will also enable the company to pursue growth and evaluate strategic opportunities to generate higher value for all shareholders. The Board remains committed to reviewing the strategic action-oriented steps taken by the management and providing timely guidance,” it added.

The company further said, “This decision to withdraw the implementation application will enable the company to continue to aggressively pursue all its claims against Sony in the ongoing arbitration proceedings at the Singapore International Arbitration Centre (SIAC) and in other forums”.

Sony has already withdrawn its merger application from the NCLT after filing arbitration before SIAC.

On the reasons behind the decision, ZEEL Chairman R. Gopalan said the immediate priority for the company is to focus on performance and achieve its targeted goals for the future.

“We have reviewed the key steps taken by the management over the last few months that are result-oriented, and we believe that the company is well poised to chart a stronger growth trajectory,” he added.

Hence, after seeking an independent legal opinion, the board has advised the management of the company to withdraw the implementation application filed before the NCLT, Gopalan said.

“The board remains focused towards maximising shareholder value, strengthening the company’s claims in arbitration and enabling the company to explore strategic opportunities,” he noted.

Recently, ZEEL management initiated a process of rationalisation of the workforce by 15 per cent to prune staff strength across the company while its MD and CEO Punit Goenka took a 20% cut in his remuneration.

The board had also instituted a Monthly Management Mentorship (3M) Program to regularly review and advise the management on critical business aspects.

“The concerted efforts being taken by the board and the management are aimed towards achieving robust growth to consistently generate higher value for shareholders,” the statement said.

New Delhi:

The National Company Law Appellate Tribunal has dismissed an operational creditor’s petition to initiate insolvency proceedings against Wipro Ltd.

A two-member Chennai bench of the appellate tribunal held earlier that there was a pre-existing dispute over the payment between Wipro and the petitioner and observed that the Insolvency and Bankruptcy Code was not framed for being a “mere recovery legislation for creditors”.

The National Company Law Appellate Tribunal has upheld the order of the NCLT.

On January 16, 2020, the Bengaluru Bench of the National Company Law Tribunal had dismissed the plea by Tricolite Electrical Industries in the capacity of operational creditor.

The order was challenged by the Delhi-based operational creditor, a manufacturer of ‘LT/ HT Electric Panels’ before the appellate body NCLAT.

However, the NCLAT also dismissed it after observing, “We are satisfied that a ‘dispute’ truly existed for the Respondent Company (Wipro) to have withheld 3 per cent of the total invoice amount”.

Under the IBC, the insolvency process against any corporate debtor is generally initiated only in clear cases where a real dispute between the parties as to the debt owed did not exist.

The dispute is related to the supply of goods for a government project implemented by Wipro, where it was awarded the work of design, manufacture, supply and installation of MV Panels.

Pursuant to that, Wipro had placed purchase orders for a total supply worth Rs 13.43 crore.

According to the appellant, it supplied the goods in a timely manner and raised various invoices, for which Wipro made a payment of 97 per cent of the value of the invoices, but 3 per cent of the total value of the invoices, which is a substantial amount, was kept outstanding.

Despite several reminders, it was not paid and did not reply to the Demand Notice issued by it.

Wipro denied the allegations, arguing that there is a pre-existing dispute between the parties, which is reflected in their email. It has already paid 97 per cent of the amounts due, and the appellant had sought to question the basis and the right of the respondent to levy liquidated damages to the tune of 3 per cent of the contract value.

Agreeing with it, the NCLAT said: “It is the consistent stand of Wipro that 97 per cent of the amount was paid and the balance 3 per cent was kept on hold only on account of evaluating customer satisfaction and it was established that there was a delay of six weeks on behalf of the Appellant Company in executing the job assigned to them on account of which liquidated damages/Penalty of Rs 40,56,539, which is as per the terms of the contract was levied”.

“Therefore, this Tribunal is of the considered view that there is a pre-existing dispute, which is not a spurious defence which is a mere bluster,” said the NCLAT bench comprising Justice M Venugopal and Shreesha Merla.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)