JAYPEE KENSINGTON BOULEVARD APARTMENTS WELFARE ASSOCIATION & ORS. versus NBCC (INDIA) LTD. & ORS.

Summary

The Supreme Court remitted Jaypee Infratech’s resolution to its committee of creditors because the NBCC plan contained impermissible terms concerning YEIDA, dissenting financial creditors, third-party security and JAL’s deposit. The NCLT could test statutory compliance but could not rewrite commercial terms. Dissenting financial creditors required monetary satisfaction; individual homebuyers were bound by their class vote. The ₹750 crore deposit and interest belonged to JAL, subject to limited reconciliation of construction advances. In exceptional circumstances, the Court allowed 45 further days for the process, with revised plans invited only from NBCC and Suraksha Realty.

Issues

1. Whether the NCLT could modify commercial terms when approving a resolution plan.
2. Whether simultaneous voting on two plans vitiated approval.
3. Whether YEIDA-related stipulations and the proposed treatment of dissenting financial creditors were lawful.
4. Whether provision could be compelled for unclaimed fixed deposits and whether subsidiary lenders, agreement holders or minority shareholders required further relief.
5. Whether individual homebuyers could challenge a plan approved by their class or demand exclusion of completed projects.
6. Whether JAL’s ₹750 crore deposit and interest formed part of JIL’s assets.
7. Whether the plan could extinguish the surviving third-party mortgage and omit adequate treatment of the released 758 acres.
8. What further resolution process and interim management arrangements were permissible.

Provisions considered

• Sections 30(2), 30(4), 31 and 61(3), Insolvency and Bankruptcy Code, 2016Review is confined to statutory parameters; commercial deficiencies require reconsideration by the committee rather than judicial rewriting. (¶¶ 71-79, 126-129)
• Sections 30(2)(b) and 53, Insolvency and Bankruptcy Code, 2016A dissenting financial creditor must receive the prescribed minimum in monetary terms, including through enforcement of qualifying existing security; compulsory equity or land substitution is insufficient. (¶ 118-125)
• Regulations 37 and 38(1), Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016Necessary authority approvals remain essential; minimum payments to dissenting financial creditors take priority over assenting counterparts. (¶¶ 103-109, 118-125)
• Regulation 39, Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016Simultaneous consideration and voting on the two plans was permissible in the circumstances; the later amendment clarified the position. (¶ 80-85)
• Sections 21(6A), 25A(3A) and 5(28), Insolvency and Bankruptcy Code, 2016The authorised representative votes for the class according to more than half the voting share of those voting within it; the result binds minority and abstaining homebuyers. (¶ 163-170)
• Section 30(2)(e), Explanation; Sections 31 and 238, Insolvency and Bankruptcy Code, 2016Deemed shareholder approval and the binding statutory scheme defeated the minority shareholders’ objections; conflicting homebuyer compensation demands could not override the approved commercial arrangement. (¶¶ 153-154, 171-175)
• Article 142, Constitution of IndiaThe Court exceptionally extended the process by 45 days, allowing revised plans from the two existing applicants only; the extension was expressly not a precedent. (¶ 219-225.6)

Held

• The NCLT cannot substitute commercial terms approved by the committee of creditors. It must return a plan with shortcomings under the statutory parameters for reconsideration. Simultaneous voting on the two plans did not vitiate approval in this case. (¶ 71-85)
• The concession agreement was not statutory merely because YEIDA executed it under enabling statutory powers. Nonetheless, essential changes, business transfers to SPVs and related documentation required YEIDA’s consent. The plan could not unilaterally shift contingent compensation liabilities to YEIDA or compel withdrawal of litigation, extinguishment of its contractual liability claims or extension of the concession. The NCLT could not cure these defects by commercial modifications. (¶ 102-109)
• The prescribed payment to a dissenting financial creditor means monetary satisfaction, by direct payment or enforcement of existing security relating to the financial debt to the extent and priority of entitlement. Compulsory land or equity substitution was invalid; voluntary acceptance of another method was not decided. The NCLT correctly disapproved the treatment but lacked power to impose its own instalment scheme. (¶ 120-130)
• The direction to provide for fixed-deposit holders who had not submitted claims within the permitted period was annulled. No timely fixed-deposit claim was shown to have been ignored. As to JHL, the plan dealt with JIL’s shareholding, not the subsidiary’s assets; the parties were left to implement a viable agreed mechanism, seeking NCLT directions if needed. (¶ 131-142)
• The agreement-cancellation clause was not unfair when affected agreement holders retained remedies before a competent forum. The minority shareholders’ objections failed: their nominal exit payment was not inequitable where promoter shares were extinguished without consideration, and statutory deemed approval applied. Clause 7 concerning corporate implementation procedures was approved; general directions for delivery of project sites were declined. (¶¶ 143-154, 207-210)
• Homebuyers whose class voted for the plan could not claim individual dissenting-financial-creditor status or maintain opposition as aggrieved persons. The statutory majority is calculated from voting share actually voting within the class. The RERA and regulatory objections failed; completed or nearly completed projects could not be segregated while the creditor relationship subsisted. (¶ 163-175)
• The ₹750 crore deposit and interest remained JAL’s property; neither the earlier interim directions nor the information memorandum made them JIL’s assets. Under NCLT supervision an independent expert was to reconcile only construction-contract advances and discharged liabilities, rather than determine other contested claims. Any amount found receivable by JIL or its homebuyers was to be transferred, with the balance returned to JAL subject to the competent authority’s orders. (¶ 182-191.1)
• The surviving mortgage over 100 acres at Tappal could not be extinguished by a general plan clause when the secured claim had not been reckoned in the resolution process. The bank’s secured-creditor capacity was distinct from its separate capacity as a dissenting financial creditor. The committee also had to consider adequate use of the 758 acres released from encumbrance by Anuj Jain. (¶ 193-206)
• The NCLAT’s interim monitoring committee was outside the statutory framework and improperly excluded the homebuyers. Its order was set aside. Except for the identified disapproved terms and required reconsideration, the other terms were approved subject to the judgment’s findings. (¶ 211-218)
• The matter was remitted to the committee, with 45 days for revised-plan consideration, voting and the IRP’s report. Only NBCC and Suraksha Realty could submit plans, within two weeks; no new expression of interest or information memorandum was required. Reconciliation and subsidiary issues should proceed separately without delaying the committee’s decision. The Principal Bench, New Delhi, was to decide expeditiously thereafter. The exceptional extension was not a precedent. (¶ 223-227)

Result

Matters disposed of with remittal to the committee of creditors. Identified plan terms and corresponding NCLT directions disapproved or modified; NCLAT interim-monitoring order set aside. Forty-five-day exceptional extension and limited reconciliation directions issued.