Jaiprakash Associates Insolvency: Lenders Reject One-Time Settlement Proposal

Jaiprakash Associates Ltd (JAL) encountered a setback as lenders, led by ICICI Bank, rejected its modified one-time settlement (OTS) proposal amidst ongoing insolvency proceedings. 

Rejection of Settlement Proposal

Yesterday, during a hearing before the National Company Law Appellate Tribunal (NCLAT), senior advocate Sajeev Sen, representing ICICI Bank, announced that the lenders had rejected JAL’s revised OTS offer. The updated proposal included a higher upfront payment and the sale of its cement assets to settle the debts.

Legal Proceedings 

The NCLAT, chaired by Justice Ashok Bhushan, was hearing a petition filed by Sunil Kumar Sharma, a suspended board member of JAL, challenging an earlier order from the Allahabad bench of the National Company Law Tribunal (NCLT). The tribunal, after a brief hearing, scheduled the next session for July 26 to further deliberate on the matter.

Details of the OTS Proposal

Initially, JAL had proposed an upfront payment of Rs.200 crore and planned to pay the remaining Rs.16,000 crore within 18 weeks of the OTS acceptance. Following orders from the NCLAT to improve the offer, JAL revised its proposal, increasing the upfront payment to Rs.500 crore. Additionally, the company committed to depositing another Rs.300 crore within 12 weeks and assured that all proceeds from the sale of its cement business would go to the creditors.

Challenges in Debt Recovery

According to the reports, recovering the outstanding debts remains a daunting task for JAL’s creditors as the personal guarantees provided by the company’s promoters amount to only Rs.800 crore, which covers less than 2% of JAL’s massive Rs.52,000 crore debt. This inadequacy raises concerns about the feasibility of full debt recovery.

Future Steps

The NCLAT’s orders for the lenders to reconsider the OTS came after a vacation bench on June 11 suggested JAL consider a higher deposit amount by the next hearing. However, with the lenders’ rejection of the improved offer, JAL’s future to financial recovery remains uncertain.

Conclusion: The lenders’ decision to reject JAL’s enhanced OTS proposal brings out the challenges faced by the debt-ridden company in its insolvency proceedings. As legal and financial battles continue, the future of JAL hangs in the balance, with stakeholders watching.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.