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Liquidation will mean the company’s assets will be sold and lenders will have the first right over the sale proceeds, putting the fate of homebuyers at risk. But bankers, as well as the Valia Group, which was the preferred bidder, indicated that every attempt would be made over the next few days to avert liquidation as it would impact thousands of families.
The surprise rejection of the resolution plan, which was put together after several rounds of consultation with the banks, came just two days before the deadline for resolving the bankruptcy case was to end. Although no reason was assigned, bankers said the offer received only 6.6% of the votes as it was seen to be below the liquidation value of around Rs 8,000 crore.
Among the 13 lenders, only Bank of Maharashtra and J&K Bank voted in favour of Valia Group’s offer to take over the company for around Rs 7,400 crore, while State Bank of India abstained. The company has loans of around Rs 10,000 crore.
The insolvency and bankruptcy code mandates that a company should be liquidated in such a scenario. In line with the provisions, sources said, the resolution professional overseeing the operations since August will approach the National Company Law Tribunal and the Supreme Court for “guidance” as the 270-day resolution deadline ends on Saturday.
The courts can allow an extension and ask the resolution professional to continue, legal experts said.
Meanwhile, sources said Valia Group was open to revising its offer although it has questioned the valuation method used by the lenders. Sources said the Mumbai-based group believed its offer was well above the liquidation value arrived at by the lenders and the resolution professional. It is expected to approach the lenders as early as Thursday to discuss the possibility of raising its offer over the next fortnight. But it is unclear how the banks intend to deal with the issue.
Separately, bank executives said they were exploring various options. “We will not allow the company to go into litigation since the interests of several homebuyers are involved. It is not an option we are looking at,” said an executive with a bank which opposed the deal.
Bankers said one option was to consider fresh bids for the project. The other was to appoint a professional management and run the business with some fund infusion and use the toll revenue from Yamuna Expressway.
While Jaiprakash Associates Ltd, which is the majority owner of Jaypee Infratech, is also working behind the scenes to reclaim its hold over the company, bankers have rejected its offer given that IBC bars promoters from bidding. Besides, JAL’s fragile finances and its track record in delivering flats is not helping its case.
The failure of banks to clinch a deal will also put pressure on the governments, at the Centre and the state, which were banking on the high interest level in the project to address the concerns of homebuyers, many of whom booked their flats or villas close to a decade ago.