NCLAT finds YEIDA must be treated as a secured creditor; directs payment of additional INR 1334 crores to it

JSA successfully advised and represented Yamuna Expressway Industrial Development Authority (“YEIDA“) in proceedings before the Hon’ble National Company Law Appellate Tribunal, Delhi (“NCLAT“) in an appeal challenging the treatment provided to its claims under successful resolution plan submitted by Suraksha Realty Limited (“Suraksha“) for the insolvency resolution of Jaypee Infratech Limited (“JIL“). The NCLAT partly allowed YEIDA’s appeal, holding that provision of INR 10 lakhs towards its claim on account of acquisition cost of land was untenable, and an additional payment of INR 1334 crores must be made by Suraksha to YEIDA.

 During JIL’s insolvency proceedings, YEIDA had inter alia submitted a claim of INR 1689 crores on account of acquisition cost of the land provided to JIL. However, under Suraksha’s resolution plan, which was approved by the Adjudicating Authority vide order dated 07 March 2023 (“Impugned Order“), a trivial amount of INR 10 lakhs was allocated towards YEIDA’s claim. YEIDA challenged the treatment provided to it in the Impugned Order and Suraksha’s resolution plan before the NCLAT inter alia on the following grounds: (a) that YEIDA is a secured creditor since amounts owed to it are protected by a statutory charge under the Uttar Pradesh Industrial Area Development Act, 1976 (“UP Act”); (b) that amounts owed to YEIDA cannot be extinguished citing its status as an operational creditor; (c) that Suraksha, who seeks to step into the shoes of JIL, must be bound by the same terms and conditions to which JIL was bound; and (d) YEIDA”s consent was prerequisite for approval of those provisions in the resolution plan which concerned YEIDA.

 The NCLAT partly allowed YEIDA’s appeal, holding that: (a) YEIDA’s claim on account of acquisition cost payable to farmers was protected by the statutory charge under the UP Act; and (b) YEIDA was entitled to be treated at parity with other secured creditors. Accordingly, the NCLAT directed Suraksha to pay an additional amount of INR 1334 crores to YEIDA towards the claim on account of acquisition cost of land. While doing so, the NCLAT also noted that since the additional payment to YEIDA was to be made over and above the amounts stipulated in the resolution plan, the framework of the plan would not be impacted and it would not require to be remanded to the Committee of Creditors for reconsideration.

Our Disputes Team Comprised Lead Partner – Amar Gupta, Partner – Divyam Agarwal, Senior Associate – Aniket Aggarwal and Associate – Mohit Sharma