Banks Transfer Jaiprakash Associates’ Debt To NARCL For Resolution
In a key development, the consortium of lenders to Jaiprakash Associates Ltd. has transferred its outstanding debt, along with underlying securities and guarantees, to National Asset Reconstruction Company Ltd., according to an exchange filing made on Wednesday. The assignment was executed via a Deed of Assignment as confirmed by NARCL in a separate letter to the lenders.
The transfer, carried out under Section 5 of the SARFAESI Act, effectively vests all rights, powers, and securities held by the lenders with NARCL, acting as trustee of the NARCL Trust. Following this, NARCL is now entitled to initiate or pursue any legal action for recovery of dues from JAL, including from guarantors.
Additionally, India Debt Resolution Company Ltd. has been appointed as an exclusive service agent by NARCL to manage the debt and oversee resolution efforts.
Background of the Transaction
The debt assignment marks a crucial step in addressing one of India's longest-running corporate debt resolutions. JAL, classified as a non-performing asset since 2016, was admitted to insolvency proceedings last year. The Rs 12,000-crore transaction involves a State Bank of India-led consortium of 25 lenders, including major public and private sector banks and financial institutions.
Under the terms of the deal, NARCL's offer involves a 23% recovery for lenders, split into a 15% upfront cash payment and 85% in government-guaranteed security receipts—a structure unique to NARCL. As a result, banks will receive approximately Rs 1,800 crore in cash, with the remaining value dependent on future recoveries through the Insolvency and Bankruptcy Code process.
NARCL, set up by public sector banks with a 51% ownership, aims to aggregate and resolve stressed assets. It has been tasked with acquiring stressed loans of up to Rs 2 lakh crore in phases, using the 15:85 cash-to-SR structure.
NCLT Ruling on Insolvency Process
The debt transfer comes shortly after a recent directive from the National Company Law Tribunal. On Monday, the NCLT ruled that the resolution plans for acquiring JAL should be invited for the entire company as a going concern, rejecting earlier attempts to divide the company's assets into clusters for separate sale.
The tribunal held that the ‘Form G' published by JAL's resolution professional—which offered two options, including splitting JAL's business operations—violated provisions of the Insolvency and Bankruptcy Code. As per the order, bidders must submit resolution plans covering the whole company, ensuring that all business verticals are resolved together rather than piecemeal.
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