New Delhi : The National Company Law Appellate Tribunal on Thursday admitted an appeal moved by ICICI Bank, Axis Bank and others challenging an order passed by the Allahabad bench of the National Company Law Tribunal directing Jaiprakash Associates to return over 700 acres of land to its subsidiary Jaypee Infratech.

Pending the appeal, the land shall continue to remain with the banks, a two-judge bench headed by Justice SJ Mukhopadhyay said.

The appellate tribunal also issued notices to the resolution professional of Jaypee Infratech asking it to file a reply to the appeal along with any evidence to show that the mortgage to the banks was done “fraudulently”.

The corporate insolvency resolution process for Jaypee Infratech would continue and the resolution professional would inform prospective bidders about the pendency of the appeal with respect to its mortgaged property which is an asset of the corporate debtor, the appellate tribunal said.

The appellate tribunal, without passing a formal order, also observed that prima facie the National Company Law Tribunal exceeded its jurisdiction by adjudicating upon the issue of legality of a legal instrument.

“NCLT is not a civil court…it has no right to declare an instrument illegal,” Justice Mukhopadhyay said.

The 700 acres of land belongs to Jaypee Infratech and was mortgaged by its parent company, Jaiprakash Associates, to a consortium of banks led by ICICI Bank for a loan advanced to the parent firm.

Earlier this month, the Allahabad bench of the National Company Law Tribunal declared the transfer of ownership of 858 acres of Jaypee Infra’s land by Jaiprakash Associates to its own lenders, in the form of collateral to avail loans as “fraudulent, preferential and undervalued” and asked Jaiprakash Associates to return 759 acres of the total land pool.

The NCLT order was passed on a plea of the resolution professional for Jaypee Infratech who alleged that the company did not receive any consideration from its parent Jaiprakash Associates for these transactions.

Jaypee Infratech is among the 12 companies against whom the Reserve Bank of India, through a Jun 13 directive, had asked banks to file insolvency petitions.

The NCLT’s Allahabad bench admitted a plea moved by IDBI Bank seeking the initiation of corporate insolvency resolution process against the real estate firm in August last year.

On May 16, the Supreme Court directed Jaiprakash Associates to deposit 10 bln rupees by Jun 15 to avert the liquidation of its subsidiary Jaypee Infratech. The matter would be next heard on Jul 13.

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