The National Company Law Tribunal (NCLT), which recently initiated insolvency proceedings against Jaiprakash Associates Ltd (JAL), dismissed the company's claim of facing a liquidity crisis and failing to repay debts primarily due to delays in government approvals and prolonged litigation regarding land acquisition for the Yamuna Expressway and changes in government policies. Despite JAL's assertion of being an 'asset-rich company', the NCLT rejected its arguments, emphasizing that debt repayment defaults trigger insolvency proceedings under Section 7 of the Insolvency & Bankruptcy Code, regardless of reasons such as liquidity challenges, litigation, or policy changes. The tribunal mentioned the importance of expeditiously resolving JAL's insolvency to safeguard its assets and enable debt repayment. Furthermore, the NCLT order highlighted ICICI Bank's concerns regarding JAL's debt restructuring, citing uncertainties regarding receivables from arbitration and the insufficiency of funds to settle outstanding debts. Following ICICI Bank's insolvency petition in September 2018, the NCLT appointed Bhuvan Madan as Interim Resolution Professional for JAL and rejected the company's merger with Jaypee Infrastructure Development Ltd. Despite JAL's disclosure of defaulting on repayments totalling Rs 46.16 billion as of April 30, 2024, the NCLT's decision underscores the imperative of addressing debt defaults promptly to facilitate the company's financial recovery. (Source: ET)