ARTICLE · 10 MARCH 2020

Third Party Security Whether A Fraudulent Preference: Supreme Court Decides

Dhaval Vussonji & Associates

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NCLT initiated CIRP against JIL on 9th August 2017.

IndiaFinance and Banking

Manisha Paranjape

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The Supreme Court on 26^th February 2020 in Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited v. Axis Bank Etc.Etc. ¹ has decided on two main issues relating to third party security which have entirely revamped lending transactions, as security from third parties was a fairly typical manner of securing dues, until the NCLT judgments in May 2018.

Facts:

Jaiprakash Associates Limited ("JAL") is a Public Listed Company and Jaypee Infratech Limited ("JIL") is its subsidiary.
JAL obtained finance from a consortium of banks and financial institutions, ICICI Bank Limited, Standard Chartered Bank Limited and State Bank of India ("JAL Lenders"), the security of which inter alia comprised of mortgage created by JIL of certain lands held by it.

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