The irrigation departments of north Indian states must have had something to do with entrepreneurship. While Amtek was floated by the son of a Haryana state irrigation department official, its neighbour Uttar Pradesh’s counterpart was not to be left behind. Only in this case, it was the official himself who quit his job midway and began his entrepreneurial journey.

Jaiprakash Gaur, an engineer with a diploma from the University of Roorkee, began his voyage as a contractor in the late 1950s. After taking up small jobs for the department he had worked in earlier, Gaur slowly ventured into bigger ventures. By 1979, he had floated Jaiprakash Associates and started eyeing larger hydel electric power projects along the tributaries of the Ganga, such as the Tehri Dam and the Narmada Valley Project.

A good relationship with successive governments stood them in good stead. Their reputation for taking care of employees and their associates preceded them. It was not until the late 1990s that Jaypee entered real estate in a big way. At that time, the government was toying with new models of infrastructure creation, where land development was offered as a barter. This model has been the source of many a failed company in the infrastructure sector.

By the early 2000s, the next generation led by Jaiprakash’s son Manoj Gaur took charge. Together, they were ambitious and energetic and were keen to take the group to the next level. The Taj Expressway and the developments around it, such as golf courses and the Formula One circuit, beckoned.

While the expressway itself was commissioned despite the several environmental issues that emerged, the heavy investment in the Buddh circuit for Formula One proved bad. When the political changes came apart from this and the power sector woes caught up, the group began to sink. The opening of the Delhi Noida Direct Flyway (DND Flyway) in 2001 brought the satellite town of Noida closer to South Delhi, triggering a flurry of development along the eastern banks of the Yamuna.

What looked like a boom soon turned into a nightmare. The predicament began in the early 2000s when the Uttar Pradesh government rushed to develop vast expanses of land in Noida and Greater Noida.

To attract more developers, the land authorities in Noida devised an unconventional approach of offering land at a significantly reduced price – merely 10 per cent of its actual value – for a ninety-nine-year lease. This triggered the developers’ greed, leading them to acquire extensive tracts of land without foreseeing the potential challenges. Consequently, they found themselves burdened with an excessive amount of over-developed land and a struggle to find sufficient buyers for their properties.

In 2003, the Jaypee Group, operating under Jaiprakash Industries, managed to secure the concession agreement for the development of the Taj Expressway, which was originally established in 2003. This agreement granted them the rights to develop a massive 2,500 hectares (25 million square feet) of land, divided into five portions of 500 hectares each.

Of these portions, three were located in the Noida and Greater Noida areas, with the remaining two in Mirzapur and Agra. Jaypee wasted no time in announcing grand real estate projects and unveiling three extravagant residential townships in the National Capital Region (NCR) – Jaypee Greens Noida, Jaypee Greens Greater Noida and Jaypee Greens Sports City.

Under the name of Jaypee Greens, the group marketed these projects with the help of Canadian architects, Arcop Associates, which designed premium properties complete with golf courses and various luxurious amenities. These three residential townships covered an area of a whopping 6,500 acres. Jaypee Greens Noida’s “Wish Town” alone spanned approximately 1,063 acres and boasted of twenty-four projects, along with residential and commercial plots, hospitals, shopping arcades, schools, golf courses, gyms and more.

The group intended to construct 32,000 flats, excluding plot properties, across multiple projects within the Wish Town city, spread across five sectors in Noida along the Yamuna Expressway. Flats, penthouses, villas and plots were all part of these ambitious endeavours. By early 2010, a staggering 88 per cent of the available space had been sold, generating over Rs 900 crore in revenue for the heavily leveraged project. Although the equity amounted to around Rs 1,250 crore, the group’s debt also surpassed Rs 4,400 crore, making the real estate operations a crucial financial cushion.

While promoters raised approximately Rs 600 crore through the 2010 initial public offering (IPO) by selling a portion of their shares, flat-buyers continued to contribute funds. But the prevalence of corruption, regardless of the ruling party, marred the situation.

Politicians and officials demanded significant cuts from builders, sometimes based on a per-square-foot basis. Jaypee Infratech acknowledged the political risks in Uttar Pradesh in its IPO document from 2015, expressing concerns about potential policy revisions or hindered implementation of transportation and development policies if there was a change in power or the election of a coalition government, which could adversely affect their business.

It is no secret that under Mayawati’s Bahujan Samaj Party government, firms led by Jaiprakash Gaur enjoyed relative success as part of a larger conglomerate. Jaypee Infratech, which was primarily a special purpose vehicle (SPV) responsible for developing the 165-kilometre Yamuna Expressway and five townships along its routes, aimed to complete most projects before the 2012 election. But because of subsequent delays, the Expressway opened in August 2012, five months after the Samajwadi Party took office. Other external factors turned less favourable, too.

“As the demand calculations were neither in sync with the job market nor with the essential infrastructure in the micro market, the projects were always going to be on a shaky wicket,” as noted by Amol Shimpi, associate dean and director of RICS School of Built Environment.

In July 2012, the Noida Authority issued occupancy certificates for 1,000 flats in Jaypee’s Aman Housing Project. This was out of the total proposed 5,000 flats in Sector 151 along the Noida Expressway. However, on August 2, 2012, the Yamuna Expressway Authority demanded that Jaypee refund advances received for approximately 3,000 studio apartments near the Buddh Formula 1 Circuit. These procedures were subsequently put on hold when Jaypee was referred to the insolvency court. According to its annual report for 2015-2016, Jaypee Infra had launched around 134.40 million sq ft and sold 128.20 million sq ft of it, of approximately amounting to Rs 24,295 crore.

Homebuyers faced their own struggles as they grappled with the implementation of the Insolvency Code. Despite efforts by the Insolvency Resolution Professional (IRP) to provide clarifications, ambiguities persisted regarding the modes of payment. The NCLT ruled that homebuyers did not fit the criteria of either “operational creditors” or “financial creditors”, as their debts did not concern the time value of money.

In response to these challenges, real estate industry bodies called for government intervention and support to ensure the completion of the stalled projects. Their aim was to deliver the properties to homebuyers and revive the market. The road ahead remained uncertain, but efforts were underway to address the various complexities and provide a resolution to the long-standing issues faced by Jaypee Infratech and its stakeholders.

Homebuyers were angry. Chitra Sharma, a Gurgaon-based former air hostess, had used her life savings to book an apartment at Jaypee’s Kensington Park Apartments. The company had floated twenty-seven such projects. When brochures had been circulated, each of these was going to be an integrated township. “Today, there are no flats, no lawns. In many places there are just skeletons,” Sharma revealed to me. She added, “In others, even these are not there.” Many buyers had paid up to 90 per cent of their costs to the company as early as 2013. Now, they were caught in a double whammy of interest and rent payments.

Homebuyers like Sharma had marvelled at Jaypee's reputation before signing up for the projects. “I had gone to Kedarnath and was impressed by their (Hydel) project in Vishnuprayag. They were known to take care of their employees well. I thought they would [also] treat their customers well.”

Instead, the money paid by the buyers was used to fund other business activities. “We paid money for the building of flats. We did not give it for business. Buyers gave money for a specific purpose. He [the promoters] has used it for some other purpose. Banks are the main villains in this. Why did they do double financing?”

Sharma pointed out that the interests of the banks and the homebuyers are at loggerheads. “They want to go to Kolkata. I want to go to Bombay. There is no meeting point.” In September 2017, following a PIL against the NCLT, Sharma moved to the Supreme Court, challenging the constitutional validity of the Insolvency and Bankruptcy Code. “This law does not recognise the rights of the homebuyers and recent rulings have said the homebuyer is neither a financial creditor nor an operational creditor,” the petition argued.

The court’s initial moves raised hopes for the homebuyers, but over a year later, Sharma said it felt like they were back to square one as the court referred the matter back to the NCLT. The court managed to force the promoters to pay a deposit of Rs 750 crore. But that was not enough

Excerpted with permission from The Dirty Dozen: India’s Twelve Biggest Corporate Defaulters, N Sundaresha Subramanian, Pan Macmillan.