The government should come up with suggestions on protecting homebuyers in case an unfinished real estate project goes into liquidation, the Supreme Court said on Tuesday as it took up a legal loophole flagged by people who bought flats from the Jaypee group that are yet to be completed.
The bench of justices AM Khanwilkar and Dinesh Maheshwari made the remark while hearing a petition filed by homebuyers who invested in projects by Jaypee Infratech Limited (JIL) but suggested a mechanism could be worked out to help cases involving other realtors as well.
“We want suggestions from the Union of India which could be uniform for all such cases,” justice Khanwilkar said. “This issue will be bothering lakhs of homebuyers. Within the IBC (Insolvency and Bankruptcy Code), we cannot do anything. IBC does not have a solution, so Union of India will have to come up with a solution. You (Centre) can suggest something outside the law. We can consider that,” the judges told additional solicitor Madhvi Divan, who was appearing for the Centre.
Divan said she will come back with a response on the next date of hearing, which was fixed as July 11.
{{/usCountry}}Divan said she will come back with a response on the next date of hearing, which was fixed as July 11.
{{/usCountry}}According to the petitioners, the IBC law — passed in 2018 — does not guarantee the interests of homebuyers in case a project cannot be revived and has to be liquidated. “Liquidation of the company will only be in the interest of the banks who will be able to recover the money lent by them to JIL,” said the petition.
The petitioners’ claim was in reference to IBC provisions which, while giving them a say in the insolvency proceedings, does not explicitly define them as secured creditors. This means that any money recovered from the asset sales will be divided up among parties such as banks that gave loans for the project.
Insolvency proceedings against JIL were initiated last year after a Supreme Court order. A 270-day deadline for a plan to revive the company passed on May 6, leaving few options apart from liquidation.
Liquidation “will expose the life savings of more than 20,000 home buyers, who have admittedly deposited more than ₹14,000 crores,” the petition said.
“We are keen to know whether you have something to suggest, which can be processed without disturbing the ongoing process,” justice Khanwilkar asked Divan. “Policy issue has to be resolved by the Union of India,” he said and referred to other instances where the court has asked the Centre to intervene and come to the aid of homebuyers.
The case of Jaypee mirrors that of Amrapali, which has also failed to deliver flats to tens of thousands of people.