Relief for homebuyers, Supreme Court stays insolvency proceedings against Jaypee
Supreme Court said it would examine a plea of the homebuyers who have challenged Jaypee’s move to declare itself bankrupt.Updated: Sep 04, 2017 23:27 IST
The Supreme Court put on hold insolvency proceedings against Jaypee Infratech on Monday, much to the relief of thousands of distressed homebuyers who have invested in projects of the private housing major in Noida and Greater Noida.
They had approached the top court after the National Company Law Tribunal in Allahabad admitted an insolvency petition filed by IDBI Bank against the debt-ridden real estate company for defaulting a Rs526-crore loan.
A bench headed by Chief Justice Dipak Misra agreed to examine the petitions and asked attorney general KK Venugopal to assist in the trial.
The court issued notices to Jaypee and the insolvency board and fixed October 10 to hear the cases again. It also sought a response from the Reserve Bank of India.
More than 30,000 homebuyers of the company’s 27 incomplete projects contended that insolvency proceedings would leave them without a house or compensation.
The people want their money refunded amid growing fears that lawsuits will become ineffective if the company is declared insolvent.
Panic spread among the homebuyers after the tribunal appointed a chartered accountant as “interim resolution professional” to settle disputes and he took over the Jaypee management.
People were asked to file their claims with the official.
Ashwarya Sinha, counsel for one of the petitioners, said the court stayed an August 9 order by which all the proceedings before consumer courts were rendered infructuous.
The stay order restores the company’s management and revives cases filed against Jaypee, he said.
Also, he said the company cannot alienate its properties since the Supreme Court is hearing the case. That allays homebuyers’ fear that the insolvency trial could liquidate the company’s assets.
Under the Insolvency and Bankruptcy Code of 2016, homebuyers are entitled to refund from whatever is left after paying the secured and operational creditors such as banks.
The petitioners requested the court to direct the government to declare the homebuyers as secured creditors.
Section 14 of the code has been challenged, saying it is unjust, unfair and unreasonable, and violated homebuyers’ right to equality and life.
The government is trying to clean up the multi-crore real estate business with a landmark law designed to protect millions of homebuyers facing harassment because of limited legal options at times of dispute. But implementation of the law is delayed because of several reasons.
The real estate sector has been suffering a slump, especially after the government scrapped high-value banknotes in a blitz against illegal cash and counterfeiting. This largely unregulated sector in India is often accused of hitching its fortunes to illicit funds and questionable transactions are said to be widespread.
Several projects have been delayed after developers diverted funds raised for one project to another, leaving buyers waiting for their homes.
Uttar Pradesh urban housing minister Suresh Khanna, who heads a three-member ministerial committee looking into the housing crisis, had held out hope to the homebuyers last week.
Khanna said Jaypee had assured them that it will deliver 6,000 flats annually. But he didn’t elaborate how the company teetering on the brink of insolvency will pull off the feat.