SC asks Jaypee Associates to deposit Rs 2000 cr: All you need to know about the controversy
The Supreme Court asked real estate firm Jaypee to deposit Rs 2,000 crore before October 27 and submit a plan on how it will protect the homebuyers’ interests.noida Updated: Sep 11, 2017 14:55 IST
The Supreme Court on Monday directed holding companies of Jaypee Infratech to deposit Rs 2,000 crore by October 27, in the latest development in an ongoing suit where homebuyers have challenged the company’s move to declare itself bankrupt. Last week, the apex court had stayed insolvency proceedings against Jaypee Infratech.
More than 30,000 buyers of Jaypee Infratech in Noida and Greater Noida are worried that the insolvency proceedings would leave them in a lurch and without a recourse to get either a house or compensation from the company.
Here’s all you need to know about the controversy:
What is an insolvency resolution process?
This is a process during which steps are explored for restructuring of the company. It is not a proceeding for liquidation.
In the case of Jaypee, an Interim Resolution Professional (IRP) has been appointed by the National Company Law Tribunal (NCLT) to carry out the proceedings under the Insolvency and Bankruptcy Code.
The IRP has six months to revive the company by paying back debts to financial creditors and homes to buyers. The period can be extended by three more months. If the IRP is unable to revive the projects, assets of Jaypee Infratech will be sold and recovered money will be distributed among creditors, including homebuyers.
Which Jaypee projects have been affected?
The corporate insolvency resolution process has been initiated only against Jaypee Infratech, one of the two promoters of The Jaypee Group which is developing 27 projects mostly in Noida and Greater Noida (Full list of projects here).
Why are homebuyers against insolvency?
In August, homebuyers moved the Supreme Court against the insolvency proceedings to protect their interests. Homebuyers contended that insolvency would prevent them from getting either the promised flats or compensation from JayPee.
What is Jaypee’s financial status?
JIL’s consolidated debt stood at over Rs 7,900 crore with a negative interest coverage ratio as on March 31, which goes to show that the company is not earning enough to repay its debt.
What has the company said?
The IRP, Anuj Jain, said construction at Jaypee Infratech housing projects will continue as usual, adding that there is no payment issue as of now but he will be able to comment on whether the company has adequate funds to finish the project or not later.
Jaypee Infratech said on August 25 it will hand over possession letters to flat owners who have invested in projects that are ready.
When did the controversy begin?
The Allahabad bench of the (NCLT) admitted insolvency proceedings against JIL on August 9, after IDBI Bank – the leader of a consortium of lenders to the company – moved a petition that pointed out that the real estate had defaulted on a Rs 526-crore loan.
JIL was among the 12 companies that were referred to the NCLT following a Reserve Bank of India order asking banks to launch insolvency proceedings for recovering dues.