The Supreme Court today stepped in to protect the interests of Jaypee Wish Town homebuyers by reinstating the management of the company back to the Insolvency Resolution Professional (IRP) Anuj Jain asking him to submit an interim plan to the apex court within 45 days while also ordering JP Associates to deposit Rs 2000 crore before the court by October 27.
The directors of Jaypee Infratech and JP Associates have also been restrained from travelling abroad without permission of the Supreme Court. They have also been directed to take the permission of IRP before selling any property. The next date of hearing is November 13.
All proceedings in other forums have been stayed. What this means is all cases pending before consumer courts, NCDRC etc will be stayed while the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 is on.
“Homebuyers welcome the order. Their main concern was to have their interests protected. With the Supreme Court intervening in the matter, they have now been assured that their interests will be protected as the apex court will now be monitoring the resolution plan,” said Ramakant Rai, Counsel, Trilegal, who was representing 2,500 homebuyers, adding the order to deposit Rs 2,000 crore would benefit homebuyers.
The court wanted to know how homebuyers interests will be protected and ordered the IRP to submit an interim plan within 45 days. The plan to be submitted will have to include details of how construction will be completed and how promoters will arrange for compensation to be paid to homebuyers for delay – the modalities for payment etc, said Rai.
Senior Lawyer, P Chidambaram, who represented 2,500 homebuyers belonging to 10 associations, argued that homebuyers are financial creditors as they are the biggest stakeholders having contributed around Rs 15,000 crore whereas IDBI, the lender, had given a loan of Rs 9,000 crore. The court also discussed the issue of homebuyers being made part of the committee of creditors, Rai informed.
The court also ordered that JP Associates and Jaypee Infratech cannot sell any properties without the permission of the Supreme Court.
“It’s a decent victory for IDBI and consortium of Rs 9000 crore lenders. Firstly, the court has de-facto restored the management to IRP. Second, IRP will prepare an interim plan which is the best way to protect both creditors and homebuyers. Thirdly, Rs 2000 crore is brought to kitty. Fourth, travel restrictions imposed on Japypee directors. Fifth, Section 14 and 17 restored. Much much much better order for IDBI than 4/9/17 order,” said Senior Advocate AM Singhvi, appearing for IDBI.
Other homebuyers were represented by Ajit Sinha and Anand Grover; IBC was represented by Tushar Mehta, additional solicitor general; JIL by PS Patwalia and JAL by R S Suri.
As many as 2,500 homebuyers of Jaypee Infratech had moved the Supreme Court last week asking it to direct Jaypee Group to ascertain and deposit the amounts towards completion of Wish Town. They had also sought compensation for delay in construction of the projects at the rate of 18 percent per annum to be deposited with the Supreme Court or in an escrow account before re-initiation of insolvency resolution process.
The petitioners had argued that flat buyers paid monies to Jaypee Group in trust for the specific purpose of construction of flats/projects and, therefore, it is necessary that the monies required for discharge of liabilities of Jaypee Group towards the flat buyers should be set aside before re-initiation of insolvency resolution process. They had pleaded that the insolvency code does not provide a suitable framework for the protection of interest of home buyers and makes the flat buyers a test case for insolvency code would result in a grave injustice to the home buyers.
The application is a follow-up to the IDBI Bank moving the apex court on last Thursday for lifting the stay on the insolvency proceedings against Jaypee Infratech.
As many as 40,000 homebuyers, who have invested in Jaypee projects, have been waiting for over eight years to get their homes delivered and have been worried about their investments, especially after the National Company Law Tribunal (NCLT) admitted IDBI Bank’s plea for initiating insolvency proceedings against Jaypee Infratech for defaulting on a Rs 526-crore loan earlier last month. NCLT appointed insolvency professional Anuj Jain as the CEO of Jaypee Infratech. He was given six months to revive the company.
Earlier last week, the Supreme Court stayed the insolvency proceedings against Jaypee Infratech, ruling in favour of a petition filed by homebuyers. Flat-buyers had contended before the court that they will neither get a home nor a refund of their hard-earned money on account of being “unsecured creditors”. A day later IDBI Bank urged the Supreme Court to lift the stay order on insolvency proceedings against the real estate developer, saying the move would not benefit home buyers.