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SC Directs Jaypee Infratech to Include Homebuyers in New Committee of Creditors

The top court also allowed the Reserve Bank of India (RBI) to direct the banks to initiate separate insolvency proceedings against JIL's holding company Jaiprakash Associate Limited (JAL).

Updated:August 9, 2018, 1:05 PM IST
SC Directs Jaypee Infratech to Include Homebuyers in New Committee of Creditors
Representative image (Reuters)
New Delhi: The Supreme Court on Thursday ordered homebuyers to be included in a fresh Committee of Creditors (CoC) for Jaypee Infratech.

The SC also allowed second round of bidding for Jaypee Infratech but barred Jaypee Associates (JAL) and Jaypee Infratech (JIL) from participating in the resolution proceedings under section 29A of the Insolvency and Bankruptcy Code (IBC).

Niranjan Hiranandi, co-founder and managing director of the real estate giant Hiranandi group, said, “Including homebuyers in the committee of creditors (CoC) for the Jaypee Infratech resolution case ‘is logical and correct.”

Hiranandani added that there had been confusion about taking care of the interest of the homebuyers taking into account the RERA and IBC norms.

He said the order could not have only secured and prioritised the creditors as the ultimate idea is for homebuyers to get homes

The insolvency resolution period, 180 days, will start afresh from Thursday, the top court directed.

The apex court sent the case back to the Allahabad bench of National Company Law Tribunal and asked Rs 750 crore to be deposited by JAL and JIL. The matter will now be heard afresh by the NCLT. The bench disposed of all the petitions and applications pending before it.

Chitra Sharma, petitioner in the case, told CNBC-TV18, “We are happy that SC has understood our problem. We have been fighting for our rights as homebuyers.”

She added, “It remains to be seen whether our case despite being a home buyer will be heard under RERA or IBC.”

Jaypee Infra’s shares fell by more than four percent after the SC order.

The top court also said the Reserve Bank of India (RBI) is at liberty to initiate insolvency proceedings against Jaypee Associates.

Even though the Supreme Court judgment is a positive move, Hiranandi said that ‘there is still a gap’ — the identification of who will complete these homes is still a question mark and the long court proceedings are cumbersome to find solutions for the homebuyers.

However, in a rare show of unity, both homebuyers and Jaypee Associates have argued against liquidation.

The apex court had earlier reserved its order on “interim reliefs” sought by various stakeholders, including the homebuyers of JIL, JAL, banks and financial institutions and the Insolvency Resolution Professional (IRP).

IDBI bank had moved the Corporate Insolvency Resolution application before the NCLT against the debt-ridden realty firm, JIL, after it allegedly defaulted in paying back a loan of Rs 526 crore.

The ASG had earlier said that, according to the amended IBC, now homebuyers are financial creditors in a firm. Hence, the committee of creditors, which usually included banks and FIs, will have to consider the views of homebuyers while deciding the resolution plan of a company.

Lawyers, representing the home buyers, opposed the submission that JAL be allowed to complete the housing projects, saying that it was barred under the law to do so.

Taking note of the enormity of the situation, the bench said it was thought that the liability of the firm was to the tune Rs 2,000 crore and it has now gone beyond Rs 30,000 crore.

Earlier, JAL had said it would deposit Rs 600 crore more to refund the home buyers if it was allowed to dispose of its identified assets, including a cement plant at Rewa in Madhya Pradesh.

JAL had said Rs 750 crore has been deposited by it with the apex court's registry and Rs 600 crore more would be required for paying the principal sum to the home buyers.

The home buyers had moved the apex court stating that around 32,000 people had booked flats and were now paying instalments.
| Edited by: Padmaja Venkataraman
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