SC stays insolvency proceedings against Jaypee, gives homebuyers first right

The Supreme Court today set aside an order by the Allahabad bench of the National Company Law Tribunal declaring Jaypee Infratech as insolvent and ruled in favour of homebuyers who have invested crores of rupees in houses being constructed by the real estate major.

The apex court also issued notices to the finance ministry, Jaypee Infratech, Reserve Bank of India, the lender IDBI Bank as well as the UP government and posted hearing in the case for 10 October.

Following the new RBI rule on loan recovery, IDBI Bank had moved the NCLT at Allahabad against Jaypee to declare it as insolvent after the latter defaulted on a loan of Rs526 crore, given by IDBI Bank.

Homebuyers who had invested in the various housing projects of Jaypee moved the Supreme Court through a public interest petition on behalf of the 32,000-odd investors who stand to lose their promised flats once Jaypee is declared bankrupt.

The home buyers had expressed concern that the insolvency proceedings would leave them without remedy to either a house or compensation.

The debt-ridden Jaypee group has proposed the sale of 74 per cent stake in Bhilai Jaypee Cement to raise Rs2,000 crore in order to extricate itself from the situation.

The company has divested a substantial portion of its cement business with a capacity of 17.2 MTPA to Aditya Birla Group firm UltraTech Cement at an enterprise value of Rs16,189 crore, to revive business and repay debt.

Jaypee had promised to start delivering of 600 flat per month starting November, an offer home buyers had rejected.

The court will hear their plea on 10 October.

Jaypee Infratech is expected to offer buyers of its flats fresh deals to shift their bookings to its new property in Greater Noida even as the insolvency resolution professional (IRP) handling the Jaypee Infratech case had ruled out the possibility of home buyers getting refunds.

The insolvency proceedings initiated under section 7 of the Insolvency and Bakruptcy Code 2016 against Jaypee Infratech at the National Company law Tribunal (NCLT) has left around 32,000 home buyers across 27 housing projects of the company in the lurch.

NCLT has now appointed Anuj Jain as the IRP to carry out the proceedings under the Insolvency and Bankruptcy Code, while the board of directors of the company will remain suspended.

The IRP had assured that efforts are being made to ensure continuation of project development.

Nevertheless, it's unclear how the existing flat buyers can avail withdrawal of their deposits, as it only provides discounts for delayed flat delivery.

In a statement released last month, Jain requested home buyers to submit the related claim forms by 24 August, and the supporting documents subsequently, but before a resolution plan is filed.

IRP had also clarified that the 24 August deadline for submitting of claims by home buyers will not be extended.

But the IRP has made no statement or commitment to any authorities or media representative suggesting that refund can be made.

IRP made it clear that the proceedings were not for Jaypee Infratech's liquidation, rather it is a process during which steps are explored for restructuring of the company.

A total of 27 projects in three Noida land parcels of Jaypee Infratech will come under the purview of the Corporate Insolvency Resolution Process (CIRP), according to another FAQ released on Friday.

IRP was to come up with a resolution plan, which would then have to be approved by the committee of creditors (CoC), including financial institutions, public sector banks and other lenders. The CoC was expected to be set up by 9 September.

Onse set up IRP will get 270 days to turn around the company's finances and see if a resolution of the company's debt is possible. In case this is not possible, the company's assets will be liquidated.