SC allows homebuyers to intervene in Jaypee insolvency case

The Supreme Court has allowed around 400 homebuyers of embattled Jaypee group to intervene in the insolvency case even as several buyers have moved the court seeking relief in the issue relating to the insolvency proceedings.

The decision comes on a plea by home buyers who had sought a direction to the government and others that the bankruptcy code "shall not curtail the legal statutory and vested rights of the flat owners/ buyers as consumers" defined under Consumer Protection Act.

Flat buyers, under the Insolvency and Bankruptcy Code of 2016, do not fall under the category of secured creditors like banks and they may get back their money only from what is left after repaying secured and operational creditors.

A bench of Chief Justice Dipak Misra and Justices A M Khanwilkar and D Y Chandrachud allowed Jaypee Orchard Resident Welfare Society to withdraw its petition seeking relief from the firm and intervene in the main matter.

The apex court, which had earlier stayed insolvency proceedings against Jaypee and later revived proceedings against the real estate firm at the National Company Law Tribunal (NCLT), Allahabad at the instance of its financier IDBI, has now directed home buyers to join the main petitioner.

The apex court had earlier restrained the managing director and directors of the company from travelling abroad without its permission and asked its parent company, Jaypee Associates, to deposit Rs2,000 crore with the registry to safeguard the interest of the home buyers.

The petition filed by the homebuyers seeks protection to the investments of 30,000 odd home buyers, who as unsecured creditors would get nothing from the firm which is under the bankruptcy process  as dues to financial institutions, which are secured creditors, would be cleared first.

These investors have invested in 27 different projects of debt-ridden realty firm Jaypee Infratech.

Alternatively, the flat buyers have sought a direction to the government to declare flat owners and flat buyers also as secured creditors like banks and financial institutions.