The Supreme Court on Wednesday agreed to hear a PIL by homebuyers seeking a stay on the National Company Law Tribunal’s (NCLT) August 9 order that initiated insolvency proceedings against realty company Jaypee Infratech, a subsidiary of Jaiprakash Associates. A bench headed by Chief Justice JS Khehar posted the matter for hearing on Thursday after senior counsel Ajit Sinha, appearing for 24 buyers led by Gurugram-based resident Chitra Sharma, sought urgent hearing on the ground that more than 32,000 buyers have been affected by the NCLT’s decision.
Thousands of homebuyers have been left in the lurch after the Allahabad bench of NCLT admitted the IDBI Bank’s plea for initiating insolvency proceedings against the debt-ridden Jaypee Infratech for defaulting on a `526-crore loan.
While initiating the liquidation proceedings under the Insolvency and Bankruptcy Code of India 2016, the tribunal also appointed Anuj Jain the Insolvency Resolution Professional (IRP) to carry out the proceedings, as the board of directors of the company would remain suspended.
“Around 32,000 buyers have booked their homes in 27 different housing projects of Jaypee Infratech and they are left in the lurch as the insolvency proceedings have been started against it,” he argued. Seeking a stay on the tribunal’s order, the flat buyers also asked the apex court to conduct a forensic audit of Jaypee Infra and Jaiprakash Associates to assess the extent of their bankruptcy.
Sharma, in her petition, termed the ministries of finance and corporate affairs’ action of introducing Section 14 of the IBC not only unjust, unfair and unreasonable, but also arbitrary and in violation of Articles 14 (equality before law) and 21 (right to life and personal liberty) of the Constitution. The senior lawyer also told the bench that the flat buyers have been left with no remedy as they will neither get their flats, nor a refund of their hard-earned money invested in booking the flats on account of being “unsecured creditors”.
Asserting their rights to avail remedies under consumer protection law, the PIL stated that when the assets will be liquidated, flat buyers will virtually get peanuts since secured creditors will be safeguarded first in the insolvency proceedings. The gravity of the matter is further reflected by the fact that several pending litigations before the consumer forums will not proceed in view of the moratorium declared by the tribunal on August 9, the petition filed through counsel Ashwarya Sinha stated.
The buyers complained that the moratorium had restricted them from pursuing other remedies, the most important being filing cases before consumer courts to seek refunds along with compensation. According to Sinha, the IBC 2016 is not only forcing the homebuyers to submit themselves to the jurisdiction of the IBC — even though it does not take care of their interest — and has also deprived them of the remedy as was available to them under the consumer protection Act.
“The homebuyers have been left with only two options, i.e. either to fill the form as an unsecured creditor, and in the eventuality of liquidation receive whatever amount is left after clearing the dues of the operational and financial creditor or do not subject itself to jurisdiction of the IBC and wait for the outcome of the insolvency proceedings,” the PIL said. It further said while flat buyers have been asked to file their claim in form ‘F,’ IRP had issued separate forms B and C for financial creditors and operational creditors. According to the lawyer, the housing sector is blighted with inordinate delays in completion of the projects owing to the large-scale mismanagement of the funds as received by the construction companies from the flat buyers, who have already paid 95% of the price as demanded by JIL as early as 2011-12.