Liquidation of real estate firm Jaypee Infratech Ltd (JIL) would not “serve” the purpose of either home buyers, financial institutions or the promoters, the Supreme Court today said.
The apex court also reserved its order on “interim reliefs” prayed by various stakeholders including the home buyers of JIL, Jaiprakash Associates Limited (JAL) which is the holding company of JIL, banks and financial institutions and the Insolvency Resolution Professional (IRP).
“The Committee of Creditors has rejected the proposal. The liquidation (of JIL) will not serve anybody’s purpose,” a bench headed by Chief Justice Dipak Misra said when senior advocate F S Nariman, appearing for real estate firm JAL, listed out the legal options left to revive the firm.
The bench, also comprising justices A M Khanwilkar and D Y Chandrachud, was told by Nariman that in the interest of justice, “an independent person or persons may be appointed to evaluate financial capability of JAL/JIL to continue executing the ongoing existing projects, should be accepted and then if it is stated by an expert body that JAL/JIL do not have the financial capability, consider what future steps to be taken”.
The senior lawyer said that 21,532 home buyers, who constituted 92 per cent of total home buyers, have expressed faith in JIL as they did not opt for the refund and the court should keep in mind their interest while passing orders.
The apex court can pass an order under Article 142 of the Constitution to ensure that JIL does not undergo the liquidation in view of the fact that statutory period of 270 days meant for approving the resolution plan of the firm by the Committee of Creditors has already expired on May 12, the lawyer said.
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 Rs 526 crore loan.
The top court also heard Additional Solicitor General (ASG) Tushar Mehta and a battery of senior lawyers including C A Sundaram, Parag Tripathi, Jayant Bhushan, V Giri, Anand Grover, Siddharth Luthra and Gopal Jain who represented various stake holders in the case.
The ASG said as per the amended Insolvency and Bankruptcy Code, now the home buyers are the financial creditors in a firm and hence, the committee of creditors, which usually included the banks and FIs, will have to consider the views of the home buyers while deciding the resolution plan of a company.
He, however, said that the apex court may do away with the 270 days statutory time period, which has expired in the case of JIL, for deciding the fate of the firm while keeping in mind the interest of the home buyers.
“But, this should not be made the norm and a parallel court should not be created,” Mehta said.
Tripathi, appearing for Interim Resolution Professional (IRP), said now the only option of liquidation of JIL was left as the resolution plans for the firm has not been approved by the Committee of Creditors (CoC) within the mandatory time period.
He also suggested that an order be passed from the apex court to deal with the extra-ordinary situation that has arisen due to the time bar imposed by the law.
Some lawyers, representing the home buyers, opposed the 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 now, it has gone beyond Rs 30,000 crore.
It was also argued that an independent committee be setup for assessing the financial health and credibility of JAL and other bidders who have expressed interest in taking over the project and complete the construction.
Lawyer Pawan Shree Agrawal, assisting the court as an amicus curiae, said a committee of experts be set up to verify the documents of the home buyers for refunding the money.
He also said an official of JAL or JIL, who has all the details of the home buyers, be asked to assist that committee to check the credentials of the home buyers who are seeking refund of their invested money.
A lawyer also suggested that former Supreme Court judge, supported by experts with financial background, be allowed to participate in the meeting to espouse the cause of the home buyers.
Nariman said that as majority of home-buyers have already opted not to claim refund, a way forward was that to allow JAL and JIL to construct the homes.
“JIL has assets provided as security to Bankers alone, valued by Bank-valuers as being worth about Rs.17,116 crores with a distress value of Rs 14,548 crore,” he said, adding that the figures were given by IDBI which had initiated the Insolvency Resolution Process against JIL at NCLT.
Earlier, JAL had said that 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 that Rs 750 crore has been deposited by it with the apex court’s registry and Rs 600 crore more would be required for paying 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.