In a relief to around 32,000 home buyers, the Supreme Court on Monday stayed the National Company Law Tribunal’s (NCLT) August 9 order that initiated insolvency proceedings against realty company Jaypee Infratech (JIL), a subsidiary of Jaiprakash Associates (JAL).
With the stay order, flat owners can now assert their rights to avail remedies under consumer protection law and can file cases or pursue their cases filed against the builder in other fora, the option that was taken away by the NCLT, which had declared a moratorium on proceedings before consumer and other courts.
The petitioners had contended that when the assets of the company would be liquidated under the Insolvency and Bankruptcy Code (IBC), 2016, flat buyers would virtually get peanuts since secured creditors would be safeguarded first under the insolvency proceedings.
A bench led by Chief Justice Dipak Misra sought responses from the Centre, the UP government, the Reserve Bank of India (RBI), the embattled group including JAL and JIL, and others on over dozens of petitions filed by individuals and their associations alleging they have been left in the lurch after the Allahabad bench of the NCLT admitted IDBI Bank’s plea for initiating insolvency proceedings against the debt-ridden JIL for defaulting on a `526-crore loan.
Seeking a stay on the tribunal’s order, the flat buyers also asked the apex court to conduct a forensic audit of JIL and JAL to assess the extent of their bankruptcy. The bench posted the batch of matters for further proceedings on October 10.
Various lawyers including senior counsel Ajit Sinha told the court that IDBI Bank’s plea in the NCLT was filed “for collusion of a petty `500 crore” when more than Rs 25,000 crore of flat buyers was at stake.
The IDBI Bank counsel, however, opposed the petitions, arguing that the buyers should wait for the the interim resolution professional’s (IRP) report as it could turn out to be fruitful for the buyers.
The petitioners also questioned the constitutional validity of the IBC as it doesn’t address the rights of the buyers and also is not in tune with other recent laws like the Real Estate Regulation And Development Act (RERA) which protects the rights of aggrieved home buyers.
The flat buyers have been left remedy-less as they would have neither got their flats nor refund of their money invested in booking the flats on account of being “unsecured creditors”, according to the petitions.
One of the public interest litigations said that in the alternative, a direction may be issued to the government that flat owners/buyers be declared as secured creditor like banks and financial institutions.
The buyers also termed the ministries of finance and corporate affairs’ action of introducing Section 14 of the IBC as 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.
While initiating the liquidation proceedings under the IBC, the tribunal had appointed Anuj Jain as the IRP to carry out the proceedings, as the board of directors of the company would remain suspended.
JIL, which was among the 12 accounts identified by the RBI for insolvency proceedings in June, has interests ranging from power to real estate, cement, highways, fertiliser, hospitality and healthcare in road and real estate sectors. As on March 31, the consolidated debt of JIL was over Rs 7,922 crore.