The Supreme Court on Monday refused to lift stay on a part of its September 4 order that had restrained homebuyers from initiating any proceedings against real estate developer Jaypee Infratech under the consumer and housing laws till the insolvency resolution process is on. The Jaypee Orchard Resident Welfare Society, comprising 400 homebuyers, told a bench headed by Chief Justice Dipak Misra that it needs permission to seek protection under the Consumer Protection Act and the Real Estate (Regulation and Development) Act. The homebuyers’ body also sought investigations into the transfer of assets between Jaypee Infratech and its parent company Jaiprakash Associates.
Though the apex court refused to entertain the petition in the present form, it asked the registered society to file an intervention application. Last week, the bench in an attempt to solely protect the interest of around 3,200 flat buyers had restored the insolvency resolution proceedings against Jaypee Infratech and also asked its parent company to deposit Rs 2,000 crore on or before October 27. Modifying its September 4 order that stayed the insolvency proceedings initiated by IDBI Bank against Jaypee Infratech, the CJI had directed the Insolvency Resolution Professional (IRP), appointed by the National Company Law Tribunal (NCLT), to take over the “records and management” of the company and submit within 45 days an interim resolution which shall include the interest of “low and middle income home buyers,” who have invested in the real estate major’s 27 housing projects in the National Capital Region. The companies will have to take consent of the IRP before any property is to be sold by them.
However, all court proceedings against the company, including those pending before the consumer courts, will remain stayed while the corporate insolvency resolution process is on, the bench had ordered. The apex court had also appointed senior counsel Shekhar Naphade and counsel Shubhangi Tuli to participate in the meetings of the committee of creditors to “espouse the cause of home buyers and protect their interests.” The next date of hearing is on November 13. The judges also restrained all directors and managing directors of Jaypee Infratech and its holding company Jaypee Associates from travelling abroad without prior permission of the SC. However, nominee directors of lenders – IDBI Bank, ICICI Bank and SBI – have been exempted.
The September 11 order assumed importance as it tried to balance the rights of creditors and home owners as the Insolvency and Bankruptcy Code of India (IBC) 2016 is silent on the rights of the latter. Besides, the SC has expedited the whole process of insolvency proceedings as it asked the IRP to submit an interim resolution plan in 45 days against 270 days granted by the new code. The code is still ambiguous on relative rights of home buyers, though a recent amendment by the government brought them in as stakeholders. In terms of the order of preference among the stakeholders in laying hands on the assets of a company liquidated under the code, secured creditors come first, followed by unsecured ones and the government.
The apex court had on September 4 stayed the insolvency resolution proceedings against Jaypee Infratech on a batch of petitions by flat buyers, who have invested in various Jaypee group projects in Noida, restoring the developer’s original board of directors and ordering resumption of all consumer cases filed against the company and its promoters. A day after, IDBI Bank had moved the SC seeking vacation of the stay order. About 32,000 home buyers were left in the lurch after the Allahabad bench of the NCLT on August 9 admitted the IDBI Bank’s plea for initiating insolvency proceedings against the debt-ridden Jaypee Infratech for defaulting on a `526-crore loan. Jaypee Infratech, which was among the 12 accounts identified by the RBI for insolvency proceedings last month, has interests ranging from power to real estate, cement, highways, fertiliser, hospitality and healthcare in road and real estate sectors.