Homebuyers are considered financial creditors under the amended IBC and their views will be considered while deciding the resolution plan of a company
Jaypee group’s homebuyers on Monday moved the Supreme Court seeking modification of its August order which remanded the insolvency case against Jaypee Infratech (JIL) to the National Company Law Tribunal’s Allahabad bench to be started afresh.
The homebuyers want the apex court to declare them “secured financial creditors” on a par with banks.
A bench led by Justice Madan B Lokur said it would come up for hearing before an appropriate bench.
The top court had on August 9 remanded the issue back to NCLT to start afresh and sought for the formation of a new committee of creditors (CoC) that would include homebuyers.
Without going into the issue of how to protect the interests of homebuyers of embattled JIL, including its earlier promise to refund the money to some homebuyers, the bench had directed reconstitution of the CoC according to new amendments to the IBC that allow homebuyers to be part of the panel, which included banks and FIs only.
Homebuyers are considered financial creditors under the amended IBC and their views will be considered while deciding the resolution plan of a company.
The top court also said both “JIL and Jaiprakash Associates and their promoters shall be ineligible to participate in the CIRP by virtue of the provisions of Section 29A.” Besides, the apex court had also allowed RBI’s plea to direct banks to initiate insolvency proceedings against the JAL, the parent company of JIL, under the Insolvency and Bankruptcy Code, thus further compounding the Jaypee group’s woes.
Sqn ldr SD Mitroo (retd), a homebuyer of Klassic Project of Jaypee Wish Town in Noida, has now sought modification of the August order on the grounds that homebuyer’s interest to the extent of their status as “secured” or “unsecured creditors” was still undecided.
He also said after a series of litigation, his relief stands stalled until the new litigation under the insolvency and bankruptcy code (IBC) was decided which would consume another year at the least.
“Due to the apex court not deciding on whether home buyers are secured creditors or not, a vacuum was created to the detriment of the homebuyers. The court also lost sight of the fact that the defective mechanism of voting in the corporate insolvency resolution process (CIRP) worked to the disadvantage of the home buyers,” the application filed through counsel ML Lahoti stated, adding that the SC also failed to consider the issue of conducting forensic audit of JIL and JAL from 2009 to 2017.
“The pattern of voting ex-facie defeats the cause of homebuyers as their claim value (including 8% simple interest) is Rs 16,317 crore (62.7%) with the total number of homebuyers being 28,113 against banks’ claim value of Rs 9,892 crore (37.3%) with just 12 banks only.
Although the homebuyers have 62.7% vote with over 28,000 units and the banks have only 37.3% vote with 12 units, but the banks are expected to vote 100% which is established from the trend in last meeting where not more than 9,500 homebuyers have exercised their voting power. This is sheer frustration as for passing a resolution, the imperative requirement is 66% and although the banks have mere 37% vote, they can always dictate the outcome,” the homebuyer said.
JAL, with a debt of nearly Rs 29,000 crore, featured in RBI’s second list of 28-30 companies to be taken to NCLT. JIL, whose total liability stands at Rs 1,575 crore, was among 12 companies against whom banks were asked by RBI to start bankruptcy proceedings in June last year.
The apex court had on September 11 last year restored the insolvency resolution proceedings against JIL and directed IRP to take over the “records and management” of the company.
Flat buyers had challenged the August 9 order of the NCLT that admitted the IDBI Bank’s plea for initiating insolvency proceedings against the debt-ridden Jaypee Infratech for defaulting on a
Rs 526-crore loan.