{"id":705,"date":"2018-01-14T11:20:10","date_gmt":"2018-01-14T11:20:10","guid":{"rendered":"http:\/\/www.wakilsahab.in\/news\/?p=705"},"modified":"2018-01-14T11:20:10","modified_gmt":"2018-01-14T11:20:10","slug":"supreme-court-stays-insolvency-case-against-jaypee-infratech","status":"publish","type":"post","link":"https:\/\/www.wakilsahab.in\/news\/supreme-court-stays-insolvency-case-against-jaypee-infratech\/","title":{"rendered":"Supreme Court stays insolvency case against Jaypee Infratech"},"content":{"rendered":"

Source –\u00a0livemint.com<\/strong><\/p>\n

New Delhi\/Mumbai:\u00a0The Supreme Court on Monday stayed an order passed in August by the Allahabad bench of the National Company Law Tribunal (NCLT) which initiated insolvency proceedings against Jaypee Infratech Ltd. Legal experts said the apex court\u2019s ruling could set a precedent in terms of how it balances the rights of lenders versus those of homeowners or the public at large.<\/p>\n

A bench headed by Chief Justice Dipak Misra ordered the stay on a public interest litigation (PIL) by Delhi resident Chitra Sharma, who has booked a home in a Jaypee Infratech project.<\/p>\n

Homebuyers in Jaypee Infratech projects were required to fill up forms to register claims in the corporate insolvency resolution process against the firm by 31 August.<\/p>\n

\u201cA total of 32,000 people are being affected and have been left remedy-less,\u201d Aishwarya Sinha, lawyer for Sharma, said.<\/p>\n

In a 9 August order passed by the Allahabad bench of NCLT, liquidation proceedings against Jaypee Infratech were initiated under the Insolvency and Bankruptcy Code of India (IBC), 2016.<\/p>\n

Jaypee Infratech has defaulted on Rs526.11 crore of loans outstanding to IDBI Bank Ltd. Jaypee Infratech is a subsidiary of Jaiprakash Associates Ltd.<\/p>\n

Sharma\u2019s plea sought a stay on the NCLT order, and urged the court to conduct a forensic audit of Jaypee Infra and Jaiprakash Associates.<\/p>\n

As per the NCLT order, it is mandatory for homebuyers to submit forms B and C issued by the insolvency resolution professional (IRP) which pertain to financial creditors. However, on 16 August, IBC was amended to include homebuyers as another category of individual creditors.<\/p>\n

The petition submitted that such an order was forcing homebuyers to submit themselves to the jurisdiction of the IBC, even though it does not cater to their interests.<\/p>\n

Jaypee Infratech was among the 12 companies, where the Reserve Bank of India (RBI), through its 13 June directive, had asked banks to file insolvency petition.<\/p>\n

\u201cIn the pecking order under IBC, lenders are above unsecured creditors and the homebuyers in this case are unsecured creditors. Supreme Court\u2019s ruling will also set a precedence for such cases (specifying) where homebuyers or larger public interest stand and balance it with the rights of lenders under IBC. We will have to see whether the apex court ruling rules on the constitutionality of IBC or limits it to case specifics,\u201d said Ajay Bhargava, Partner, Khaitan and Co., a law firm.<\/p>\n

IDBI Bank is expected to seek legal opinion and then call for a meeting of the joint lenders\u2019 forum to chart out the future course of action, said a person aware of the matter, requesting anonymity.<\/p>\n

\u201cI don\u2019t think this case will deter lenders from filing insolvency cases because this matter dealt exclusively with homebuyers. IBC allows cases to be filed by financial as well operational creditors and in most cases operational creditors have been proactive in filing a petition. But definitely, there will be more clarity for other potential cases from the real estate sector,\u201d said an official at a Mumbai-based public sector bank on the condition of anonymity.<\/p>\n

Apart from the initial 12 cases, banks have started work in identifying other borrowers against whom they can file insolvency cases as part of resolution mechanism. RBI has also sent a second list of at least 26 defaulters, where banks have to decide on a resolution package before 13 December. If there is no resolution, lenders can initiate action under IBC<\/p>\n

Jaypee Group\u2019s flagship firm Jaiprakash Associates Ltd is part of the second list drawn up by RBI.<\/p>\n

\u201cWhile it is true that treating flat-buyers as unsecured creditors is unfair and unjust, it must also be borne in mind that IBC is not a consumer protection law. Consumer protection requirements vary across sectors and should ideally be left to sectoral laws. For instance, the Real Estate (Regulation and Development) Act, 2016, currently states that 70% of the amount paid by allottees should be kept in an escrow to cover construction and land costs. Further protection could be extended to flat buyers under this law to ensure that prepayments are bankruptcy remote,\u201d said policy researcher Pratik Datta.<\/p>\n

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