Observing that flat buyers who have paid money to developers should get their flats, Finance Minister Arun Jailtey said "our full sympathy" is with the aggrieved home buyers. The minister's comments came after the initiation of insolvency proceedings against Jaypee Infrastech threw its buyers into a lurch.
The Finance minister said there is a provision for running a company under insolvency proceedings.
"Those who are aggrieved can get remedy under this law (the Insolvency and Bankruptcy Code). If there is any such move, the government's full sympathy is with those who have paid money and have rights on the flats," the minister said in reply to a question on problems being faced by the Noida home buyers at a post-Cabinet briefing here.
Jaypee Infratech, part of the debt-ridden Jaypee group, has defaulted on Rs 526.11 crore outstanding loan to IDBI.
“The people who have paid money to developers should get their flats. The government’s sympathy is with the flat buyers,” the Finance minister said.
The ministers comments should comne as a sign of relief for the thousands of home buyers who were left in a lurch after the Allahabad bench of the National Company Law Tribunal (NCLT) on August 9 admitted IDBI Bank’s plea to begin insolvency proceedings against Jaypee Infratech for defaulting on Rs 526 crore loan.
The FM's remarks are of significance not just for the buyers at Jaypee, but several others who have been faced with the double whammy of delays in possession and monthly loan interests. Several projects, particularly in the outskirts of the national capital, have been delayed by years, putting investors who put their hard-earned money into their projects in a fix.
Jaypee, for instance, has its biggest incomplete project as the Wish Town project in Noida on the outskirts of the national capital. The company has reportedly handed over only 5,500 flats out of the proposed 32,000 flats and 3,000 plots across 800 acres along the Noida-Greater Noida Expressway. The project has 305 towers, of which 250 are incomplete.
Speaking to reporters today, Jaitley pointed out that there are provisions within law for buyers affected by the initiation of insolvency proceedings.
The process, which Jaitley was apparently referring to for homebuyers, is that of aggrieved homebuyers seeking a refund. The NCLT has asked the homebuyers to file their claims by August 24. Two companies of Jaypee group – Jaypee Infratech and Jaypee Associates — are developing projects in Wish Town Integrated township.
Homebuyers who have purchased flats through Jaypee Infratech need to approach the Interim Resolution Professional (IRP) for refund of their money in case revival of the company fails.
The court had appointed Anuj Jain as the Interim Resolution Professional (IRP) to carry out the proceedings under the Insolvency and Bankruptcy Code. He has been given a 6-month timeframe to revive the company by repaying debts to financial creditors and homes to buyers. The period can be extended by three more months, if needed.
If Jain is unable to revive the projects, assets of Jaypee Infratech will be sold and recovered money will be distributed among creditors including homebuyers.
However, the bigger worry for homebuyers is of the consequences if the revival efforts fail. As per the process laid down, the IRP will be entitled to distribute funds giving banks and financial lenders highest priority and then the buyers. In such a case, buyers fear that their life earnings that they invested for a dream home may go down the drain because their interests come low on the list of priorities as per law.
Govt to sell builders’ asset to complete projects?
Reports suggest that the government was exploring if it was legally tenable under insolvency laws to sell its assets to raise money to complete pending housing projects of the company.
According to a Finance Ministry official, the ministry will have to first discuss with the Corporate Affairs Ministry if the bankruptcy code provides any legal ground for sale of other assets of companies to fund completion of pending projects.
Japyee Infratech is among the 12 big corporate loan defaulters against whom bankruptcy proceedings has been initiated under a new law. The company is into road construction and real estate business. It has constructed the Yamuna Expressway, connecting Delhi-Agra. The biggest incomplete project of Japyee is the mammoth Wish Town project in Noida, on the outskirts of the national capital.
Other companies against whom such proceedings has been initiated include Bhushan Steel, Bhushan Steel and Power, Electrosteel Steels and Lanco Infratech, Alok Industries and Jyoti Structures.