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Reprieve for over 30,000 homebuyers, Supreme Court stays NCLT order initiating insolvency proceedings against Jaypee Infratech

Flat-buyers had contended before court that they will neither get a home nor a refund of their hard earned money on account of being "unsecured creditors".

Reported by: India TV Business Desk, New Delhi [Updated:04 Sep 2017, 2:43 PM IST]
SC was hearing a plea of aggrieved homebuyers of Jaypee
SC was hearing a plea of aggrieved homebuyers of Jaypee InfratechPhoto:PTI

In big relief for thousands of aggrieved homebuyers in projects of Jaypee Infratech, the Supreme Court today ordered a stay on the order of the National Company Law Tribunal initiating insolvency proceedings against the real estate company. The apex court was hearing a plea filed by several homebuyers who had booked flats in several projects of Jaypee Infratech.

A bench comprising Chief Justice of India Dipak Misra, and Justices A M Khanwilkar and D Y Chandrachud also issued notices to Jaypee Infratech on the plea moved by homebuyers who had not received possession of their flats despite having paid heavy amounts against it.  

The matter has now been posted for further hearing on October 10.

On August 9, the Allahabad bench of the National Company Law Tribunal admitted a petition by IDBI Bank for insolvency proceedings against Jaypee Infratech Ltd. and also approved the appointment of an interim resolution professional.

Jaypee Infratech is among the 10 of 12 companies identified by the RBI against whom various benches of NCLT have admitted insolvency proceedings. The insolvency proceedings follow the Reserve Bank of India’s June 13 directive to banks to this effect.

Flat-buyers had contended before court that they will neither get a home nor a refund of their hard earned money on account of being "unsecured creditors".

"Around 32,000 buyers have booked their homes in 27 different housing projects of Jaypee Infratech and they are left in the lurch as the insolvency proceedings have been started against it," senior advocate Ajit Sinha, appearing for 24 flat-buyers had said earlier.

As per the provisions of the Insolvency and Bankruptcy Code of 2016, the financial interest of secured creditors like banks takes precedence over that of flat buyers who have been tagged under the category of unsecured creditors.  

The petition alleged that the action of the Ministries of Finance and Corporate Affairs of introducing Section 14 of the Code was "unjust, unfair and unreasonable" and violative of Article 14 (Right to Equality) and 21 (Right to Life) of the Constitution.

The home buyers fear that if the insolvency process is not successful, then the liquidation process of the company would be initiated, it said.

It also claimed that if the home buyers refuse to be an unsecured creditor and the company goes into liquidation, their hard-earned money would go to the financial and corporate liquidators.

Hundreds of home buyers have been left in the lurch after the National Company Law Tribunal (NCLT), on August 10, admitted the IDBI Bank's plea for initiating insolvency proceedings against the debt-ridden realty company for defaulting on a Rs 526-crore loan.

Jaypee Infratech is into road construction and real estate business. It has constructed the Yamuna Expressway, connecting Delhi to Agra.

(With PTI inputs)