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SC stays Insolvency Proceedings against Builder: Big Relief to Jaypee Home Buyers

Team SoOLEGAL 4 Sep 2017 5:11pm

SC stays Insolvency Proceedings against Builder: Big Relief to Jaypee Home Buyers

Supreme Court today, issued a notice to real estate firm Jaypee Infratech and others on petitions filed by homebuyers who are yet to receive possessions of their flats. The SC also stayed the insolvency proceedings initiated against the firm at the National Company Law Tribunal (NCLT), Allahabad. It is a great relief to the Home buyers.

The Apex Court bench headed by Chief Justice of India Dipak Misra, also comprising Justices A M Khanwilkar and D Y Chandrachud was hearing the petitions filed by aggrieved home buyers and argued by their lawyers as thousands of home buyers still haven’t received possessions of their dream home booked by the company.

The Allahabad bench of NCLT had declared Jaypee Infratech an insolvent company on August 9 on the petition filed by Industrial Development Bank of India (IDBI) under section 7 of Insolvency and Bankruptcy Code 2016. Homebuyers were given time until August 24 to file their petitions and join the proceedings.

The IDBI filed an insolvency plea after the Jaypee Infratech defaulted on a loan of around Rs. 8,500 crores, although the bank claimed that it has seized sufficient assets of the company that can cover the amount of loan.

The Court sought the response from the company, RBI and others on a plea filed by Chitra Sharma and other home buyers alleging that they have not received their homes, also claiming that the insolvency proceedings against the company will render them without any remedy. 

The plea stated that home buyers, being unsecured creditors, will receive nothing out of the insolvency proceedings as the Financial credit institutions, as being secured creditors, would be cleared of their dues first.

The appeal moved to the Supreme Court seeking protection of the interests of almost 32000 home buyers who invested their lifelong savings to reserve their dream home in 27 different projects of financially ruined Jaypee Infratech company. They may receive something in the end after the secured creditors get their full coverage.

The plea sought the Court’s directions to the Government and others that Insolvency and Bankruptcy code 2016, is not sufficient to curb the basic rights of the home buyers as “consumers” defined under the Consumer Protection Act.   

The petitioners alleged that the move of the Ministries of Finance and Corporate Affairs of introducing Section 14 of the Insolvency and Bankruptcy Code, 2016 was inequitable, unfair, discriminatory and violative of Article 14 (Right to Equality), Article 21 (Right to Life) of the Constitution.

If the insolvency fails and the company goes into liquidation, the lifelong savings of the home buyers would go to the financial and corporate liquidators.

The bench scheduled the further hearing on October 10 to discuss a batch of issues related to the case.

Tagged: Supreme Court   Chief Justice of India Dipak Misra   Justices A M Khanwilkar   Bankruptcy Code   Jaypee  
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