NCLT has admitted the insolvency petition filed by IDBI Bank against the debt-ridden Jaypee Infratech and it has allowed Bank of Baroda's plea against Amrapali Group. Home buyers in the projects of both these firms are demanding that their money be returned first as they fear if the company is declared insolvent, all their court cases will become ineffective and they will not be able to get possession of their flats and lose their hard-earned money.
Consumer rights experts believe that the fears of the property buyers are valid, as till now there are not many provisions in the law which would help the aggrieved parties to recover money. Around 32,000 home buyers of Jaypee as well as 30,000 flat owners of Amrapali group are facing immense anxiety over the NCLT issue.
"Home buyers are financially starved; they do not have the wherewithal to fight these developers. The government, at the prime minister's level, now needs to intervene and come out with laws that would help these people either get their money back or get the projects completed. This should be treated as a national issue now," said consumer rights expert and founder of Consumer Online Foundation, Bejon Misra.
Jaypee Infratech is among 12 big corporate loan defaulters against which RBI (Reserve Bank of India) has ordered initiation of insolvency proceedings. The company had a debt of about Rs 8,000 crore till March 2017.
The company, which is developing about 32,000 flats and plots across various projects in Wish Town, has been facing protests and litigation from home buyers due to huge delays in completion.
According to industry experts, this is the first time that home buyers are facing a problem of this scale. With not many viable options available, they fear buyers would be left high and dry.
"This is the first time that thousands of people have been affected by developers. Home buyers in most cases paid almost 90 per cent of the amount; even after that, errant developers did not pay the authorities for the leases. Some of the options are that the authorities take over the project and give it for auction, or allow home buyers to complete construction on their own. In both these cases, someone has to shell money," said Amol Shimpi, associate dean and director, RICS School of Built Environment.
According to top finance ministry officials, the government may consider selling assets of Jaypee Infratech to complete pending projects and explore possibility of appointing receiver or state agencies for completion.
It is also planning to consult the corporate affairs ministry in case the bankruptcy code has legal provisions for sale of other assets for completion of projects. "We will discuss with the corporate affairs ministry if the bankruptcy code provides any legal ground for sale of other assets of companies
such as Jaypee and Amrapali to fund completion of pending projects," said a senior official.
Running out of options
Thousands of home owners in beleaguered real estate developments owned by Jaypee Infratech and Amrapali Group are running out of options as both head for National Company Law Tribunal
While officials in the finance ministry say the government is working on ways to relieve home buyers, experts believe that homeowners would not be able to do much in case firms are declared insolvent
Consumer rights experts believe that the fears of the property buyers are valid, as till now there are not many provisions in the law which would help the aggrieved parties to recover money
Around 32,000 home buyers of Jaypee as well as 30,000 flat owners of Amrapali group are facing immense anxiety over the NCLT issue