The Supreme Court
on Thursday ordered that the insolvency
case of Jaypee Infratech be returned to the National Company Law Tribunal
(NCLT), and the entire process, including the bidding for the asset, be restarted.
This follows the amendment of the Insolvency
Code (IBC), in June 2018, bringing homebuyers on a par with financial creditors. Though the amendments are not retrospectively applicable, in this case they will be according to the Supreme Court
According to sources, homebuyers’ dues in the case are about Rs 99 billion; Jaypee owes bankers Rs 100 billion. Of the 35,000 units booked by homebuyers in Jaypee’s housing projects, 20,000 are yet to be completed.
“Now the committee of creditors (CoC) will be controlled by the homebuyers, as their dues will be equal to the bankers put together,” said Nilesh Sharma, senior partner at Dhir and Dhir Associates.Two legal sources told Business Standard that the Supreme Court
order in this case, issued under Article 142 of the Constitution, does not set a binding precedent for all other IBC cases.
This means corporate entities undergoing the IBC process cannot cite this case to restart the 180-day period for insolvency
resolution and the CoC meetings. It will, however, apply to those cases where homebuyers were not included in the CoC meetings.
Experts said resolution applicants will have to present a plan to take care of the interest of homebuyers and bankers, or pay all dissenting creditors upfront. The IBC states that such creditors must be paid the liquidation value, which in Jaypee’s case, is Rs 70 billion.
Those close to the resolution professionals said since the groundwork for the case was already been done, it would not be a problem to find a resolution. With this order, promoters of Jaypee Infratech are out of the bidding race for the company. Homebuyers can bargain between getting possession of their flats or getting their money back, said experts. The money (Rs 7.5 billion) collected by the court from the promoters of Jaypee Infratech will be transferred to the NCLT.
The Allahabad Branch of the NCLT
is hearing the case. The petition in the Supreme Court
was filed by homebuyers who opposed the insolvency
proceedings, fearing they would lose their investment.
Before the Supreme Court
started hearing the case, the bidding process had been completed. The highest bidder was Lakshadweep, a joint venture between Suraksha Asset Reconstruction
and Dosti Realty.
But, the CoC rejected their offer. IDBI is the main lender to Jaypee.