Relief to flat-buyers as SC puts breaks on Jaypee's insolvency

New Delhi: The Supreme Court on Monday stayed the insolvency proceedings initiated by the Allahabad bench of the National Company Law Tribunal against real estate firm Jaypee Infratech. The tribunal had accepted IDBI Bank's plea and classified Jaypee Infratech as insolvent for defaulting on a Rs 526-crore loan.

A three judge bench of Justices Dipak Misra and Justices A.M. Kanwilkar and D.Y. Chandrachud issued notice to Jaypee, Reserve Bank of India and others on a batch of writ petitions filed by Chitra Sharma and other buyers of houses who could not get possession from the company even after several years after depositing the money.

It was submitted by the petitioners that they have not received the flats and the insolvency proceedings initiated against the company will render them without any remedy.

Their counsel informed the bench that being unsecured creditors, the buyers will get nothing out of the insolvency proceedings as the dues of financial institutions, which are secured creditors, would be cleared first. They wanted protection of the interests of over 30,000 buyers who invested hard-earned money to book their dream homes in 27 different projects of debt-ridden realty firm Jaypee Infratech.

Flat buyers, said that under the Insolvency and Bankruptcy Code of 2016, do not fall under the category of secured creditors like banks and hence they may get back their money only if something is left after repaying secured and operational creditors.

The plea has sought a direction to the Centre and others that the Insolvency and Bankruptcy Code “shall not curtail the legal statutory and vested rights of the flat owners as consumers” defined under the Consumer Protection Act.

The petitions 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.