The Supreme Court on Monday stayed insolvency proceedings instituted against real estate firm Jaypee Infratech by the Allahabad Bench of the National Company Law Tribunal.
The stay order passed by a Bench led by Chief Justice of India Dipak Misra was on the basis of the argument made on behalf of more than 30,000 home buyers, who have not yet received their flats in 27 different projects of Jaypee Infratech.
The buyers said the proceedings under the Insolvency and Bankruptcy Code (IBC) of 2016 gives priority in clearing the debts of secured creditors like banks and financial institutions. This may leave “unsecured creditors” — individual flat buyers who have invested money for a roof above their heads — in the lurch.
The petition filed by Delhi resident Chitra Sharma and other home buyers said the proceedings in NCLT under IBC would leave them without a remedy. The petition has challenged the IBC for violating Articles 14 (right to equality) and 21 (right to life) of the Constitution. The petition argues that certain provisions in the Code “curtail the legal statutory and vested rights of the flat owners/buyers as consumers" defined under the Consumer Protection Act.
‘Secured creditor tag’
The petition seeks the court to issue a judicial direction to the government to declare flat buyers as secured creditors like banks and other financial institutions.
The home buyers fear that if the insolvency process was not successful, liquidation process of the company would be initiated, the petition said.
The petition apprehended that if the company went into liquidation, the flat buyers' investments would be taken over by financial and corporate liquidators.
Home buyers were left in dire straits after the NCLT, on August 10, admitted IDBI Bank's plea to initiate insolvency proceedings against Jaypee Infratech for defaulting on a ₹526 crore loan.
“To recover a debt of over ₹500 crore, our investments worth over ₹25000 crore are at stake,” the counsel for the flat buyers explained their plight.
The court posted the next hearing for October 10, 2017.
