SC stays insolvency proceedings against Jaypee Infratech
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SC stays insolvency proceedings against Jaypee Infratech

This move, taken in response to a PIL filed by homebuyer Chitra Sharma, spells respite for nearly 40,000 buyers in Noida and Greater Noida. The PIL says insolvency proceedings against the company will render buyers without any remedy.

SC stays insolvency proceedings against Jaypee Infratech

The Supreme Court today stayed the insolvency proceedings against real estate firm Jaypee Infratech at National Company Law Tribunal (NCLT), Allahabad, initiated at the instance of its financier IDBI. This move spells respite for around 40,000 buyers in Noida and Greater Noida.

According to the buyers, a bench comprising Chief Justice Dipak Misra and Justices AM Khanwilkar and DY Chandrachud also sought the response of the realtor, the RBI and others on a PIL filed by Chitra Sharma and other homebuyers.

The PIL alleged that buyers had not received the flats and insolvency proceedings initiated against the company will render them without any remedy.

Petitioner Sharma told City Spidey that the court also issued notices to Jaypee Infratech and others on a plea filed by homebuyers who are yet to receive possession. “The court will examine the plea during the next hearing on October 10,” she added.

The plea said the homebuyers, being unsecured creditors, will get nothing out of the insolvency proceedings as the dues of financial institutions —or secured creditors — would be cleared first. It further says that the Insolvency and Bankruptcy Code (IBC) “shall not curtail the legal statutory and vested rights of the flat buyers as consumers” defined under the Consumer Protection Act.

As an alternative, the PIL added, a direction may be issued to the government that flat owners or buyers be declared secured creditors like banks and FIs.

Advocate Aishwary Sinha said the petition alleged that the action of the ministry of state for 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.

It also claimed that if homebuyers refused to become unsecured creditors and the company goes into liquidation, their hard-earned money would go to the financial and corporate liquidators.

The Allahabad bench of the NCLT had admitted IDBI bank's insolvency plea against Jaypee Infratech. IDBI had filed the insolvency plea after the realtor defaulted on a loan of around Rs 526 crore.