Supreme Court Stays Liquidation, Asks Jaypee To deposit Rs 1,000 Crore By June 15
Homebuyers are constantly puzzled as complexities of the case keep deepening even after seven months when the National Company Law Tribunal (NCLT) admitted IDBI Bank's plea against Jaypee Infratech under the Section 7 of the Insolvency and Bankruptcy Code, 2016.
While the the Supreme Court (SC) on May 16 stayed the liquidation proceedings against Jaypee Infratech, it asked the promoters to deposit Rs 1,000 crore by June 15 to refund homebuyers. Now, the matter has been listed for hearing on July 4.
Earlier, Jaypee had said that the company was greatly undervalued during the bidding process and had put forth an affidavit to the SC, stating that with the help of interim funds, it could finish the flats. However, this proposal has been rejected by the apex court as the statute bars an ailing company to bid.
Lakshadweep Pvt Ltd, a joint venture formed between Sudhir Valia-led Suraksha Asset Reconstruction Company and Mumbai-based Dosti Realty, had emerged as the winner among bidders with a whopping Rs 7,350 crore bid. Jaypee rejected Lakshadweep's Rs 7,350-crore offer on grounds of undervaluation. Two independent valuers had estimated Jaypee's liquidation value between Rs 12,469 crore and Rs 14,798 crore.
Resultantly, the fate of over 20,000 homebuyers looks gloomy. While Jaypee has offered to give 2,000 shares to each of its homebuyers and proposed to bear 50 per cent of stamp duty on first registration as part of the offer, buyers have given the offer a cold response. The group has also promised to deliver all units within 42 months.
Meanwhile, the SC had also given permission to two of the managing directors of the company to travel within a stipulated period of time adding that if the Rs 100 crore is not submitted till May 10, the company runs the risk of losing the personal properties of the directors.
On March 21, the SC asked Jaypee Infratech to deposit Rs 100 crore by April 6 and the next Rs 100 crore by May 10. So far, Jaypee has managed to settle Rs 650 crore.
Homebuyers in a dilemma
For real estate buyers, the real worry is the significant delays that they have to deal with. Meanwhile, banks haven’t spared them either ‘threatening’ with legal recourses which could mean attaching the property and sale of assets.
In such a case, homebuyers should approach the judiciary. As in Supertech’s case where the developer firm was asked to pay the installments, homebuyers can always seek the judiciary’s intervention if they see that it might be difficult to take possession of the flat they have paid for. Experts also point out that while it may be unfair to expect homebuyers to continue with the EMIs, they should not stop paying the EMIs without permission or consultation.
Affected homebuyers took to social media with pleas put forth to the government to help them get their units. Some others are asking for other developers to join Jaypee and finish the projects. There are also buyers who have been posting images of under-construction projects of Jaypee, wondering about the completion schedule.
The case history
Jaypee's insolvency case has been in news for quite some time now. Not too long back, as per the apex court's mandate, JAL had to deposit Rs 550 crore in installments by January 25. By depositing Rs 125 crore, JAL has managed to stick to the mandate.
A bench headed by Chief Justice Dipak Misra had earlier asked the firm to deposit Rs 2,000 crore with its registry. Citing its inability to come up with a hefty amount, JAL had sought time after which the SC directed JAL to deposit the amount in installments.
The developer on November 22 deposited a demand draft of Rs 275 crore. Following which, the SC Bench, headed by Dipak Misra, had asked the developer to deposit Rs 150 crore by December 14 and another Rs 125 crore by December 31, rejecting the company's plea to deposit the amount by June 2018. "This court has nothing against you. Homebuyers need to get back their money. These people (directors) have gone to the top at the expense of homebuyers' money. You mortgage, sell your assets, jewellery and payback. Otherwise, we will attach your properties," the Bench said. Any violation of this can hold Jaypee liable for criminal prosecution and contempt action.
Earlier, Jaypee had submitted an affidavit saying that it would submit Rs 2,000 crore but in instalments by June, 2018.
The amicus curiae was asked to set up a second portal to "keep alive" grievances of the homebuyers of JAL. On November 22, the Supreme Court (SC) directed 13 directors of the debt-ridden developer not to sell or transact any of their or their family members' personal property.
The money that JAL needs to deposit as penalty — Rs 2,000 crore which the company is finding impossible to submit — would be used to pay off the aggrieved homebuyers who have invested in various projects of the company. So far, 627 units have been delivered to homebuyers since the proceedings against the company began.
The Jaypee Insolvency case has taken various twists and turns so far. Here is what has transpired in past few months:
*Allahabad bench of the National Company Law Tribunal (NCLT) admits the petition filed by the IDBI Bank against Jaypee Infratech under Section 7 of the Insolvency and Bankruptcy Code 2016.
*Jaypee Infratech asked to clear debts within 180 days or find a resolution within the stipulated period. The time frame could be extended by another 90 days. The court asks homebuyers and banks to raise claims by August 24, 2017.
*The NCLT appoints Anuj Jain as the CEO of Jaypee Infratech to oversee the insolvency proceedings.
*Homebuyers dilemma and protests amidst debates on their status as unsecured creditors. Buyers take to the road and social media.
*Noida Authority promises to protect home buyers' interests. Noida Authority CEO Amit Mohan Prasad is quoted saying, "Hard earned money of home buyers will not be allowed to go down the drain."
*Authority to work on rescheduling the payment plan under which developer will be directed to deposit the dues within a specified period.
*Unsold inventory of Jaypee to be taken over by the Authority and auctioned to recover dues and has already written to the Uttar Pradesh government for permission.
*In the interim, before 24 August, a homebuyer, who comes under category of a financial creditor, needs to file form-C. The form can be downloaded from the website.
*Union Finance Minister Arun Jaitley assures that homebuyers who have paid money to the real estate developers should and will get their homes.
*The government considers whether homebuyers will need to file any claim forms by August 24. The developer could very well obtain statements of accounts of payments made by homebuyers from its records and send these to each home buyer to check for any discrepancy. Those in Jaypee Aman's project needn't fill the claim form.
*The Supreme Court to hear a Public-Interest Litigation (PIL) on behalf of over 30,000 homebuyers who have invested in Jaypee Infratech's projects. Senior advocate representing the homebuyers was quoted saying that once these affected sign the forms (Form F), it would prevent them from initiating any case against the developer in a consumer court which thwarts their right to justice.
*As the number of homebuyers raising a PIL keeps swelling, the Supreme Court (SC) adjourns the hearing to September 4, 2017.
*About Rs 16,000 crore is stuck in Jaypee Infratech's projects and homebuyers plead that any resolution plan should monitor and enforce that the funds for project completion should be put into an escrow account according to the norms of the Real Estate Law. Meanwhile, these homebuyers also asked the Uttar Pradesh government to intervene meaningfully.
*The Yamuna Expressway Industrial Development Authority (YEIDA) assures homebuyers in Jaypee's six scrapped projects that they would be refunded at any cost. The scrapped projects include Budh Circuit-01, Budh Circuit-02, Nature View, Boulevard, Aman-III and Udaan where construction had not even started although possession was scheduled for 2016. In worst case scenario, the YEIDA maintains that it will cancel Jaypee's lease and liquidate its assets to recover the money if the developer fails to pay the first installment of refunds by the end of October 2017. There are over 3,300 homebuyers who have invested in these projects.
*A three-member committee is appointed by the Uttar Pradesh Chief Minister Yogi Adityanath to look into the grievances brought forth by homebuyers. Urban Housing Minister Suresh Khanna, Industries Minister Satish Mahana and State Minister of Cane Development and Sugar Mills Suresh Rana are the members of the committee who after much deliberation bring to notice that co-developers could be brought in to complete the projects. Homebuyers are assured that they need not pay any outstanding amount till the units are completed. The delivery of these flats is the focus because a majority of the buyers preferred to take the flat and not the refund or compensation.
*The Supreme Court has directed JAL to deposit Rs 2,000 crore by October 27 and all the directors and managing directors of the company have also been directed to not leave the country without permission. These measures have been taken to safeguard the interests of the homebuyers, most of whom are salaried class.
*Chief Justice Dipak Misra also an amicus reportedly said, “We are not concerned about the companies, but only about the interest of homebuyers."
*Uttar Pradesh Chief Minister, Yogi Adityanath assures homebuyers in Jaypee's projects that the developer firm would deliver 600 flats monthly, starting November. This was the decision communicated to three-member committee.
*The Supreme Court refuses to entertain any urgent application by Jaypee Associates (JAL) for modification of the order in September that said that the holding company of distressed Jaypee Infratech should deposit Rs 2,000 crore in the apex court by October 27.
*More than 1,150 homebuyers who had put their money in Jaypee Wish Town and Kosmos have received possession letters over the last two months. By December 2017, another 2,300 homes may be ready for possession if the work goes on without hurdles. Jaypee has also said that it has plans to raise Rs 2,500 crore from the Yamuna Expressway project.
*The SC directed the non-institutional directors of JAL to appear in person and furnish details of their personal assets. The court had on November 6 refused to allow the company to deposit Rs 400 crore with its registry as against Rs 2,000 crore as directed earlier.
*Mining giant Vedanta expressed interest in Jaypee Infratech. In a BSE filing, Vedanta Ltd said that it has "submitted a preliminary non-binding Expression of Interest for submission of resolution plan of Jaypee Infratech Ltd under corporate insolvency process (CIRP)". However, no negotiations have taken place yet.
SC also appointed advocate Pawan Shree Agrawal, as amicus curiae and ordered setting up a web portal in order to enable the homebuyers of the Jaypee Infratech to register their grievances.
After the Supreme Court (SC) gave Jaiprakash Associates Limited (JAL) a tough time in November for paying the penalty on time, the focus has shifted to the aggrieved homebuyers. In a fresh development to help the homebuyers who invested in Jaypee's projects, a new website had been launched to allow buyers to register their claims. The buyers could log on to https://www.amicusjaypee.in/tiki-index.php , amicus curiae of the Jaypee insolvency case, Pawan Agrawal informed the SC. It was in November that the SC had directed that an online provision should be available to the aggrieved homebuyers.
The homebuyers, looking for a refund or possession of the flat, had to register on the above-mentioned web address.
As per senior advocate Mukul Rohatgi and lawyer Anupam Lal Das,
appearing for JAL, only eight per cent homebuyers had opted for refund of money, while 92 per cent wanted their homes.