NBCC Assures Jaypee Homebuyers Of Project Completion Within 3 Years
Three years from now, state-owned NBCC plans to deliver all Jaypee projects. For this, Mumbai-based Suraksha Group has made an offer of Rs 20 crore as upfront payment and land which is worth Rs 5,000 crore. The decision was taken at a meeting convened by the NBCC on March 11 that was attended by over 300 homebuyers.
Homebuyers raised some pertinent queries and the NBCC regarding the status of their units. NBCC has confirmed that if there is any swapping of units, it would be done only after the consent of homebuyers and in the same project, if necessary. As for compensation for delay, AK Mittal, Chief Managing Director, NBCC has confirmed that it wouldn't be less than Rs 5 per sq ft but a revised bid is being prepared. Meanwhile, both NBCC and Suraksha will submit a revised bid within the next five days.
Meanwhile, homebuyers are concerned that NBCC may be striving for a balance in the situation but may end up favouring the banks that had voted against the resolution in the last creditors meeting.
On August 9, the Supreme Court (SC) had handed over the case to the Allahabad Bench of the NCLT for resolution in six months. The SC had directed that homebuyers must be included in the committee of creditors in line with the amendments made to the Insolvency and Bankruptcy Code, 2016. It has been decided in the committee of creditors (CoC), homebuyers will have a 62.3 per cent representation.
Let us look at what transpired in the past one year in what is being termed as one of the first insolvency cases against a real estate developer in India.
The fall of the titan
A year has passed by since the NCLT admitted the insolvency petition moved by IDBI Bank against Jaypee Infratech, one of the leading real estate developers in the National Capital Region. The developer was booked under Section 7 of the Insolvency and Bankruptcy Code, 2016, and was asked to clear its debts or find a resolution within 180 days, extendable by another 90 days. Affected homebuyers, who till date await the delivery of their homes, were also asked to raise claims. One year on, homebuyers in Jaypee’s projects are still staring at uncertainty.
Later on September 11 this year, private lender ICICI Bank had moved the National Company Law Tribunal (NCLT) against Jaiprakash Associates Limited (JAL) over non-payment of Rs 1,200-crore dues.
The courtroom drama
Launching action against the company liquidation because it could have jeopardised their interest (homebuyers were unsecured investors before the Insolvency Code was amended. This would have meant they would have been the last in the line to make claims in case the company was declared insolvent), several buyers moved the Supreme Court (SC) against the IDBI Bank’s move.
Admitting several petitions, the apex court directed the developer to pay Rs 2,000 crore, barred top management of the company from leaving the country and also directed that the non-institutional directors of the parent company, Jaiprakash Associates Limited (JAL), to appear in person and furnish details of their personal assets.
In November, the developer submitted a demand draft of Rs 275 crore and was asked by the court to deposit Rs 275 crore in two tranches by December-end. This amount was submitted by the developer within the set deadline.
In the meantime, the top court ordered that a web portal be created where aggrieved homebuyers – estimated to be 35,000 in number – could register their complaints.
In May this year, the SC stayed the liquidation proceedings and asked the Jaypee promoters to deposit Rs 1,000 crore by June 15 to refund homebuyers. Later in July, the apex court reduced this amount to Rs 600 crore and said it would ask the NCLT to expedite the case and decide on revival or restructuring. Latest reports indicate JAL will deposit the Rs 600 crore in seven installments for paying the principal amount to the homebuyers.
Amid the courtroom drama that involved several alterations in timeframes, strategies and restructuring process, affected homebuyers took to the streets, and to the internet demanding stern action against the developer. While some of these homebuyers were looking for a refund of the money, others placed their demand of early possession. Some of them have been waiting for the possession of their flat for over a decade.
As the unrest among homebuyers grew, Union Minister Arun Jaitley and Uttar Pradesh Chief Minister Adityanath assured them justice.
The state government appointed a three-member committee to look into homebuyers’ grievances.
Later the Yamuna Expressway Industrial Development Authority (YEIDA) said that homebuyers in Jaypee's six scrapped projects – Budh Circuit-01, Budh Circuit-02, Nature View, Boulevard, Aman-III and Udaan – would be refunded at any cost.
The growing uncertainty
Initially, Jaypee had planned to raise Rs 2,500 crore from the Yamuna Expressway project to refund buyers. That plan did not work out. Plans of a takeover of the insolvency-hit company did also not materialise.
When Lakshadweep Pvt Ltd, a joint venture between Sudhir Valia-led Suraksha Asset Reconstruction Company and Mumbai-based Dosti Realty, won the bid to buy the company for Rs 7,350 crore, Jaypee declined the offer on the grounds of undervaluation.
Rumours of a takeover by Vedanta were also refuted by the company.
It also put forth an affidavit in the SC, stating that with the help of interim funds, it could finish its under-construction flats.
In another move to placate them, Jaypee 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. This offer received a cold response.
The winning moment
The sole winning moment for the affected homebuyers so far has been the awarding of ‘financial creditors’ in insolvency proceedings. Through an amendment in the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018, the government has brought homebuyers on an equal footing with financial institutions. Under the changed norms, homebuyers along with banks will have the first claim on a company’s asset in case it is liquidated.
Financial creditors which include homebuyers, financial institutions and fixed deposit holders have made new demands. Appointment of a new resolution professional is one of them. In a previous meeting, the reappointment of Anuj Jain, interim resolution professional was rejected. Next, Deloitte Touche Tohmatsu India LLP may be appointed to assist the IRP. Besides, the proposed fee of the resolution professional was also discussed. Dealings between JIL and JAL; forensic audit of JIL, role of resolution professional in fixing RERA timelines, interest penalty accumulated in the National Company Law Tribunal were other matters discussed in the recent meeting.
Earlier, the National Consumer Disputes Redressal Commission (NCDRC) had allowed Jaypee homebuyers to file a case against parent company Jaypee Associates Limited (JAL) seeking compensation and possession. However, the NCDRC says the homebuyers cannot approach it against Jaypee Infratech as insolvency proceedings against the developer are underway.