As per the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 which is an amendment to Insolvency and Bankruptcy Code, 2016 (IBC), the status of homebuyers is classified as financial creditors under the laws of insolvency and bankruptcy.
A case was filed by the IDBI bank against Jaypee Group in the National Company Law Tribunal (NCLT) after which a Petition was filed by the homebuyers against Jaypee Group before the Supreme Court asking for relief, stating that around 32,000 people had booked flats and were paying instalments. However, the Supreme Court has directed the matter back to NCLT for starting afresh.
The Supreme Court of India on Thursday, 9th August, 2018 barred the promoters of Jaypee Infratech Limited (JIL) from participating in any fresh bidding process and directed the Allahabad Bench of the NCLT to initiate fresh insolvency proceedings against JIL.
The Apex Court also directed the Reserve Bank of India to initiate separate insolvency proceedings against Jaiprakash Associate Limited (JAL) which is one of the subsidiaries of the Jaypee Group.
The Court while taking note of the enormity of the issue, stated that the liability of the Jaypee Group was initially thought to be around Rs 2,000 Crore and now it has gone beyond Rs 30,000 crore.
A Bench headed by Chief Justice Dipak Misra and also comprising Justices A. M. Khanwilkar and D. Y. Chandrachud disposed-off all the petitions and applications pending before it and the Bench said that starting from 9th August the insolvency proceeding against JIL is to be concluded within 180 days timeframe set by IBC and the grace period of 90 days will not be granted.
The Bench also refused to refund any money to the homebuyers, saying it would be unfair to other creditors, and ordered to transfer Rs 750 crore deposited by the Jaypee Group in the Supreme Court to the NCLT, Allahabad and to be disbursed eventually among creditors.
The Supreme Court by the aforesaid direction has spread a strong message against promoters of real estate companies that relief will be provided to thousands of homebuyers stranded due to non-delivery of their homes. This protection will go a long way in building the confidence of stranded homebuyers that their hard earned money will not be wasted.