Facts of the case
Jaypee Infratech Ltd (hereafter referred to as JIL) is a special purpose vehicle created by its holding company, Jaiprakash Associates Limited which committed default of Rs. 526.11 crores in the repayment of its dues against IDBI bank and took advanced money from home buyers for sale of houses. But sooner, JIL turned into a non-performing asset (NPA). Therefore, the IDBI Bank filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal, Allahabad to initiate Corporate Insolvency Resolution Process against it. The court ordered JIL to deposit Rs 750 crores. During the pendency of the said application, writ petitions were filed in Court by the home buyers concerning the stated project of JIL and seeking clarification as to the manner in which the voting percentage of the allottees (home buyers) will be reckoned.
Arguments presented by the parties
IDBI Bank claimed that JIL had committed default of Rs. 526.11 crores in the repayment of its dues and sought the initiation Corporate Insolvency Resolution Process against JIL. However, JIL filed its objections opposing the admission of the petition. On 9 August 2017, NCLT initiated the CIRP in respect of JIL. An order of moratorium was issued under Section 14 by which the institution of suits and the continuation of pending proceedings, including execution proceedings was prohibited. The Board released a press note clarifying that homebuyers could fill in Form -F as they could not be treated at par with financial and operational creditors. The board ignored the interests of vital stakeholders in building projects, chief among whom are individuals who have invested their wealth in pursuit of the human desire to own a home. The IBC, in the submission of the petitioners, recognized only three categories or classes namely
- corporate debtors;
- financial creditors and
- operational creditors
Not being protected by the IBC, the petitioners argued that the rights conferred upon them by special enactments including the Consumer Protection Act 1986 and by RERA could not be divested. Suspension of the right to seek redressal before an adjudicatory forum left the home buyers without a remedy. Therefore, they filed an appeal in the higher court.
Court categorizes Home Buyers as Financial Creditors
The supreme court stated that a CoC shall be constituted afresh in accordance with the provisions of the Insolvency and Bankruptcy (Amendment) Ordinance, 2018, more particularly the amended definition of the expression “financial creditors”. The amount of Rs 750 crores which has been deposited in this Court by JIL shall together with the interest accrued thereon be transferred to the NCLT and continue to remain invested and shall abide by such directions as may be issued by the NCLT. The Tribunal disposed of Company Appeal and applications therein by a common judgment and gave its decision including home buyers in the list of financial creditors.
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