Homebuyers of the embattled real estate developer Jaypee Infratech have urged the Insolvency and Bankruptcy Board of India (IBBI) to ensure that the basis of calculating voting share of homebuyers in the committee of creditors (CoC) should be ‘an aggregate of the principal amount paid to the real estate developer’. Earlier this month, president Ram Nath Kovind gave assent to the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018, providing significant relief to homebuyers by according them financial creditors’ status. So, in case a company/developer is declared insolvent and a resolution professional is appointed, homebuyers can participate in the resolution process, thereby making their voices heard. They will be placed higher than non-financial unsecured creditors.
The homebuyers have also asked the board to specify the manner of voting in meetings of the CoC. “We request that the board allow usage of electronic means for the purpose of voting by home buyers. Such a manner of voting would be akin to the voting methodology applied for shareholders of listed companies, where a large number of shareholders cast their vote using electronic means,” the letter said.
In a letter addressed to the chairman and the members of the board, as many as 2,460 homebuyers have reiterated their demand for a compensation in the form of interest at 15% per annum on the principal amount calculated from the date when the delivery of flats was promised. Such a provision would ensure that the homebuyers are equitably restituted in respect of the inordinate delay they have suffered in the completion of real estate projects. Further, a provision in this regard would be in compliance with RERA and various orders of the hon’ble Supreme Court,” the letter said.
Homebuyers have requested that the regulations clearly lay down that the ‘first meeting of creditors’ would mean the first meeting of creditors after the coming in force of the regulations.
With regard to the new Section 25A that has been inserted in the Code after the coming into force of the Ordinance, homebuyers have said if this is implemented in a ‘literal manner’, it would pose an immense logistical challenge for the IRP appointed to represent the financial creditors. The challenge would be especially pronounced in cases where a large number of homebuyers are involved in the insolvency process of real estate projects.
They have also pointed to the problems that may arise due to non-participation of some homebuyers in the voting process and suggested that the votes cast by the homebuyers be extrapolated to be representative of the remaining home buyers who have not cast their votes. “For example, if the total number of homebuyers are 10,000 and only 1000 homebuyers cast their votes, then it is our suggestion that the 1,000 homebuyers should be considered to represent all the 10,000 homebuyers.
Accordingly, if 800 out of the 1,000 voting homebuyers vote in favour of the resolution plan and 200 home buyers vote against it, then in such a case, it should be considered that 80% of the total home buyers (that is 8,000 out of the 10,000 homebuyers) have voted in favour of the resolution plan,” the letter said. It also gives them due representation in the CoC and makes them an integral part of the decision-making process. It also enables them to invoke Section 7 of the Insolvency and Bankruptcy Code (IBC) 2016 against errant developers.
Source: Financial Express, June 19, 2018