HON’BLE SUPREME COURT LANDMARK JUDGMENT IN JAYPEE INFRATECH LIMITED & JAYPRAKASH ASSOCIATES LIMITED – FRESH CIRP TO INCLUDE HOME BUYERS
CHITRA SHARMA AND ORS
UNION OF INDIA AND ORS,
WRIT PETITION (CIVIL) NO 744 OF 2017 Dated 09/08/2018
In the judgment dated August 9’ 2018, the Supreme Court has directed to initiate corporate insolvency resolution process (CIRP) against Jaypee Infratech Limited afresh and also directed the constitution of a fresh Committee of Creditors (CoC) to include the Home Buyers. It held that the funds deposited by Jaypee will not be disbursed to home buyers seeking a refund but will be transferred to Hon’ble NCLT.
The Court decided the same in a batch of petitions filed by over 646 home buyers who had invested in projects floated by Jaypee Infratech Limited (JIL), which is a special purpose vehicle created by its holding company, Jaiprakash Associates Limited (JAL).
In the background, IDBI Bank Limited, financial creditor had instituted a petition under Section 7 of the Insolvency and Bankruptcy Code (IBC) against JIL before the National Company Law Tribunal (NCLT) at its Bench at Allahabad and sought the initiation of CIRP against JIL and its petition was allowed by NCLT. The bank claimed that JIL had committed a default of Rs. 526.11 crores in the repayment of its dues.
Subsequently, JIL ended with a situation where no resolution plan was approved by CoC/ NCLT leading to liquidation of JIL.
The Home Buyers during the CIRP of JIL sought relief with Hon’ble Supreme Court as IBC (before the amendment effective June 6, 2018) did not had provisions for inclusion of Home Buyers as Financial Creditors. The IBC was amended vide an Ordinance to include Allottees of Real Estate Project within the meaning of term Financial Creditors, entitled to petition for CIRP under IBC and be a part of CoC and vote on the Resolution Plan. Though the judgment of Hon’ble NCLAT in Nikhil Mehta & Sons HUF vs. AMR Infrastructure Ltd. gave some hopes to home buyers with assured returns being treated as financial creditors.
Direction of Supreme Court
Therefore, to do complete justice to secure the interests of all concerned, the Hon’ble Court directed the following:
“(i) In exercise of the power vested in this Court under Article 142 of the Constitution, we direct that the initial period of 180 days for the conclusion of the CIRP in respect of JIL shall commence from the date of this order. If it becomes necessary to apply for a further extension of 90 days, we permit the NCLT to pass appropriate orders in accordance with the provisions of the IBC;
(ii) We direct 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”;
(iii) We permit the IRP to invite fresh expressions of interest for the submission of resolution plans by applicants, in addition to the three short-listed bidders whose bids or, as the case may be, revised bids may also be considered;
(iv) JIL/JAL and their promoters shall be ineligible to participate in the CIRP by virtue of the provisions of Section 29A;
(v) RBI is allowed, in terms of its application to this Court to direct the banks to initiate corporate insolvency resolution proceedings against JAL under the IBC;
(vi) The amount of Rs 750 crores which has been deposited in this Court by JAL/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.”
Knowledge Partner :
CS Pankaj Jain
VEDA LEGAL, Advocates & Solicitors, New Delhi
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