IDBI moves SC to vacate stay on Jaypee insolvency

IDBI moves SC to vacate stay on Jaypee insolvency

The Supreme Court on Monday put aside the Allahabad National Company Law Tribunal's order that declared Jaypee Infratech as insolvent.

"Our main contention is that after the stay on insolvency proceedings, the management of Jaypee Infratech has back to the promoters, who have failed earlier", said Bishwajit Dubey, counsel for IDBI Bank and partner, Cyril Amarchand Mangaldas.

The Supreme Court on Monday stayed insolvency proceedings against real estate firm Jaypee Infratech after homebuyers told the bench they would lose all their money. The court will hear their plea on October 10. Around 32,000 buyers have booked flats across 27 different housing projects of Jaypee Infratech.

Under the petition filed by home buyers, flat buyers do not fall under the Insolvency & Bankruptcy Code (IBC) of 2016 category of secured creditors like banks and thus they are allowed to take back their money only if something is left after repaying the secured and operational creditors. The petition argues that certain provisions in the Code "curtail the legal statutory and vested rights of the flat owners/buyers as consumers" defined under the Consumer Protection Act.

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By shutting out the flat owners from accessing this remedy, the Code as well as the order of the NCLT has violated their fundamental rights under Article 19 (1)(g) and 21 of the Constitution, the petition contends. The bank said that a huge number of home buyers, who feel cheated, have decided on 4,000 more individual suits, both civil and criminal.

The petition seeks the court to issue a judicial direction to the government to declare flat buyers as secured creditors like banks and other financial institutions. Singhvi mentioned before the apex court, also comprising Justices Amitava Roy and AM Khanwilkar, that the stay by NCLT's August 9 order would likely to benefit the Jaypee, and thereby the apex court should lift the stay.

Some buyers had won cases against Noida-based Jaypee in consumer courts but the orders could not be executed, said the petition filed on their behalf through lawyer Ashwarya Sinha. Jaypee Infratech has defaulted on Rs526.11 crore of loans outstanding to IDBI Bank Ltd. Jaypee Infratech is a subsidiary of Jaiprakash Associates Ltd. This is because the consumers can not access the remedy under the Consumer Protection Act till the insolvency proceedings reach their logical end.

IDBI Bank pleaded it would like the interim resolution professional (IRP) appointed by the NCLT to help it recover its loans and also work out a solution for flat buyers.

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