IDBI Bank on Tuesday objected to the Supreme Court’s stay of insolvency proceedings against Jaypee Infratech by the Allahabad Bench of the National Company Law Tribunal (NCLT), saying it virtually gives the reins of the company back to the real estate giant.
“This court’s order has the effect of a status quo ante. That is, it virtually gives the company back to Jaypee,” senior advocate Abhishek Manu Singhvi submitted before a Bench led by Chief Justice of India Dipak Misra.
The bank, which had instituted insolvency proceedings before the NCLT, alleged that some of the home buyers had approached the Supreme Court to favour Jaypee Infratech. “Otherwise why should the home buyers want Jaypee back in charge of the company?” Mr. Singhvi asked.
Relief for home buyers
Mr. Singhvi argued that the Insolvency Resolution Professional (IRP) appointed by NCLT would take care of the claims of the over 30,000 home buyers.
“IDBI Bank has a debt of ₹4,000 crore out of a total consortium debt of ₹10,000 crore. This ₹10,000 crore is also public money. The stay order has the unintended effect of giving the company from the IRP to Jaypee,” Mr. Singhvi submitted.
“The insolvency is equipped with the claims of the home buyers. Why would the home buyers want the company to go back to Jaypee, who is the principal perpetrator of the distress suffered by home buyers... the stay order has unintendedly helped the principal perpetrator,” he added.
The Bench agreed with Mr. Singhvi’s request to file an interlocutory application against the stay order, and said it would hear the bank on September 11.
Senior advocate K. V. Vishwanathan, appearing on behalf of some home buyers, said his clients “slept peacefully for the first time after getting the Supreme Court order” on September 4.
‘Unsecured creditors’
A stay was imposed on the basis of the argument made by home buyers, who have not yet received their flats in 27 different projects of Jaypee Infratech, that the insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) of 2016 gave priority in clearing the debts of secured creditors like banks and financial institutions. This may leave “unsecured creditors” such as individual flat buyers high and dry.
The buyers have also challenged the IBC for violating Articles 14 (right to equality) and 21 (right to life) of the Constitution.
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.
The court has sought the assistance of Attorney-General K. K. Venugopal on this aspect.
Home buyers were left in dire straits after the NCLT, on August 10, admitted the IDBI Bank’s plea to initiate insolvency proceedings against Jaypee Infratech for defaulting on a ₹526 crore loan.