Supreme Court Directs Centre To Frame Policy To Protect Interests Of Those Cheated By Jaypee, Other Real Estate Firms

The Supreme Court has asked the central government to frame a policy to protect the interests of homebuyers cheated by Jaypee Infratech Ltd and other real estate companies.

The court’s directive came while hearing a petition filed by Jaypee’s cheated homebuyers who sought the court’s intervention to stop the liquidation process of the company.

The court said that a way needs to be found to protect the interests of homebuyers without disturbing proceedings under the Insolvency and Bankruptcy Code and asked the centre to examine the issue and report back to it.

Jaypee homebuyers’ lawyers told the court that liquidation of the company would leave thousands of homebuyers in the lurch and without any remedy and pleaded the bench to intervene.

Liquidation would defeat the very purpose of safeguarding the interest of 32,000 homebuyers who had paid around Rs 14,000 crore to Jaypee, the cheated homebuyers’ lawyers argued.

An Insolvency and Bankruptcy Code provision clearly stipulates that in case of distribution of proceeds, secured creditors would be given preference over an unsecured creditor, the lawyers stated.

However, since no amendment has been brought forth in the definition of secured creditors to include homebuyers, those cheated by Jaypee continue to be regarded as unsecured creditors, the lawyers’ stated.

It may be recalled that in August 2018, the Supreme Court had ordered insolvency proceedings afresh against Jaypee Infratech Ltd before the National Company Law Tribunal, Allahabad, and asked the interim resolution professional to seek fresh bids from other companies to take over the company.

It may be noted that under the Insolvency and Bankruptcy Act, corporate insolvency resolution process must be completed within 270 days, and if the process fails, the course of liquidation starts immediately thereafter.