REAL ESTATE MATTERS
SC Intervenes in Insolvency Proceedings to Protect Homebuyers
The dispute between homebuyers and Jaypee has now tilted in favour of homebuyers after the Supreme Court recognised that home buyers have substantive rights and they cannot be ignored during insolvency proceedings. As per the provisions of Insolvency and Bankruptcy Code (IBC), 2016, the financial interests of secured creditors take precedence over that of unsecured creditors. Homebuyers fall in the category of unsecured creditors.
Ever since the judgement passed by the National Company Law Tribunal (NCLT), Allahabad, dated 09.08.2017, in the matter of IDBI Bank Limited versus Jaypee Infratech Limited CP NO. (IB) 77/ALD/2017 (hereinafter referred to as ‘Allahabad Judgement’) admitting the insolvency proceedings against Jaypee Infratech Limited (‘Jaypee’) for default committed by Jaypee in payment of debt due to IDBI as ‘financial creditor’, there have been regular protests by the large number of homebuyers (estimated to be nearly 32,000) waiting to get either completed flats or their investments back with interest. After the NCLT order, homebuyers were left in the lurch as there was no certainty if they would get possession of their flats or refund of their hard-earned money. Being unsecured creditors, they feared they would get nothing out of the insolvency proceedings as the dues of financial institutions, the secured creditors, would be cleared first.
The aggrieved homebuyers then filed a public interest litigation (PIL) seeking a stay order on NCLT’s insolvency proceedings against the defaulting company. The petition was heard by a