REAL ES­TATE MAT­TERS

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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

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