Form C or Form F: which form should Jaypee home buyers submit?
For the over 25,000 homebuyers stuck in the stalled Jaypee Infra residential projects, there is a new twist in the story. They can now file a claim on the truant builder with India’s brand new regulator, the Insolvency and Bankruptcy Board of India (IBBI). The bankruptcy process in India empowers creditors, employees and other claimants to invoke the law and begin the process under the Act to recover dues. This is the first case under the new regulator that has been filed against a real estate firm that has thousands of aggrieved homebuyers who are stuck paying EMIs without an end in sight as the builder has defaulted on its debt and construction is way behind the schedule.
There’s a more than good chance it won’t be the last.
When the bankruptcy process began against Jaypee, homebuyers were not included in the list of parties who could stake a claim. After an uproar, IBBI made available Form F for consumers to fill. But a new dilemma faces them. Should they fill Form C or Form F? Form C is to be filled by ‘financial creditors’. Says Ashwin Bishnoi, partner of law firm Khaitan and Co: “If there is an “assured return” payable to the homebuyer— which was not paid—then she may be able to fill Form C (form for financial creditors) rather than Form F. A financial creditor has greater rights and protection under the Bankruptcy Code than other classes of creditors.”
Because those who fill Form C are ahead in the line of those who fill Form F when the assets get liquidated and creditors are paid. According to Section 53 of the Insolvency Code, first the money will be paid towards expenses incurred on the bankruptcy process and the liquidation of the company. After that dues to workmen, secured creditors, wages and any unpaid dues owed to employees other than workmen will be paid. Then the financial debt due to unsecured debtors gets paid. Next come any dues to central and state governments. “The homebuyer will be paid after the above claims are satisfied, in that order,” said Mayur Shetty, associate partner, Rajani Associates, a Mumbaibased law firm.
Since homebuyers have not been defined in the Insolvency and Bankruptcy Code, 2016, lawyers are divided on their status. Says Delhi-based lawyer Harsh Pathak, “The insolvency code has not defined homebuyers in any category. It is relevant to note that from the reading of Section 53, homebuyers may be considered in the category of either financial debts owed to unsecured creditors or any remaining debts and dues.”
Homebuyers with Jaypee and other builders in stalled projects must read through their contracts carefully to see if they can be classified as ‘financial creditors’. If yes, they can then go ahead and file their claim under Form C. Others must use Form F. Claimants can file their claims by email at IRPJIL@bsraffiliates.com. They can also send their claims by post to Anuj Jain, c/o BSRR & CO., Chartered Accountants, 8th Floor, Building No. 10, DLF Cyber City, Gurgaon, 122002.