‘IRP must engage with the homebuyers and be their voice’
The IDBI bank had moved the National Company Law Tribunal (NCLT) for insolvency proceedings against Jaypee Infratech for default of a loan of about Rs 526 crore. Namrata Kohli speaks to Sumant Batra, India’s leading insolvency lawyer who is representing Anuj Jain, Insolvency Resolution Professional in the Jaypee Infratech case. Edited excerpts: into account the concern of buyers. In Jaypee Infratech, the IRP put together an excellent communication plan to engage with flat buyers and keep them informed and upto speed in the first two weeks through FAQS, media announcements and responding to their queries.
He also kept all authorities which flat buyers were approaching, fully informed. IRP had planned to constitute a separate committee of stakeholders and invite the flat buyers to nominate representatives to attend its meetings. Now, the Supreme Court has appointed two representatives of homebuyers to attend the meetings of committee. an The Supreme Court has directed the IRP to present an interim resolution plan within 45 days. He has started working on the contours of an interim resolution plan to be presented to the Supreme Court which will take into consideration all relevant factors including interim finance needed to continue the construction of flats. Simultaneously he has initiated the process to invite resolution plan from interested parties in accordance with the resolution process under IBC. In any insolvency resolution, a sustainable resolution of insolvency is possible only if the interest of all stakeholders is balanced or equitably addressed. IBC requires that a resolution plan approved by creditors must mandatorily provide for continuity of affairs of insolvent company. It also provides for enormous flexibility in designing the resolution plan to achieve this goal.
The creditors who have to vote on the plan are unlikely to approve a plan which is neither realistic nor can be sustained if it excludes the interest of key stakeholders such as that of the large number of flat buyers.
In resolution process, there is no priority prescribed as such for consumers.
Only dissenting financial creditors (there are over 15 banks and financial institutions with IDBI in the forefront) and operational creditors (suppliers of raw material/services) get paid ahead of others at liquidation value. But there is nothing that restricts the party proposing the plan and creditors to approve a plan where interest of other stakeholders is given priority. The IRP is not obliged to service the bank loans during the insolvency process. His job is to step in to stabilize the business and ensure it is not dis- rupted. His duty is to make sure the business continues and the value of assets is preserved. In other words, he has to endeavour to continue the development work for the period of six months of his term.
Eventually, someone will put forward a resolution plan which will provide for completion and delivery of flats. IBC allows interim finance to be raised to continue the construction work and preserve value of assets. Also, under IBC, interim finance is treated as cost of resolution process and gets paid ahead of any other payment.
There are other options which will be presented by the IRP to the Supreme Court as part of the interim resolution plan. Only when the liquidation is likely to realise better returns for creditors than resolution will the creditors opt for liquidation. In cases of real estate insolvencies, resolution and not liquidation is the most likely outcome. I don’t see liquidation as an option for cases like Jaypee. Of that profile and scale, yes. But there are others that are equally, if not more complex. Have faith in the Insolvency and Bankruptcy Code.