The Supreme Court has stayed the insolvency proceedings against real estate firm Jaypee Infratech at the National Company Law Tribunal (NCLT) and sought the firm's response on a plea seeking protection of the interests of hassled home buyers who have neither got homes, nor their money back.
A bench headed by Chief Justice Dipak Misra also asked Attorney General K K Venugopal to assist it in deciding a batch of petitions opposing the insolvency proceedings and seeking protection of the home buyers' interests.
"We will pass a stay order on the proceedings at NCLT (at Allahabad). Issue notice (on pleas of home buyers)," the bench, which also comprised justices AM Khanwilkar and DY Chandrachud, said.
Flat buyers, under the Insolvency and Bankruptcy Code of 2016, do not fall in the category of secured creditors like banks and hence they can get back their money only if something is left after repaying the secured and operational creditors, one of the pleas filed by some home buyers said.
It was alleged by senior advocate Ajit Sinha, appearing for petitioner Chitra Sharma, that around Rs 25,000 crore worth of money of flat buyers and others has been at stake and the insolvency proceedings were initiated "for a petty sum of Rs 500 crore".
Around 32,000 persons had booked flats in the projects of Jaypee Infratech.
Sharma, in her amended PIL filed through lawyer Ashwarya Sinha, has challenged the constitutional validity of certain provisions of the Insolvency and Bankruptcy Code on grounds including that they do not protect customers.
Besides seeking a "forensic audit" of Jaypee infratech and one of its sister concerns, the plea has also sought a direction to the Centre to ensure the home buyers' interests.
The NCLT at Allahabad had initiated the insolvency proceedings against Jaypee Infratech based on IDBI's charge that the company has defaulted in loan repayment.
The home buyers, in the plea, referred to the provisions of the Code and the order passed by the Allahabad bench of the NCLT and said that even decrees, passed by civil courts and consumer fora, in their favour cannot be executed once insolvency proceedings begin.
"The actions as have been taken under the Code has led to a situation wherein the life-long savings of the flat owners will go waste with no prospects of them recovering the same, if their interests are not saved by this court," the plea filed by Sharma said.
The PIL also said that a direction may be issued to the government that flat owners/buyers be declared as as a secured creditor like banks and FIs.
Around 32,000 buyers have booked their homes in 27 different housing projects of Jaypee Infratech and they have been "left in the lurch as the insolvency proceedings have been started against it," the senior lawyer had said.
He said the financial interests of secured creditors will be safeguarded first in the insolvency proceedings and flat buyers, being unsecured creditors, would virtually get nothing.
Hundreds of home buyers have been left in the lurch after the NCLT, on August 10, admitted the IDBI Bank's plea to initiate insolvency proceedings against the debt-ridden realty company for defaulting on a Rs 526-crore loan, the plea said.
Jaypee Infratech is into road construction and real estate business. It has constructed the Yamuna Expressway, connecting Delhi-Agra.