Exclusive – SC to hear plea seeking Forensic Audit of Jaypee & equal rights for buyers under IBC

Ever since the NCLT directed to initiate insolvency proceedings against Jaypee Infratech, home buyers have been worried a lot by conflicting reports by IRP, Government and News Papers. While most of the buyers are debating over the type of form that needs to be filled, a group of buyers has filed a WRIT in the Hon’ble Supreme Court of India. The SC has agreed to hear the application and shall be heard shortly.

Exclusive details of PIL Filed

Following persons/entities have been made a party to the:

Complainant: Chitra Sharma

Respondents: Secretary – Ministry of Finance, Secretary – Ministry of Corporate Affairs, Jaypee Infratech Limited, Jaiprakash Associates Limited, IDBI Bank Ltd, Reserve Bank of India, NOIDA Authority, Cheif Secretary, Uttar Pradesh, Anuj Jain – IRP

Reasons for petition

The petition is filed in public interest under Article 32 of Constitution of India seeking protection of the interest of thousands of home buyers in the country. The need for the petition has arisen from the Insolvency and Bankruptcy code 2016 and NCLT order in the petition titled as IDBI Bank Ltd vs Jaypee Infratech Limited [CP (IB) 77/ALD/2017]. The action as has been taken under the IBC code and the case have led to a situation where lifelong savings of thousands of homebuyers shall go waste without any option of recovery.

Grounds took in petition

The provisions of IBC are violative of the Fundamental rights of common citizens. As consequences of the order passed by NCLT in this matter, who buyers who have invested their hard earned money are left without any option to approach any Court to compel Jaypee Developer to deliver the flats as guaranteed or refund the money with interest.

The provisions of IBC even bars the Hon’ble Supreme Court from hearing any petition or appeal despite being the highest court in the Country.

In the light of provisions brought in IBC 2016, the citizens of the country (home buyers) have been left remediless. Section 14 of the IBC not only bars initiation of suits against Jaypee but also stays the execution of any decree or order passed by any court, including the SC.

NCLT, as well as NCLAT in judgements such as Vinod Awasthy vs AMR Infrastructure, have held that home buyers are neither Financial Creditor nor Operation Creditors under IBC.

In the event of Jaypee Infratech put to a liquidation under Section 53(1), liquidated assets shall be distributed among various stake holders in such a manner that home buyers shall not have first rights over the funds generated and shall possibly get only a meagre amount due to not falling under Secured Creditor category. Thus, the provisions of IBC have left common citizens remediless.

Facts presented

Consumers of this country are protected by Consumer Protection Act 1986. Hon’ble SC has held that Consumer Act is a benevolent piece of legislation enacted to protect consumers from exploitation. The NCDRC in many cases has held that delay in handing over the apartments amounts to deficiency in services and thereby direct either a refund of money with interest or expedient delivery of flats.

Most buyers are from middle-class families who have purchased apartment after developer lured them of timely delivery. Even after taking 90% of the money, the developer has not been able to construct most of the apartments. Home buyers have taken home loans and are under the burden of EMIs.

Many home buyers have approached consumer forums and other courts for relief but the order of NCLT have debarred them from exercising such rights to approach the courts.

A mere reading of Insolvency and Bankruptcy Act 2016 suggests that it is aimed at maximisation of the value of assets of corporates. The same is not for the common benefits for the citizen in general.

Many provisions of the Act are drafted are in direct conflict of the Consumer Protection Act.

The provisions of the IBC are violative of the fundamental rights of citizens of the country.

Prayers

Issue directions so that Section 14 of the Code does not curtail the legal rights of home buyers as defined under section 2(d) of the Consumer Protect Act, 1986.

Issue direction so that home buyers be notified by Govt of India as Secured Creditors as defined under Section 36 of the IBC.

Appoint an Independent Auditor to conduct a Forensic audit of the Jaypee Infratech and Jaiprakash Associates.

Next steps

The Hon’ble SC has agreed to hear the petition and a likely hearing is scheduled on Thursday, 24th August.

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