Jaypee homebuyers who have been left in a lurch, due to the seemingly endless delay, may have some relief in sight. Keeping in view that the Jaypee insolvency case has been long pending, the Supreme Court (SC), on August 6, 2020, took over all pending appeals related to the Jaypee Infratech (JIL) insolvency case from the National Company Law Appellate Tribunal (NCLAT).

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State-owned NBCC had been at odds with the National Company Law Tribunal (NCLT) decision, which asked it to pay Jaypee’s dissenting creditors - ICICI Bank and the Yamuna Expressway Industrial Development Authority (YEIDA). However, senior counsel UK Chaudhary said that the NBCC cannot be forced to do so. Perceiving that these matters, along with previous cases related to Jaypee, may cause further delay, the SC transferred all pending cases from the NCLAT back to itself. This includes the one filed by NBCC against the NCLT’s March 2020 decision that ordered that the Rs 750 crore deposited by JIL’s parent firm Jaiprakash Associates with the SC registry, would be part of the resolution plan. Meanwhile, 20,000 homebuyers are still awaiting possession of their flats.

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Complete Jaypee's Insolvency Resolution Process Within 90 Days: SC

Earlier, in November 2019, the Supreme Court (SC) had reserved its verdict in the Jaypee Group case. The debt-ridden company had submitted a plea against the National Company Law Appellate Tribunal (NCLAT) order that had restrained the parent company from participating in the auction of Jaypee Infratech Limited (JIL). On November 6, 2019, the SC directed that Jaypee's corporate insolvency resolution process should be completed within 90 days. Moreover, only the National Buildings Construction Corporation Ltd (NBCC) and Suraksha Realty were eligible to submit a revised resolution plan, the SC clarified.

'We direct the IRP to complete the CIRP within 90 days from today. In the first 45 days, it will be open to the IRP to invite a revised resolution plan only from Suraksha Realty and NBCC respectively, which were the final bidders and had submitted a resolution plan on earlier occasion and place the revised plan(s) before the Committee of Creditors (CoC), if so required, after negotiations and submit report to adjudicating authority NCLT within such time,' said the bench comprising of justices AM Khanwilkar and Dinesh Maheshwari.

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Prior to this verdict, last month, Advocate FS Nariman, who is appearing for Jaypee said that around 12,000 units were delivered to homebuyers. The apex court has asked whether the company would be able to get statutory approval of 90 per cent members of the Committee of Creditors (CoC) to bid. While Jaypee cannot guarantee this, it had said that homebuyers will not suffer. On the other hand, the counsel representing homebuyers have said that they have been waiting for a decade for possession of their units. It did not matter to them whether Jaypee or the NBCC would be undertaking the project. The SC had then reserved its verdict for November 6, 2019, thereafter.

SC defers review of NBCC's revised plan

After the SC asked NBCC if the state-run developer was willing to give a revised proposal to take up the stalled housing projects of debt-saddled Jaypee Group, the latter on September 6, 2019, responded positively. The state-run builder was assisted by the union Finance Ministry in drafting the revised plan that was to be submitted within three weeks under the court order. Earlier, two proposals by the NBCC were rejected by the committee of creditors.

Within a week of the NBCC agreeing to submit a plan, Jaypee homebuyers had sent across a 15-point demand list that sought to safeguard their rights and interests. Among the key demands of the buyers was the delivery of homes in three years. In a scenario where this demand cannot be fulfilled, an adequate delay penalty should be provided, buyers insisted. The buyers had also asked for the stamp duty to be on the basis of the sale value.

The buyers also wanted NBCC to ensure the provisions of the earlier builder-buyer agreement are not violated after the latter takes over the projects. Besides, NBCC must also take responsibility to maintain the township, external infrastructure facilities, common and shared areas. Buyers have also been insistent that no extra charges be levied on them.

Homebuyers want the construction work should be under the supervision of a monitoring committee which includes both buyers and experts. Till a residents’ welfare association is elected and handed over its duties, NBCC must also bear the responsibility of maintaining Wish Town and Sports City, buyers say.

Homebuyers have also clarified that NBCC shouldn’t sell assets of Jaypee to settle lenders dues without handing over the units. As a security, they are also keen on having a homebuyers’ trust where 250 acres of land should be earmarked.

Also, homebuyers have challenged a National Company Law Appellate Tribunal (NCLAT) order that lets Jaiprakash Associates Ltd (JAL) to control 858 acres of land that belongs to Jaypee Infratech Ltd (JIL) in the SC. The SC has issued a notice to JAL lenders and sought a reply on the basis of homebuyers’ petition. The next hearing is scheduled for October 17.

While the NBCC is ready with a revised plan and has submitted it through a counsel, the court has not opened the seal of this plan and deferred the review.

Jaypee group had not objected to the NBCC being asked to submit a fresh plan to revive the stalled project but had asked to be allowed to participate in the bidding since it was willing to pay all dues to the lenders as also complete the stuck project within three years' time.

Hard times for Jaypee

Recently, the Competition Commission of India (CCI) had slapped a Rs 13.82-crore fine on promoter Jaiprakash Associates (JAL) for misusing its position. A CCI probe indicated that JAL created builder-buyer agreements inserting one-sided terms to safeguard its own interests. The CCI also termed abusive, the manner in which the company went about the project construction without consulting buyers. Homebuyers have accused the company of undue delays in project delivery, alteration of plans and imposition of various new charges.

The NCLAT, on July 30, 2019, extended the insolvency period of ailing firm, JIL by another 90 days. This allows fresh bids to be submitted during this time. Of the 90 days, 45 days would be used to finalise new bids, while the remaining period will be used to weed out any discrepancies that may occur. All the previous bids stand invalid hereafter and will be considered, only if the bidders submit fresh plans. Parent company JAL will not be allowed to submit a fresh bid.

Whether the litigation period, which is 260 days between September 17, 2018 and June 4, 2019, should be excluded has also received a split opinion from a two-member bench of the NCLT. Given that this time was taken by the NCLAT for the insolvency resolution process, lenders have requested that it shouldn’t be counted.

Sometime back, the SC had heard a plea, seeking that Jaypee Infratech Ltd should not be sent into liquidation. This comes almost two years after the company came into focus in August 2017, with over 21,000 homebuyers staring at uncertainty. The plea, filed by a homebuyer, maintained that liquidation would only be in the interest of banks.

Referring to the apex court's 2018 order, the plea noted, 'The court had made a conscious effort to avoid liquidation of Jaypee Infratech Limited. However, the events as have unfolded, subsequent to the passing of the judgment, have frustrated the efforts as made by the court.' In the days that followed only two serious bids were received but not accepted by the Committee of Creditors. Stating that the liquidation works only for financial institutions, the plea sought a forensic audit of JIL.

Meanwhile, Jaypee’s promoters have proposed to clear all their debts without any compromise. The company owes Rs 9,800 crores to 13 banks. Likewise, over 20,000 homebuyers are also looking forward to a resolution in their favour. As per Jaypee, homeowners will be handed over their fully-constructed units in three years' time.

The Jaypee case so far

A few months back, state-owned NBCC said that it plans to deliver all Jaypee projects within the next three years. For this, Mumbai-based Suraksha Group made an offer of Rs 20 crores as upfront payment and land which is worth Rs 5,000 crores. The decision was taken at a meeting convened by the NBCC on March 11 that was attended by over 300 homebuyers.

Homebuyers raised some pertinent queries with the NBCC regarding the status of their units. The NBCC confirmed that if there was any swapping of units, it would be done only after the consent of homebuyers and in the same project, if necessary. As for compensation for delay, AK Mittal, Chief Managing Director, NBCC, confirmed that it would not be less than Rs 5 per sq ft but a revised bid was being prepared. Meanwhile, both NBCC and Suraksha will submit a revised bid. Meanwhile, homebuyers are concerned that while NBCC may be striving for a balance in the situation but may end up favouring the banks that had voted against the resolution in the last creditors meeting.

On August 9, the Supreme Court (SC) had handed over the case to the Allahabad Bench of the NCLT for resolution in six months. The SC had directed that homebuyers must be included in the committee of creditors in line with the amendments made to the Insolvency and Bankruptcy Code, 2016. It has been decided in the committee of creditors (CoC), homebuyers will have a 62.3 per cent representation.

Let us look at what transpired in the past one year in what is being termed as one of the first insolvency cases against a real estate developer in India.

The fall of the titan

Almost two years have passed by, since the NCLT admitted the insolvency petition moved by IDBI Bank against Jaypee Infratech, one of the leading real estate developers in the National Capital Region. The developer was booked under Section 7 of the Insolvency and Bankruptcy Code, 2016 and was asked to clear its debts or find a resolution within 180 days, extendable by another 90 days. Affected homebuyers, who till date await the delivery of their homes, were also asked to raise claims. One year on, homebuyers in Jaypee’s projects are still staring at uncertainty. On September 11, 2018, private lender ICICI Bank had moved the National Company Law Tribunal (NCLT) against Jaiprakash Associates Limited (JAL) over non-payment of Rs 1,200-crore dues.

The courtroom drama

Launching action against the company liquidation because it could have jeopardised their interest (homebuyers were unsecured investors before the Insolvency Code was amended. This would have meant they would have been the last in the line to make claims in case the company was declared insolvent), several buyers moved the Supreme Court (SC) against the IDBI Bank’s move.

Admitting several petitions, the apex court directed the developer to pay Rs 2,000 crore, barred top management of the company from leaving the country and also directed that the non-institutional directors of the parent company, Jaiprakash Associates Limited (JAL), to appear in person and furnish details of their personal assets.

In November 2018, the developer submitted a demand draft of Rs 275 crore and was asked by the court to deposit Rs 275 crore in two tranches by December-end. This amount was submitted by the developer within the set deadline. In the meantime, the top court ordered that a web portal be created where aggrieved homebuyers – estimated to be 35,000 in number – could register their complaints.

In May 2018, the SC stayed the liquidation proceedings and asked the Jaypee promoters to deposit Rs 1,000 crore by June 15 to refund homebuyers. Later in July, the apex court reduced this amount to Rs 600 crore and said it would ask the NCLT to expedite the case and decide on revival or restructuring. Latest reports indicate JAL will deposit the Rs 600 crore in seven installments for paying the principal amount to the homebuyers.

Homebuyers’ woes

Amid the courtroom drama that involved several alterations in timeframes, strategies and restructuring process, affected homebuyers took to the streets, and to the internet demanding stern action against the developer. While some of these homebuyers were looking for a refund of the money, others placed their demand of early possession. Some of them have been waiting for the possession of their flat for over a decade.

As the unrest among homebuyers grew, Union Minister Arun Jaitley and Uttar Pradesh Chief Minister Adityanath assured them justice. The state government appointed a three-member committee to look into homebuyers’ grievances. Later the Yamuna Expressway Industrial Development Authority (YEIDA) said that homebuyers in Jaypee's six scrapped projects – Budh Circuit-01, Budh Circuit-02, Nature View, Boulevard, Aman-III and Udaan – would be refunded at any cost.

The growing uncertainty

Jaypee Hospital Doctors

Initially, Jaypee had planned to raise Rs 2,500 crore from the Yamuna Expressway project to refund buyers. That plan did not work out. Plans of a takeover of the insolvency-hit company did also not materialise.

Jaypee Krescent Homes Possession Date

When Lakshadweep Pvt Ltd, a joint venture between Sudhir Valia-led Suraksha Asset Reconstruction Company and Mumbai-based Dosti Realty, won the bid to buy the company for Rs 7,350 crore, Jaypee declined the offer on the grounds of undervaluation. Rumours of a takeover by Vedanta were also refuted by the company. It also put forth an affidavit in the SC, stating that with the help of interim funds, it could finish its under-construction flats.

In another move to placate them, Jaypee offered to give 2,000 shares to each of its homebuyers and proposed to bear 50 per cent of stamp duty on first registration as part of the offer. This offer received a cold response.

The winning moment

Jaypee Krescent Homes

The sole winning moment for the affected homebuyers so far has been the awarding of ‘financial creditors’ in insolvency proceedings. Through an amendment in the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018, the government has brought homebuyers on an equal footing with financial institutions. Under the changed norms, homebuyers along with banks will have the first claim on a company’s asset in case it is liquidated.

Jaypee Hospital Noida

In 2018

Financial creditors which include homebuyers, financial institutions and fixed deposit holders have made new demands. Appointment of a new resolution professional is one of them. In a previous meeting, the reappointment of Anuj Jain, interim resolution professional was rejected. Next, Deloitte Touche Tohmatsu India LLP may be appointed to assist the IRP. Besides, the proposed fee of the resolution professional was also discussed. Dealings between JIL and JAL; forensic audit of JIL, role of resolution professional in fixing RERA timelines, interest penalty accumulated in the National Company Law Tribunal were other matters discussed in the recent meeting.

Earlier, the National Consumer Disputes Redressal Commission (NCDRC) had allowed Jaypee homebuyers to file a case against parent company Jaypee Associates Limited (JAL) seeking compensation and possession. However, the NCDRC says the homebuyers cannot approach it against Jaypee Infratech as insolvency proceedings against the developer are underway.