Supreme Court sends Jaypee Infratech case back to NCLT for fresh resolution

NEW DELHI: The Supreme Court, which had stalled insolvency proceedings against Jaypee Infratech to protect the interests of homebuyers, has referred it back to the insolvency court to start the process afresh under a new committee of creditors that includes homebuyers.

The top court on Thursday also directed the Reserve Bank of India (RBI) to initiate similar resolution proceedings against parent company Jayprakash Associates Ltd (JAL), observing that an audit had shown diversion of Rs 10,000 crore from Jaypee Infratech to JAL. “JAL is undergoing a serious financial crisis,” said a bench led by Chief Justice of India Dipak Misra.

It hasn’t been able to pay Rs 2,000 crore since September 11, 2017, and has so far only paid Rs 750 crore, the bench observed. The company also owes more than Rs 30,000 crore to 30 banks, it noted.


While calling for fresh resolution process against Jaypee Infratech under the Insolvency and Bankruptcy Code (IBC), the court clarified that promoters of the company, its sister companies or the parent company cannot bid in the process. “…accepting the proposal submitted on behalf of JAL would cause serious prejudice to the discipline of the IBC and would set at naught the salutary provisions of the statute,” it said.

The bench of CJI and Justices AN Khanwilkar and DY Chandrachud also refused to refund any money to the homebuyers, saying it would be unfair to other creditors, and transferred Rs 750 crore lying with it to National Company Law Tribunal (NCLT), Allahabad, to be disbursed eventually among creditors. That could take time.

NCLT will have to determine if homebuyers are to be treated as secured or unsecured creditors. A bench led by the CJI had in September last year stayed the resolution process on the basis of a petition filed by Jaypee Infratech’s homebuyers. Since then, the government has brought in an ordinance to accord homebuyers the status of financial creditors under insolvency law.

However, by that time the statutory period of 180 days for completing the insolvency resolution process had lapsed. Now, the Supreme Court has granted another 180 days starting Thursday to complete the process under a reconstituted committee of creditors (COC).

Ashwarya Sinha, an advocate representing homebuyers, said the ruling has taken homebuyers back to square one as they continue to get entangled in legal technicalities of IBC.

“We have a coordinate bench of the same court dealing with identically situated homeowners of Amrapali, where NBCC (state-run real estate developer, formerly, National Buildings Construction Corporation) has been roped in to take over the project,” he said. “The only redeeming feature is that homeowners have significant voting power in the committee of creditors meetings in view of the recent amendments.”

The court, CJI said, lacked the expertise to oversee any insolvency proceedings. Besides, a complete statutory mechanism exists to take care of it, the court had said.

(With inputs from Ankit Sharma)