Noida: Experts unsure over safety of buyers’ money invested in Jaypee projects
A section of experts said that the insolvency proceedings against the Jaypee Infratech following the National Company Law Tribunal (NCLT) order will give homebuyers an option of getting back their investment. Another section is of the opinion that if Jaypee Infratech’s assets are not adequate to pay off the bank loans, buyers will be in trouble.
Legal experts have mixed opinions on the insolvency proceedings against the Jaypee Infratech with regard to the safety of buyers’ investments.
A section of experts said that the insolvency proceedings against the Jaypee Infratech following the National Company Law Tribunal (NCLT) order will benefit around 30,000 homebuyers and it would give them a chance to get back their investment. But homebuyers will have to represent themselves properly with required documents before NCLT.
Another section is of the opinion that if Jaypee Infratech’s assets are not adequate to pay off the bank loans, buyers will be in trouble.
“The insolvency proceedings are a blessing in disguise for homebuyers because Jaypee Infratech was unable to deliver flats or refund the investment. There was hardly any possibility that the Jaypee Group would have delivered the project in a time-bound manner. But the Interim Resolution Professional (IRP) will file a resolution report within six to nine months,” said Pawan Chaturvedi, an advocate in Delhi high court and expert on real estate and insolvency cases.
The tribunal has appointed Anuj Jain, a chartered accountant, as Interim Resolution Professional (IRP) under Insolvency and Bankruptcy Code, after admitting an insolvency plea from IDBI on August 9. Jain has taken over the Jaypee Infratech management, held meetings with staff of Jaypee Group and also met the Noida authority officials.
“The IRP’s report will consist of a detailed road map for reviving Jaypee Infratech. If it cannot be revived, the company will go for liquidation. The report will detail a series of steps to revive the company. The IRP will give the recommendation and NCLT will decide to either revive or liquidate the company, based on the report,” Chaturvedi said.
As per the law, secure creditors such as banks and financial institutions have the first right to recover their money and the second right is of the homebuyers. If the Jaypee Infratech is not revived, NCLT has the power to auction assets and recover the money of the secure creditors and buyers.
“I believe that the insolvency proceedings will benefit buyers because NCLT will take over the assets and sell them through auction to raise funds. Without insolvency proceedings, it was not possible to do that and do justice to buyers under any other law. I trust the Jaypee Group has adequate assets,” said Chaturvedi. He also advised buyers to continue payment of the remaining flat cost.
Homebuyers who have taken loans said that their monthly instalments must be suspended till legal issues are resolved.
“Since the is Bharatiya Janata Party government is in power both at the state and the Centre, the finance minister should issue an order that Jaypee buyers can stop paying home loan instalments until the legal proceedings are over,” said SK Nagrath, retired army official and president of Jaypee Aman buyers’ association.
Homebuyers, however, are fearful that the Jaypee Infratech’s assets will be exhausted in repaying the banks loans.
“Insolvency proceedings will benefit Jaypee Group as it will get away easily from the responsibilities of delivering the flats. Jaypee Infratech had got the housing land for free for constructing the Noida Expressway. It means it did not pay any money to buy land. Then, where have the funds collected from homebuyers been diverted? It is a big scam and the Jaypee Group is hiding behind insolvency proceedings. There should be an investigation on fund diversion because the buyers have been cheated. Buyers will be in trouble once banks recover their money by selling assets as Jaypee Infratech will be declared bankrupt,” said Avinash Narula, an advocate in Delhi high court.
IRP under Insolvency and Bankruptcy Code does not have investigative powers but it will detail the exact number of buyers who have invested in realty projects and where the money was spent. “IRP resolution report will narrow down on how the Jaypee Infratech used funds collected from the buyers. NCLT has the power to take action if the funds are found to be diverted for other purposes,” said Chaturvedi.
First Published: Aug 14, 2017 21:48:12