The Supreme Court today agreed to hear tomorrow a plea seeking protection of interests of over 30,000 buyers who invested hard-earned money to book their dream homes in the projects of debt-ridden realty firm Jaypee Infratech, which is facing insolvency proceedings.
Flat buyers, under the Insolvency and Bankruptcy Code of 2016, do not fall under the category of secured creditors like banks and hence they may get back their money only if something is left after repaying secured and operational creditors.
"We will hear it tomorrow," a bench comprising Chief Justice J S Khehar and Justice D Y Chandrachud said when the PIL was mentioned for urgent hearing, saying that if the apex court does not safeguard the interests of the troubled home buyers, then they would be rendered remediless.
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Senior advocate Ajit Sinha, appearing for one of the home buyers, referred to the provisions of the Code and the order passed by the Allahabad bench of the National Company Law Tribunal (NCLT) and said that even decrees in favour of home buyers or the civil courts and consumer fora cannot be executed once insolvency proceedings begin.
"The actions as have been taken under the Code has led to a situation wherein the lifelong savings of the flat owners will go to waste with no prospects of them recovering the same, if their interests are not saved by this court," the plea filed by Chitra Sharma said.
The plea has sought a direction to the Centre and others that the Insolvency and Bankruptcy Code "shall not curtail the legal statutory and vested rights of the flat owners/buyers as consumers" defined under the Consumer Protection Act.
The PIL said that in alternative, a direction may be issued to the government that flat owners/buyers be declared as as a secured creditor like banks and FIs.
Around 30,000 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 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.
The petition alleged that the Ministry of Finance and Corporate Affairs' action of introducing Section 14 of the Code was "unjust, unfair and unreasonable" and violative of Article 14 (Right to Equality) and 21 (Right to Life) of the Constitution.
"The gravity of the matter is further reflected by the fact the several pending litigation before the consumer forums established under Consumer Protection Act will not proceed in view of the moratorium declared by NCLT," the plea said.
The home buyers fear that if the insolvency process is not successful, then the liquidation process of the company would be initiated, it said.
"The home buyers have been left with only two options, either to fill the form as an unsecured creditor and in the eventuality of liquidation, receive whatever amount is left after clearing the dues of the operational and financial creditors or do not subject itself to the jurisdiction of the Code and wait for the outcome of Insolvency Proceedings," the plea said.
It also claimed that if the home buyers refuses to be an unsecured creditor and the company goes into liquidation, their hard-earned money would go to the financial and corporate liquidators.
Hundreds of home buyers have been left in the lurch after the National Company Law Tribunal (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.
Jaypee Infratech is into road construction and real estate business. It has constructed the Yamuna Expressway, connecting Delhi-Agra.
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