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Realty mess: Supreme Court stops Jaypee directors from separating assets

22 November 2017

The Supreme Court on September 11 had asked Jaiprakash Associates to deposit Rs 2,000 crore by October 27 to pay off the aggrieved home buyers.

The bench of Chief Justice Dipak Misra, Justice A.M.Khanwilkar and Justice D.Y.Chandrachud asked the real estate major to deposit another Rs. 275 crores after it allowed it to deposit Rs. 275 crores.

JAL has deposited Rs 275 crore with apex court which asksed it to deposit a further amount of Rs 150 crore and Rs 125 crore on December 14 and 31 respectively.

Senior advocates Kapil Sibal and Ranjit Kumar, appearing for the Group, told the court that the company was making all-out efforts to give possession of the flats and more than 1,300 flats had been handed over to buyers.

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The court, by this order, had appointed senior counsel Shekhar Naphade and advocate Shubhangi Tuli to represent the home buyers at the meetings of the Committee of Creditors that would consider the plan for restructuring Jaypee Infratech by the IRP appointed by the NCLT.

The court order is seen as a relief to Jaypee Associates whose earlier plea to deposit Rs 400 crore was turned down as court had asked it to be ready with sizeable amount of Rs 2,000 crore that it has been directed to deposit to safeguard flat buyers' interests.

Experts believe that the decision of the SC preventing promoter directors and independent directors and their family members from alienating their assets is a welcome move.

The next hearing is on January 10 and the court has asked the 13 promoters and directors to be present on that day. It said the company had gone up in the real estate sector at the cost of home-buyers and it must come down to refund the money. The fact that JAL will go into liquidation will not help anybody.

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Jaypee Infratech is a wholly owned subsidiary of Jaypee Associates. Besides seeking a "forensic audit" of Jaypee infratech and one of its sister concerns, the plea has also sought a direction to the Centre to protect home buyers' interests. They also claimed Jaiprakash Associates transferred the land bank of Jaypee Infratech for settling its loans without adequate provisions and used its land bank as a security for getting loans. The top court had on September 4 stayed insolvency proceedings against the real estate firm at National Company Law Tribunal (NCLT).

Flat buyers, under the Insolvency and Bankruptcy Code of 2016, do not fall in the category of secured creditors like banks and hence they can get back their money only if something is left after repaying the secured and operational creditors, Sharma, in her plea, said.

Hundreds of home buyers have been left in the lurch after the NCLT, on August 10, admitted IDBI Bank's plea to initiate insolvency proceedings against the debt-ridden realty company for defaulting on a ₹526-crore loan, the plea said.

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Realty mess: Supreme Court stops Jaypee directors from separating assets