Summary
Home buyers sought protection during Jaypee Infratech’s insolvency. Following the June 2018 amendment recognising allottees as financial creditors, the Supreme Court restarted the resolution period under Article 142 and required a fresh creditors’ committee including them. It rejected a court-supervised process outside the Code, excluded JIL/JAL and their promoters, and declined preferential interim refunds.
Issues
- How home buyers’ newly recognised financial-creditor status should be accommodated after expiry of the original resolution period.
- Whether the Court should permit promoter participation or supervise resolution outside the Code.
- Whether the deposited funds should be distributed immediately to home buyers seeking refunds.
Provisions considered
- Article 142, Constitution of IndiaIn the peculiar circumstances created by the intervening statutory amendment, the Court renewed JIL’s resolution period while preserving the Code’s institutions and procedures. (¶¶ 39, 42(i))
- Section 5(8)(f), including the 2018 Explanation; Section 21(6A)(b), Insolvency and Bankruptcy Code, 2016Amounts raised from real-estate allottees were recognised as financial debt, requiring representation of home buyers in the freshly constituted creditors’ committee. (¶¶ 27, 28, 39, 42(ii))
- Section 29A(c) and (g), Insolvency and Bankruptcy Code, 2016The statutory disqualifications precluded participation by JIL/JAL and their promoters; the Court declined an exception allowing their return through a resolution proposal. (¶¶ 30, 31, 32, 35, 39, 42(iv))
Held
- The amendment recognising allottees as financial creditors came after the original 270-day period ended. Complete justice required restarting the process for 180 days from the order and constituting a fresh CoC under the amended regime. A further ninety-day extension could be considered by the NCLT under the Code. (¶¶ 27, 28, 39, 42(i), 42(ii))
- The Court would not replace the expert statutory process with its own supervising committee. The IRP could invite fresh expressions of interest alongside the three shortlisted bidders, but all bids had to comply with the Code and no bid was approved by the Court. (¶¶ 39, 42(iii))
- JIL/JAL and their promoters were ineligible under Section 29A. Their proposed participation would defeat the statutory safeguards, and the Court also found their claimed ability to complete the projects unsupported by the financial circumstances. (¶¶ 31, 32, 35, 39, 42(iv))
- Immediate pro-rata refunds from the deposited corpus would prefer one group over other creditors and home buyers awaiting possession, contrary to a composite resolution. Whether home buyers were secured or unsecured creditors was expressly left open. (¶ 40)
- The Rs.750 crore deposit and accrued interest were to be transferred to the NCLT, remain invested and abide its directions. RBI was permitted to direct banks to initiate insolvency proceedings against JAL. (¶¶ 41, 42(v), 42(vi))
Result
Proceedings disposed of with a renewed JIL resolution process, fresh CoC, statutory promoter exclusions, transfer of the deposited corpus to the NCLT and permission for RBI-directed JAL insolvency proceedings. Liberty reserved to pursue appropriate future proceedings.