Jaypee Infratech is declared insolvent by NCLT. Understand what it means for the home buyers. read all the facts and understand the process involved.

NCDRC full bench judgement on Section 12 (1) (b) – Associations can file cases against developers Middle class buyers can now fight developers in Supreme Court for very low cost 3 cases pending in Supreme Court that will reshape the Real Estate in India NCLT declares Jaypee Infratech Insolvent, pending cases & execution of orders put on hold Buyers of under construction apartments won’t pay higher tax under GST – Govt. The Logical Buyer enlightening real estate consumers! Latest Laws Noida - Greater Noida Real Estate  NCLT declares Jaypee Infratech Insolvent, pending cases & execution of orders put on hold August 10, 2017 thelogicalbuyer 0 Comment Anuj Jain, HomeBuyers, Insolvency, Jaypee Infratech, Jaypee WishTown, KPMG, NCLT In an unfortunate turn of events, National Company Law Tribunal  (NCLT ) has declared Jaypee Infratech as an insolvent company. This decision was taken after Mr. Manoj Gaur of Jaypee Infratech had withdrawn his objection to the petition filed by IDBI Bank under Section 7 of the Bankruptcy Code 2016. In a written response filed in the court, the said objections were withdrawn in the interest of home buyers and depositors as per Mr. Gaur. Jaypee Infratech is primarily engaged in the business of development of Group Housing projects among others in Noida and Greater Noida region. The Case Jaypee Infratech has been defaulting on the loan amount to the tune of 500+ crores provided by IDBI Bank. Unable to recover the loan amount, the IDBI bank filed an application with NCLT under Section 7 of the Bankruptcy Code 2016. Initially, Jaypee had objected to the application but later withdrew the objections filed. Considering the mutual decision of bank and the company, the Allahabad bench of NCLT allowed the petition and ordered following: Mr. Anuj Jain of Ms. BBSR & Co (KPMG) is appointed as Interim Resolution Professional (IRP) under Insolvency and Bankruptcy Code effective 09/09/2017. All sub-Judice cases and execution of any order/decree is put on hold The NCLT has prohibited institution of new complaints, execution of any order or decree in any court of law, tribunal or arbitration, including SARFESI Act. This also includes the NCDRC. Existing board of the company will be seized of all powers. Next steps The IRP will handle the affairs of the company starting today. IRP will invite claims from the financial creditors, operational creditors, and employees etc. They all shall have to submit their liabilities claims as on date. IRP will verify each and every claim and all parties will get voting rights according to their exposure. Within 30 days, IRP will constitute the Committee of Creditors (CoC). This CoC will become the new board of the company. RP will continue to manage the decisions of CoC. IRP will continue for next 5 months a Resolution Professional. COC will decide if they want to continue with same IRP or appoint a new IRP. RP will ask for resolutions plans from all parties involved including Jaypee. All the plants have to be submitted to CoC and a decision is taken by CoC in 180 days. There is a provision of 90 more days. If a solution is not found, the company will be put to liquidation. The likely outcome The first aim of the CoC will be to recover their money. All options including another company taking over the Jaypee Infratech shall be explored. However, this is less likely to happen in this case. The CoC may also look at the option of restructuring their debts. In the event of CoC is unable to find a solution in 180 + 90 days, the company shall be put to liquidation. If the company is forced into liquidation, the proceeds from the sale of liquidation assets shall be distributed in the following order and priority: the insolvency resolution process cost and liquidation cost in full; Workmen’s dues for the period of 24 months preceding the liquidation commencement date. Debt owned by a Secured Creditor. Wages and unpaid dues to employees other than workmen for the period of 12 months. Financial debts owed to unsecured creditors. (Homebuyers falls under this category). Dues to the governments. shareholders or partners. What happens to the home buyers? Under the current laws, the home buyers are not the secured or operational creditors. It’s is less likely that their interest can be safeguarded if the CoC decides to go for liquidation process. As the home buyers fall under the category of unsecured creditors, it is highly unlikely that they shall receive anything if the company is liquidated. Home buyers need to understand that, at this point, the company is not declared bankrupt but insolvent. All the parties affected shall have to try to revive the situation in 270 days timeframe. NOIDA will also be a party to it. Opinion It would be in the best interest of buyers if a new company can take over the projects. Housing units can also be taken over by the Noida or equivalent government bodies to save the helpless middle class buyers from this crisis.