As many as 107 homebuyers (owners of 70 apartments) of Amrapali’s Centurian Park project in Greater Noida filed a writ petition in the Supreme Court on Wednesday challenging certain provisions of the Insolvency and Bankruptcy Code 2016. The petition states that buyers be treated at par with financial creditors and that all court proceedings against the cash-strapped company should continue.
“In this petition, we have gone a step beyond the Jaypee case. We have challenged sections 14, 33, 53 and 238 of the IBC. We have said that buyers be treated at par with banks. They ought to be declared as secured creditors under the code and should be among the first claimants to be given the proceeds in the event of the company’s assets being sold,” says Supreme Court lawyer ML Lahoty, who has filed the plea on behalf of Amrapali homebuyers.
Section 53 of the Code is not meting out equal treatment to the homebuyers and the secured creditors fall foul of Article 14 of the Constitution. It is submitted that the homebuyers have put their lives at stake by paying their savings and hard earned money into the purchase of flats. As such they cannot be categorised as ordinary financial creditors to rank pretty low in order of priority under Section 53. Going by the normal dynamics a corporate builder heavily counts upon the homebuyers as stakeholders to sustain in the market, says the petition.
“We have also said that there should not be a moratorium on all cases against the builder. All cases should go on. Otherwise this will be a blessing in disguise for builders,” says Lahoty.
This also directly infringes upon right to survive of the homebuyers who have been pursuing proceedings before the National Consumer Disputes Redressal Commission (NCDRC) to enforce their paramount claim to possession of the flats or refund of their sale consideration running into several hundreds of crores of rupees, says the petition.
“We have asked the court to restrain the interim professional from alienating the property We have requested the apex court to restrain the interim resolution professional from creating any third party interest in Amrapali Centurian Park," said Lahoty, adding just about 75 percent members of the committee of creditors have the power to decide whether and how the company should be liquidated with buyers having no say at all.
The petition says that there are certain “inherent flaws of Sections 7, 8 and 9 which leaves much room for manipulation at the hands of corporate debtor who can get the insolvency process initiated by a favoured financial or operational creditor. The resolution process may be maneuvered in such a manner that the resolution plan falls through culminating into the liquidation of the corporate debtor. The homebuyers, who are identically footed to, financial creditors and operational creditors are, therefore, deprived of equality before and equal protections of the law.
Homebuyers, who have filed the writ petition, have also said that since Amrapali Silicon City owns 98.84% share in Amrapali Centurian Park, the resolution process initiated against Amrapali Silicon City cannot be viewed in isolation and be divorced from Amrapali Centurian Park. “The order passed by NCLT has direct bearing on the home buyers of Amrapali Centurian Park Pvt Ltd which is virtually owned by Amrapali Silicon City Pvt. Ltd. with 98.84% shareholdings. Both the Companies, holding and subsidiary, are run by almost same set of directors…,” it says.
The petition also states that some of the homebuyers entered into Memorandum of Understanding with the builder who had agreed to allot the flat to the home buyer under the “No Pre-EMI till 36 months or till the date of intimation of possession whichever is earlier” scheme. The tenure of the said subvention scheme has approved by the concerned bank/financial institution is 36 months.
“It was also undertaken by the builder that if due to any reason, the possession offer of the booked unit gets delayed, the builder undertakes to pay the EMI only to the buyer even after 36 months. It is submitted that the (developer) Respondent No.4 has not complied with the said subvention scheme as the buyer is making the payment of EMIs to the banks thereby causing a double loss of EMI, rent and non-delivery of said flats,” says the petition.
Under the insolvency law, the insolvency resolution professional (IRP) takes over the day-to-day management of the company and tries to arrive at a solution within six months. In the case of the Amrapali Silicon City project, Deloitte’s Rajesh Samson has been appointed as the IRP. Bank of Baroda had initiated the insolvency process for an outstanding amount of Rs 56 crore. The company has delayed delivery of the Silicon City project located in Noida and has been unable to clear dues it owes Noida Authority (around Rs 550 crore). It is facing a default of Rs 155 crore against banks.
Some buyers of Amrapali Centurian Park had moved NCDRC earlier this year against delay in delivery of their projects and sought a refund with penal interest at the rate of 18 per cent per annum. The matter is still pending.Vandana.firstname.lastname@example.org