Flawed voting rules may push Jaypee into liquidation, homebuyers tell IBBI

The method of computing voting percentage needs immediate attention, the letter mentioned and pointed out that in the recent elections, over 14,500 homebuyers did not exercise their voting rights.

"We understand based on publicly available information that the resolution professionals have been taking into account, all creditors who abstain from voting in the CoC, for purposes of determining the voting percentage of the creditors. If a similar approach is adopted (and which is likely to happen) in the CIRP of JIL, it is evident that the HBs’ voting share would be significantly diluted," the letter continued.

Citing an example they said that  even if the share of banks is 40 percent and of homebuyers was 23 percent (9,500 out of 24,000) and fixed deposit holders was 2 percent, the total share would still be 65 percent against the required 66 percent.

Assuming that all banks vote in favour of a resolution and 9,500 home buyers cast their vote (also in favour) along with all FD holders, the sum total will be short of 66 percent required to pass any resolution for construction and possession of our homes. Assuming all banks want to reject a resolution, they will not have the necessary 51 percent of votes required. At the same time, if 9,500 home buyers want the resolution rejected, they will also not be able to do so.

They informed the chairperson that in case absentee votes are considered for computing the voting percentage, the exercise will head towards a stalemate liquidation due to lack of sufficient consensus.

The letter pointed out that the Supreme Court had earlier acknowledged that the liquidation of JIL would not be a viable option.

Rate of interest for voting share be recalibrated to 12 percent

They want the rate of interest for voting share to be recalibrated to 12 percent per annum and demanded that the insolvency resolution professional Anuj Jain be instructed to display the entire list of 30,000 home buyers on the website, mentioning sold/unsold inventory and claims made and admitted for all homebuyers.

Rate of interest for delay in completion be increased to 12 percent

JIL had levied a default rate of 18 percent per annum for late payment of instalments, which was subsequently reduced to 9 percent in 2016 after it was vehemently opposed by buyers considering the delay in possession of flats by JIL. "The IRP [Interim Resolution Professional] has considered a simple interest rate of only 8 percent per annum with respect to the compensation payable to HBs, which has been reflected in the admitted claims for each of the HBs. This action of Anuj Jain is arbitrary, without application of commercial judgment and contrary to the prevailing market practice as well as judicial precedents in relation to award of compensation to HBs," the letter said.

 IRP be instructed to display the entire list of 30,000 homebuyers

Homebuyers claimed that the IRP had earlier refused to publish the list of JIL creditors on its website, or permit homebuyers to inspect it. The IRP claimed that an individual homebuyer is only allowed to view his/her claims and not the entire list of creditors.

"This denial by IRP is clearly in violation of the applicable laws and in particular, aforementioned Regulation 13," the letter alleged.

"The key objectives of the Insolvency and Bankruptcy Code, 2016 (Code) is to ensure transparency and efficacy in dealing with the insolvency/ bankruptcy process of a corporate debtor. Furthermore, it may be noted that CIRP of JIL is a unique and unprecedented case, and one of its own kind. The majority stakeholders of JIL are the innocent HBs, who must be protected by capricious and unscrupulous practices of keeping the information concealed and discreet. It is extremely important for us to know the status of other HBs, as it would help us align our interests, propose a joint and effective strategy to secure possession of our homes and coordinate in a meaningful manner."

Dealing with untraceable buyers

The letter further suggests that there are a large number of homebuyers with either missing details or are not traceable at all. “We request the authority and your good offices to kindly look into these fictitious/ suspicious transactions, how to deal with such flats in voting as well as in the resolution process needs to be looked into,” the homebuyers said.

"It appears that the lists published on JIL’s website constitute such HBs [homebuyers] who have not been exercising their voting rights, which was also evidenced in the voting conducted by the Amicus Curiae pursuant to the order of Hon’ble Supreme Court…In the recent voting conducted for electing the authorized representative to represent the HBs in the CoC, only 9,500 HBs have exercised their voting rights," the letter said.

JIL had earlier admitted that more than 24,000 apartments were yet to be completed, hence it is unlikely that more than 14,500 HBs would not exercise their option to vote.

Homebuyers be treated as unsecured/secured financial creditors

Homebuyers have requested the IBBI chairperson that they should be treated as secured creditors at par with secured financial creditors. "Any treatment otherwise of HBs will be inequitable, discriminatory and unfair. As you would appreciate, most of the HBs have taken huge loans from the banks, have nearly fully paid the builder and honoring heavy EMIs through their hard-earned monies. In fact, it is only the HBs who stand security to both builder and banks, and any unfair treatment of that category of creditors would result into systematic failure, bringing down the entire structure," the letter stated.

Small window of 24 hours for voting

The letter draws the chairperson’s attention to the 25,000 homebuyers involved against the number of banks. "While it would be convenient for the Banks to respond to voting call within a short span of 24 hours, communicating and securing responses from over 24,000 HBs to exercise their votes would be next to impossible. The recent window of 10 days for voting on choice of HBRP could see response only from about 9,500 HBs. One can therefore imagine, the fate if the window is kept just for 24 hours. An alternative and fail safe method needs to be evolved in case of HBs," it said.

Transparency in process

During the last resolution process between August 9, 2017 and August 9, 2018, the HBs were not provided details about the information memorandum, evaluation metric, bidding process, shortlisted bidders, subsequent negotiations and the final resolution plan. While HBs understand that commercially sensitive information can be withheld; the portion that pertains to largest stakeholders of JIL must be published on its website.

“During our recent meetings with the IRP, we have been made to understand that in future, some information may be provided to the authorised representatives subject to confidentiality clauses. In effect, it means that the authorized representative will be restrained from discussing and sharing the details with HBs, which is prima facie unreasonable,” the letter noted.

Instructions be issued to buyers who have received offer of possession

The letter states that the IRP has directed that those who were issued an Offer of Possession (OOP) after August 2017, will be debarred as claimants. "This appears unfair since CIRP’s cut-off date for claims remains as August 2017. Secondly, it is widely accepted that OOP is not in order since mandatory requirement of OOP have not been met and that flats offered for possession and the towers and the scheme are significantly short of completion," the letter read.

Investigating agency should examine fund flows

An investigating agency should look into the details of fund flows from the inception of JIL to unravel and locate the homebuyers' money.

vandana.ramnani@nw18.com