Jaypee insolvency case: There is still hope for buyers

The road ahead for them full of uncertainties but it may not be as dark and gloomy as it may seem now.

Following the insolvency petition against the debt-ridden Jaypee Infratech, hundreds of home buyers gathered at the company office in Noida, shouting slogans against the management and demanding refund of their investments.

The National Company Law Tribunal has admitted the insolvency petition filed by IDBI Bank against the Jaypee Infratech. The protestors demanded that their money be returned first as they fear that if the company is declared insolvent, all their court cases will become ineffective and they will not be able to get possession of their flats and lose their hard-earned money.

It is understandable that people who have paid for these projects are worried about their money, after all it's their hard-earned money.

The road ahead for them full of uncertainties but it may not be as dark and gloomy as it may seem now. Here are the reasons why:

There is still time

Under the Insolvency and Bankruptcy Code, the NCLT has appointed an insolvency professional to carry out the proceedings. The NCLT appointed debt resolution professional needs to come up with a resolution plan in 180 days, plus a 90-day extension at the NCLTs discretion. The plan is expected to have a clear roadmap for the resolution of how the company will repay its lender.

Court could be sympathetic towards buyers

There are lots of laws involved and many laws may collide with each other. This would require the court to interpret the laws and it may take a considerate view to safeguard interests of buyers.

Insolvency professionals will try their best to revive

Since thousands of buyers are involved in the Jaypee projects, the revival becomes all the more important. The revival process is not going to be as simple as for other companies. If it does come to liquidation, then it would be done through sale of assets.

Banks may buy equity

If the banks show the willingness to buy equity in the company, it may still not be liquidated. Of course, the this would come into the picture only if the insolvency professional fails to come up with a revival plan. Banks may not get back their entire money by the sale of assets, so they may opt to buy equity in the debt-ridden company. In that case, banks are likely to put in their efforts to revive the project which would be a win-win situation for both banks and buyers.

Regarding EMIs

An ET report advised buyers, who have taken bank loans, to not stop paying equated monthly installments as it can impact their credit rating negatively and make their participation in insolvency proceedings problematic.

OneIndia News with PTI inputs