Hopeful of getting a fair treatment after reclassification as financial creditors, the homebuyers of Jaypee Infratech are planning to approach the court to rerun the ongoing resolution process under the amended Insolvency and Bankruptcy Code (IBC).

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The government on Wednesday approved changes in the IBC through an ordinance that gives homebuyers the status of financial creditors at par with banks in the insolvency resolution process. “Once the ordinance is promulgated upon getting President’s assent, we will approach the National Company Law Tribunal (NCLT) to rerun the resolution process,” said Ramakant Rai, who is representing a large number of homebuyers in the Jaypee Infratech case.

Jaypee has failed to deliver 25,000 flats to the buyers citing lack of funds. The realtor had raised around Rs 12,000 crore from the buyers for its Wishtown housing project in Noida in the National Capital Region.

Rerunning the case would mean starting the process from the stage of invitation of fresh bids and reconstitution of the Committee of Creditors (CoC). So, even if the changes are prospective, it would not matter in this case, Rai said.

Currently, the resolution process is heavily tilted in favour of banks, whereas homebuyers have little say in it, homebuyers and lawyers feel.

Even as their contribution in most real estate projects is more than that of banks, homebuyers are unable to participate equitably, leave aside preferential treatment, rue lawyers and homebuyers.

Jaypee raised about Rs 12,000 crore from homebuyers in instalments and booking amount which was much higher than Rs 8,276 crore raised by it from the banks. However, homebuyers were offered only 30% as compared to banks which were offered 70% of  the bid price of around Rs 10,000 crore earlier quoted by a company during the resolution process.

With better representation on the CoC, homebuyers hope to get this order reversed.

“This is likely to get reversed if the new bids are invited. Given that Rs 3,500 crore is required to complete the remaining 60% construction in the project, the homebuyers are likely to get 4-5% of the principal amount as delay compensation,” Rai said.

But even in this scenario, the homebuyers are looking at 20% haircut on an average instead of 42% expected earlier, experts point out.

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Classification as financial creditors will allow homebuyers to have a greater say in the resolution process and protect their rights. Homebuyers will have voting rights and can now participate in the CoC meetings. Till now, they had no voting rights and were sitting outside the CoC.

A total of 66% members of the CoC can decide on a resolution process.

However, “placing thousands of homebuyers on CoC could be tricky. Some of them may not come to vote, while others may have a different opinion,” said Aaditya Gutgutia, one of Jaypee homebuyers. Gutgutia feels that placing homebuyers on par with banks in the IBC proceedings would have solved the problem in entirety.

By Anjul Tomar, DNA Money