Jaypee Infratech it is the first real estate company that has entered insolvency proceedings though there are a lot like Kohinoor Group,Mumbai are facing liquidation proceedings.
The insolvency proceeding will give answer a lot of questions like :
1) what is claim preference when a so called
Real Estate Developer raise money from bankers and customers in the pretext of constructing a building, divert money and than claim insolvency.
2) can secured creditor (who are just part owner of property) can do whatever it like ? Without consent of customers?
3) Are customers are also secured creditors to the extent of their ownership in the under construction unit? ( RERA recognises this and that where it require 70% consent of all customers)
Bankruptcy law has made it simpler to go bankrupt without realising fate of customers. So what should the home buyers do when real estate developer take short cut and declare himself insolvent?
Don't give easy turf to Bank or Developers
Buyers can give tough fight to all stake holders to protect their interest. They need to do detailed SWOT and realise following :
a) in an ongoing project, where construction of complete more than 30-40% complete than bankers security on remaining unsold unit is zero unless it is completed. Here buyers and bankers are on same risk zone and hence "Advantage buyers to stop any arbitrary decisions by lenders"
b) File breach of trust cases against developer since money was paid to him for construction and not for repayment of his loans/interest or personal profiteering. Profits are not accrued to developer till completion of project.
c) Raise your claim in The National Company Law Tribunal ( NCLT)
(i) Claim that the money that was paid by him (Buyer) was never meant for repayment of secured creditor. The secured creditor was paid by developer through diversion of money and breach of trust. The secured creditor is making undue profits in all cases.
(ii) No order of NCLT should be passed without detailed investigation in accounts of the developers. Buyers should claim first right on all assets purchased by Developer with the help of diverted money, since the diversion itself was breach of trust.
d) Form larger groups : 30000 buyers of Jaypee must be paying atleast Rs 150 cr EMI to various bankers. They can collectively negotiate with bankers on EMI and revival. Always take into account how much money secured creditor has already received back (Interest and repayment of capital) rather than just their outstanding.
e) Don't Wait and watch : Patience is the biggest problem with
Home Buyers in India. Nothing will change unless thousands of home buyers come together and make sure that there is constant pressure on government, administration, developer, secured creditor and judiciary.
f) Find out if other customers have initiated actions under Indian Penal Code, Negotiable Instrument Act etc against the Developer and how can you strengthen their case.
Finally, customers need to make sure that developers just don't abuse process of law and get away to London or Dubai !
