Distressed Jaypee home buyers seek government’s intervention

Union Finance Minister Nirmala Sitharaman

New Delhi, ┬áHome buyers of the bankrupt Jaypee Infratech Ltd (JIL) on Sunday wrote to Union Finance Minister Nirmala Sitharaman, seeking the government’s intervention in the realty company’s ongoing resolution process to resolve the matter at the earliest.

The home buyers also approached Union Housing and Urban Development Minister, Hardeep Singh Puri as they staged a protest at the Jantar Mantar here against the promoters of Jaypee Infratech and IDBI Bank, its lead lender.

Members of the home buyers’ association said that they would also seek the intervention of Prime Minister Narendra Modi and Home Minister Amit Shah.

In the letters to Sitharaman and Puri, the home buyers have primarily urged the government to direct the IDBI Bank to vote in favour of the NBCC’s resolution plan.

Public sector construction major NBCC’s bid to acquire the insolvent JIL was put to vote from May 31 to June 10 and a majority of the lenders, led by IDBI Bank, voted against the bid on the grounds that it is conditional.

The NBCC’s bid seeks the cancellation of an estimated income tax liability of Rs 33,000 crore due over a period of 30 years under the concession agreement for the transfer of land from the Yamuna Expressway Industrial Development Authority to JIL.

Home buyers, however, were in favour of the bid, and have sought that the government “direct IDBI Bank and NBCC to resolve their differences on the resolution plan” and the bank to vote for it.

The banks and home buyers together have given around Rs 30,000 crore to JIL and both parties are desperately looking to salvage their funds, they said.

“While banks are only concerned about the 30 per cent haircut they are taking under the NBCC resolution plan, they have been indifferent to almost 40 per cent hair cut home buyers have taken while paying EMIs (considering a 5 year delay in possession) and this burden is increasing by 8 per cent year-on-year.

“Delaying the insolvency process further for one more bidder or two to tweak a clause or two in the NBCC bid is in no one’s interest. There is a carrying cost running into thousands of crores per annum if the resolution is delayed,” the letter said.

The home buyers also urged the government that the votes from home buyers, whatsoever the percentage, be considered as vote from all the home buyers.

“It is requested that home buyers be considered as a separate class of creditors, as they have a same goal and similar agenda, thereby forming a homogenous group amongst themselves, and we humbly request to your good offices to ensure, through judicial and the legislative process, that the vote of majority of home buyers shall be treated as the vote of the whole sub-class. We will be grateful if the Government of India tables and approves an amendment to this effect in the current session of the parliament,” the letter said.

A resolution plan needs 66 per cent votes for acceptance and while the home buyers have a vote share of 59 per cent, the lenders had 41 per cent. However, out of the around 22,000 home buyers, only around 12,000 voted in the latest round of online voting for the NBCC’s bid, bringing down votes for the bid way below the required level.

In their letter, the home buyers attributed the low voting to several factors including lack of proper understanding or access to the voting mechanism, some buyers being old and “several thousand ghost buyers who have not voted at all so far”.

They cited the Ministry of Corporate Affairs’ communication to the National Company Law Tribunal as recommending that “for the purpose of deciding share and manner of voting by home buyers, the principle of present and voting may be applied. The resulting majority vote by this manner or mechanism may be considered as the vote for the whole of the sub-class of the home buyers”.

They also demanded a forensic audit of both JIL and its promoter company, Jaypee Associates.

“The construction of the expressway as well as development of the five land parcels by the Jaypee Group, viz, JAL and JIL, was a project for public purpose and the land that was acquired in connection with this project was not for JIL but for public purpose. However, the Gaur family and JAL siphoned off huge sums of home buyers and public money lent by lenders of JIL and stripped this public project naked.

“We therefore request your good offices to direct forensic audit of JIL and JAL from inception to examine the money trail and pass disgorgement orders against the wrong-doers. The funds of home buyers that have been siphoned off shall be recovered and then proportionately distributed amongst us home buyers as compensation for the inordinate delay in delivery of our apartments.”