The Supreme Court (SC) has done well to put the promoters of the Amrapali and Jaypee groups in their place; for too long have these builders duped and harassed home-buyers and got away with it. The apex court’s decision to disallow Jaypee Associates from bidding for its subsidiary’s (Jaypee Infratech) assets will send out the right signals to errant promoters who believe they can get away with reneging on their commitments. Indeed, if the promoters do have the resources to complete the projects, why is it that they were unable to repay their loans? If, as they now claim, there is enough land to monetise to complete the projects, what were they waiting for? The fact is the real estate sector has been left totally unregulated all these years and builders have taken advantage of hapless home-owners have had no means of redress. The SC order may have taken some time to come, but it is strong and unambiguous. Any promoter who believes he can wear down the lenders and home-owners by prolonging the litigation for years on end—as has been possible in the past, thanks to the apathy of the government whether at the Centre or in the states—will now think twice before he does so. Given how governments have done virtually nothing to help home-buyers and have actually supported the builder fraternity, it is good the courts are taking them to task.
If the promoters of Jaypee Associates—with whom the SC has been really patient, giving them many chances—have been rightly barred from trying to win back their company, the SC has rightly warned the Amrapali Group it would sell “each and every property” if the latter couldn’t raise Rs 5,000 crore to complete the unfinished projects. If the promoters don’t fall in line as directed, the SC should indeed render them “homeless”, or see to it they are put behind bars.
The SC has also done well to allow a fresh round of bidding for Jaypee Infratech without excluding the earlier bids presented—this will allow greater participation and better price discovery. Earlier, the court had rejected a bid for Rs 7,350 crore that it had said was not good enough. While banks already have their representatives on the Committee of Creditors (CoC), which will assess the bids coming in, the SC has now allowed them to initiate insolvency proceedings against JAL (on the directive of the Reserve Bank of India). This, then, would give them more clout as they negotiate with the promoters to recover their dues. It is also not a bad thing the apex court has already allowed the Allahabad bench of the National Company Law Tribunal (NCLT) to use an additional 90 days in case the proceedings aren’t wrapped up in the prescribed 180 days. It is important the banks and other creditors have enough time to be able to attract a good number of proposals and assess them carefully, so as to be able to get the best deal both for themselves and the home-owners.