SC stays proceedings against Jaypee Infratech

The Supreme Court on September4 has stayed the insolvency proceedings against real estate firm, Jaypee Infratech, going on at the Allahabad National Company Law Tribunal (NCLT), initiated by the IDBI Bank for a default of a loan of Rs. 526 Cr. Thousands of homebuyers have not yet received possession of their flats booked with the company. The bench has also sought the replies of Reserve Bank of India and others on a PIL filed alleging that they have not received the flats, and the insolvency proceedings initiated against the company will render them without any remedy. The Court noted that the insolvency proceeding would severely disadvantage the homebuyers, since no decrees passed by the civil courts or consumer fora would be executed against Jaypee once the proceedings begin. The debt ridden realty firm has accumulated money from about 32,000 buyers who have put their hard earned money to the tune of Rs. 25,000 cr. in different projects, being developed by the Company. The homebuyers have also asked for a financial audit of Jaypee to evaluate the magnitude of the bankruptcy. IDBI, the financier for Jaypee had asked to lift the stay on the insolvency proceedings against Jaypee on the basis that it would not really benefit the buyers, and the Court is going to hear the plea soon.
The petition had also challenged a few provisions of the Insolvency &Bankruptcy Code, 2016, especially on the grounds that it did not protect customers, as they did not fall in the category of secured creditors of the defaulter and under the Code, the interests of the secured creditors will be safeguarded first. It further highlighted how the customers had been made to sign some contracts that prohibited them from approaching the Consumer Forum. The Court weighed the interest of the homebuyers against the debt amount, stating that the interest of the homebuyers could not be put at stake for a paltry sum of 500 Crs. For the homebuyers, all their life savings would have gone to waste with no prospects of recovering the same. Accordingly, the Government is considering to amend the I&B Code to protect the interests of the home buyers, either to treat them at par with banks and financial institutions, or to make them trustees so that their investments are mandatorily protected.
[Chitra Sharma v Union of India Writ Petition Civil No. 744 of 2017 order dated 04.09.2017]

Major Decisions

i. Insolvency and Bankruptcy Code, 2016 upheld – The Supreme Court has recently passed a detailed judgment on the legality of the Insolvency and Bankruptcy Code, 2016. Earlier, ICICI had started an insolvency proceeding against the Innoventive Industries, which claimed that the petition could not be maintained as the Government of Maharashtra had given relief to the company under the Maharashtra Relief Undertaking (Special Provisions Act) 1958 (MRUA) and thus no amounts were due. But the NCLAT held that the provisions of the IBC override that of the MRUA and thus the petition was maintainable while deciding Section 7 applications. It held that by giving effect to the MRUA, the plan/ scheme which may be adopted under the IBC will directly be hindered and/or obstructed and that there would be direct clash between moratoriums under the two statutes.[M/s Innoventive Industries v ICICI Bank & Others Civil Appeal No. 8337 of 2017, judgment dated 31.08.2017]

ii. Cow Vigilantism ordered to be stopped – The Supreme Court came down heavily on those who take law in their own hands and mete out justice in the name of cow protection. Though the Centre tried to argue that this was a law and order situation to be dealt by the States, the bench sternly said that such incidents needed to be curbed. The Court asked the Centre and the States to file affidavits within four weeks. The Government also submitted that the States of Haryana, Gujarat, Maharashtra, and Rajasthan would nominate a senior police officer of the Police Department as the Nodal Officer in each district to ensure that vigilante activities do not take place. [Tehseen S. Poonawalla v Union of India, Writ Petition (Civil) 754/2016, order dated 06.09.2017]

iii. Petition filed for mandatory filing of documents on criminal offences before elections – The Supreme Court has issued notice on a PIL filed, which seeks to ensure greater transparency in the election process by making it mandatory for candidates to furnish documents supporting affidavits related to their criminal offences. The petition contends that without the requirement of filing affidavits, the voter cannot know as to whether the affidavit reflects the whole truth or not. [Khemchand Rajaram Khoshti v Union of India Special Leave Petition (Civil) 22373 of 2017, order dated 08.09.2017]

iv. Court to examine whether re-tweeting a defamatory tweet amounts to defamation–The Supreme Court has agreed to hear a petition filed by AAP Spokesperson, Raghav Chadha, asking whether re-tweeting a defamatory tweet itself also amounts to defamation. Earlier, the Delhi Chief Minister Arvind Kejriwal accused Arun Jaitley of corruption during his tenure as the President of the Delhi and District Cricket Association. Those accused in the case are Arvind Kejriwal, Raghav Chadha and other AAP leaders like Kumar Vishwas, Ashutosh Singh, and Deepak Bajpai. [Raghav Chadha v State of NCT of Delhi, Special Leave Petition (Criminal) No. 6526-6527 of 2017, order dated 07.09.2017] (IPA/To be continued)

Friday, 22 September, 2017