Home buyers flex muscles, swing Jaypee Infra CoC to reject bankers' moves

In a meeting on October 17, CoC rejected appointment of Vijaykumar Iyer and Deloitte Touche Tohmatsu India LLP to assist with company's resolution process

Jaypee Infra's home-buyers have been given considerable amount of leverage as they are now a part of the Committee of Creditors (CoC) to the insolvent firm. In a meeting held on October 17, the CoC rejected the appointment of Vijaykumar Iyer and Deloitte Touche Tohmatsu India LLP to assist with the resolution process of the company. 

 

The most significant aspect of the voting pattern, documents show, is that decisions that bankers were comfortable and content with, were rejected (through abstention) by the home-buyers. This signifies a clear shift in the power dynamics between the different group of financial creditors, namely Jaypee's bankers and the home-buyers. 

 

The meeting and subsequent voting was conducted over six issues including the appointment of Iyer as the Resolution Professional to replace the Interim Resolution Professional, Anuj Jain, who was earlier appointed to oversee the corporate insolvency resolution process of the company. 

 

According to filings with stock exchanges, the appointment of Iyer and Deloitte to assist with the resolution process, respectively, received around 57 per cent of the CoC's vote. Which is below the minimum 66 per cent requirement according to Section 28 of the Insolvency and Bankruptcy Code (IBC) rules. 

 

Only one matter, that is the invitation for expression of interest, was approved by the CoC as Section 21 of the IBC requires a minimum of 51 per cent of the CoC to vote in favour of publishing an EoI. 

 

Jaypee Infra's bankers, including IDBI Bank, have claims worth Rs 97.83 billion against the corporate defaulter and all of them assented to appoint Iyer. However, the majority of the home-buyers abstained from voting (41.15 per cent) and only 15.53 per cent of them assented to Iyer's appointment. 

 

A similar trend took place in the voting pattern when it came to appointment Deloitte to assist with the resolution process. All banks had assented to firm's appointment, while 41.15 per cent of the home-buyers abstained from voting. 

 

After a recent Supreme Court ruling, home-buyers of insolvent real estate developers, like Jaypee Infra, were allowed to participate in the CoC as financial creditors. Prior to the ruling home-buyers were classified as operational creditors in the CIRP of a corporate defaulter, therefore they were subjected to any and all decisions that were made by bankers and lenders. 

 

 Jaypee Infra's customers had made the necessary down-payments and premium payments on flats in a number of housing projects, but were left to dry as the company consecutively delayed the delivery of the property to the rightful owners/buyers. 

 

The SC had ruled that the insolvency process for Jaypee Infra had to be 'restarted' as all decisions that had been made by the earlier CoC (without the representation of home-buyers) were void, in light of their ruling. Jaypee Infra's home-buyers have filed claims worth Rs 136.6 billion.

 

The third matter that was voted on was the proposed fee of the resolution professional, pegged at Rs 4.5 million per month, which was rejected. Similarly, the fourth issue on related party transactions and the fifth issue of the acceptance of the resignation of seven directors of the corporate debtor, were also rejected, given the majority abstention by the home-buyers.