2,500 Jaypee homebuyers file application in SC seeking forensic audit of accounts of JAL and JIL

Apprehending that at least Rs 10,000 crore may have been diverted from Jaypee Infratech Limited (JIL) to Jaiprakash Associates Limited, a consortium of associations consisting of around 2,500 flat buyers of Jaypee Wish Town, Noida has filed an application with the Supreme Court seeking a forensic audit of both the companies.

The application was filed by Trilegal in the Supreme Court on behalf of the homebuyers.

In their application, homebuyers have said that the two companies should honour the rights of each and every homebuyer who are seeking possession of their flats by depositing an amount of at least Rs 6000 crore with the Supreme Court for construction of the projects in Noida, development of common amenities and compensation for delay in construction of the projects at the rate of 18 percent.

The consortium had appointed an audit firm ASA Financial Services (ASA) to undertake a diligence of the publically available accounts of JIL. According to the ASA report, JIL claims to have spent an amount of Rs 13,283 crore towards construction and development of the Yamuna Expressway which translates to an amount of Rs 80.50 crore per kilometre.

However, an amount of Rs 17.16 crore per kilometre (which translates to Rs 34.32 crore per kilometre after indexing for inflation as per the consumer price index) was spent on constructing a comparable six-lane concrete Mumbai-Pune Expressway.

On the basis of this, the consortium apprehends that JAL might have potentially received an excess payment of approximately Rs 46 crore per kilometre for the construction of the Yamuna Expressway. This amount totals to approximately Rs 7500 crore for the 165-kilometre length of the Yamuna Expressway.

The consortium also apprehends that JAL, which was responsible for the construction and development of the real estate projects of JIL, might have overbilled an amount of at least Rs 3,000 crore to JIL in relation to real estate projects of JIL. The consortium argues that while the homebuyers are forced to deal with uncertainties of the insolvency process, JAL appears to have taken out an amount of approximately Rs 18,000 crore from JIL while its investment in JIL was an amount of meagre Rs 2,000 crore, it says in its application.

The application filed by consortium argues that JAL had treated JIL as its stepchild as it has used JIL’s land bank as a security for JAL loans and transferred JIL’s land for setting JAL loans. The application cites instances of provisions of 967 acres of JIL land as a security for JAL loans and transfer of  476 acres of land worth Rs 2600 crore by JIL to the lenders of JAL to settle JAL loans.

Besides, homebuyers are also forced to deal with the uncertainties of the insolvency process, it notes and seeks a direction of a forensic audit of the accounts and reversal of transactions involving fraudulent/excess payments.

“It is submitted that if the transactions involving excess payments are reversed, the company will be capable of fulfilling its obligations towards the homebuyers and other stakeholders in a time-bound and efficient manner…it will also be easier to formulate a resolution plan for construction of real estate projects and revival of JIL,” it says.

Homebuyers have also said in their application that they are secured creditors and have a security interest in the flats allotted to them and the two companies cannot transfer the projects without the consent of two-thirds of the allottees under RERA.

It says that the monies paid by homebuyers should be treated as monies paid in trust and such money is first secured in an escrow account or deposited with the Supreme Court before initiation of proceedings under the IBC.

The application lists assets of JAL to be around Rs 23000 crore that include unsold cement assets, hotel business, Sports City and Formula One Track among others.

Last Monday, the Supreme Court had come down heavily on Jaiprakash Associates Limited (JAL) for missing the fourth deadline to deposit Rs 2000 crore with the court’s registry towards refunding homebuyers and ordered that all non-institutional directors of the parent company be present before the apex court on the next date of hearing on November 22 and also directed the amicus curiae to set up a portal for homebuyers.

The SC directed all non-institutional directors of the parent company be present at the next hearing and present their affidavits disclosing their personal assets, the order said.

The Supreme Court last Monday also appointed amicus curiae Pawan Shree to create a website for home buyers to enter their claims.

On September 11 this year, Supreme Court directed Jaypee Associates, the parent firm of its real estate firm Jaypee Infratech, to deposit Rs 2,000 crore by October 27. The apex court also asked the NCLT-appointed interim resolution professional (IRP) to take over the management of Jaypee Infratech and submit a plan to protect the interests of homebuyers and creditors within 45 days.