Castles in Thin Air

article

The Jaypee group seems to have planned a lot of corporate jugglery to make their monies and with the help of the government, shatter middleclass dreams

The downfall of the Jaypee Group Company has triggered a serious crisis in the housing sector in NCR and India. At least 32,000 families facing a homeless future due to the collapse of Jaypee Infratech are crying foul that the company’s plea of insolvency is a big fraud. Lakhs of other families are looking at the critical financial health of their own builders, which in these turbulent times is not very well. Confusions remain about the law in this regard, as the National Company Law Tribunal (NCLT) stayed the pending and future litigations against Jaypee Infratech. Noticing the citizen’s ire, the government claimed to amend the law in this regard by including homebuyers as the third class of parties to the case. Assocham has demanded that homebuyers be treated at par with corporate lenders but action has yet to be seen on such demands. Even after this bad news, the stock prices of the Jaypee Group companies have rather gone up. Surely, there is more than what meets the eye.

Forbes to Insolvency

These are not small companies, mind you. Gaurs were featured in the Forbes list of richest companies in 2010, but their name is now out of the window. Jaypee, founded in 1979, has the largest land bank in NCR and yet failed to deliver homes for which it collected huge money from buyers. It sold its cement business to Ultratech for around 16,000 crore this year. It is the largest private sector hydro power construction company and was a name that had value. Its verticals range from healthcare, fertilisers, and coal. The net sales from operations of both Jaypee Associates and Jaypee Infratech have downsized in the past four years. In the case of Jaypee Associates it has halved, whereas it has become one-third for Jaypee Infratech.

Jaypee, through a scheme launched in 2013, without any permission from Yamuna Expressway Authority (YEA) sold 3,120 flats and collected around Rs 500 crore. Even as the scheme was cancelled in 2015, Jaypee is yet to return the money, in spite of YEA’s directions. In an interview in March 2016, Manoj Gaur, Jaypee CEO, admitted to a financial mess that came to his notice in 2012 itself. He resolved to end the debt crisis, which has only gone up from Rs 30,000 crore in 2016 to now more than Rs 40,000 crore. Amidst this financial hullabaloo, UP government has ordered a forensic audit of defaulting builders. It would be ultimate tragedy and travesty if any forensic audit is limited to Jaypee Infratech group companies. Instances like Kingfisher have shown us the amount of rampant siphoning off in the corporate sector. Home buyers on the streets are asking for Forensic or CAG audit of all the 17 companies of the Jaypee Group in the public interest.

‘Insolvent’ Indians

While their companies may be going down the hill, the spirit of the promoters is usually high in this unusual corporate sector. Subrata Sahara is one big exception who had to suffer jail time, but he too has been out for a long time now. Even though Gaurs have assured in a assuring tone that they have no intention of running away, why should the government not take steps to ensure that they don’t? After all, if Vijay Mallya can comfortably stay in the UK, leaving behind businesses to bust, what prevents Gaurs from doing so? But the government has sung a different tune. Finance Minister Jaitley has said that the aim of Insolvency Law is to recover loans, while also protecting the interest of promoters. At another venue, he said that interest of homebuyers will be looked into. But the world is surely coming down for all the buyers as the IRP has ruled out refund possibility for home buyers. The housing sector is said to have suffered during the last few years, yet it was not deterred from making significant contributions to the political parties. It seems likely that the contribution was more of an investment to get protection once things got rough in the future. Between 2012 and 2016, builders donated Rs 121 crore to political parties, which accounts for 12.67 percent of total political donations. Political parties escaped the impact of demonetisation despite KN Govindacharya’s specific representation to the Election Commission. A total of 15 parties deposited more than Rs 167 cr. When accepting old notes was barred during demonetisation, how could political parties, which are required to deposit cash received within 10 days, gather so much money?

In the Dark

When Manoj Gaur knew in 2012 that Jaypee companies were in serious crisis, why did he not inform the clear picture to buyers? Such was the state of helplessness amongst latter that they started street protests in 2016. Eventually, Jaypee Infratech withdrew its objection to being a defaulter before NCLT and all hell has broken loose. The NEFOWA (Noida Extension Flat Owner Welfare Association) has written to the Finance Minister stating that no EMI should be taken by banks for a home that cannot be delivered. The fate of thousands of litigants already battling before different forums is also under a cloud as doubts remain on Jaypee projects. After the insolvency proceedings were initiated before NCLT Allahabad, buyers who had been offered possession and were to get their properties registered have been unable to do so. In the absence of registration, the buyers have no ownership as recognised in law and will definitely face issues in dealing with future sale of the property.

Modi’s Lollypop

PM Modi promised housing for all by 2022 but homebuyers today have come out on the streets, and are highlighting the government’s apathy, which is akin to reading a book to a buffalo. Surely, the government does not have the wherewithal to deliver on these fronts alone. It seems that a ‘Corporate Safai Abhiyan’ needs to be launched in the realty sector. Siphoning off, blatant corruption and institutionalised political donations are different ways through which the powerful few have kept their political masters happy. The Delhi government’s threat of a forensic audit by CAG on Delhi power firms itself ensured that tariffs were kept low. Homebuyers have no choice but to look at a bleak future. One day, like Unitech’s jailed MD, maybe Jaypee too will agree to sell its own house. But will that mend the shattered dreams of thousands of homebuyers who are on NCR streets?

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