The Supreme Courts intervention in the bankruptcy proceedings against Jaypee Infratech (JIL) is a legal mess. To begin with, the case brings out a deficiency in the Insolvency and Bankruptcy Code, in that it does not provide for resolution of real estate development firms, and so, does not recognise the legitimate claims of homebuyers and of the banks that lend to homebuyers, except as unsecured creditors.
The government must amend the code to correct the flaw. While the courts first intervention stripped the insolvency professional of his job, the subsequent clarification reinstates him and asks him to prepare a plan that would also satisfy the homebuyers.
Finally, the court would appear to have erred in lifting the corporate veil of …
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