As the Jet Airways bankruptcy faces proceedings in the National Court of Corporate Law (NCLT) and creditors await their installments, some others are left with candles. These are passengers who had booked tickets on Jet Airways flights last year, which were canceled due to the airline’s fortune plummeting. One of those affected was Mumbai-based Bhavesh Nagda, whose plane flight to Singapore last year was canceled. She lost Rs 90,000 on her tickets.
About a year ago, the Pune-based elderly couple Maneck K and Kayomarz M Adajania had just obtained their visas for their group trip to Europe organized by Cox & Kings, when the tourism company filed for bankruptcy and retired. . The tour was canceled. The Adajanias have yet to regain their Rs 2.5 lakh. The NCLT has moved forward, and bankers across the country hope to get their fees after the bankruptcy proceedings of various companies are completed. But the consumer recovery path for such companies is more arduous. Legal experts suggest alternatives.
Contact a resolution professional
When a company files for bankruptcy, creditors, usually bankers, have the right to file a petition with the NCLT, requesting a resolution. The NCLT appoints a resolution professional (RP) whose primary task is to revive the company. If the business cannot be revived, it is liquidated and the creditors are paid.
Unfortunately, “many consumers, who have made their reservations or paid for a service, are not recognized by law as creditors and need to file a claim as the court will never know that you have a valid claim,” says Abhay Vohra., Partner at Burgeon Law.
Present a case in consumer court
Since NCLT gives preference to secured creditors (such as banks), Uday Wavikar, Vice President of the Maharashtra and Goa Consumer Court Lawyers Association suggests approaching a consumer court. Add that RP is a part of the case, he adds, even if you go to a consumer court. By doing this, a favorable decision by a consumer court, whenever it comes along, puts you on a par with secured creditors. Wavikar has been fighting consumer cases for the past 20 years in consumer court.
For example, in the case of Jet Airways of Rs 26 billion in quotas, the first to receive the quotas are banks (Rs 8.5 billion), followed by taxes and salary payments (Rs 3 billion) and sellers (Rs 10 billion) Passengers like Nagda are the last. All this recovery will be made from an airline that has losses of around Rs 13.5 billion accumulated. Now if Nagda gets close to the RP first, he would be last in line. But if you file a Consumer Court case, list the RP as part of it, and get a decree order, then it will rise higher in the order of priority and you will be paid before the 10 billion rupee sellers are settled.
Fighting simultaneously on two forums
Consumer protection experts say cases related to the same causes, which were fought separately in the NCLT and consumer courts, can spark clashes. Jehangir B Gai, a Mumbai-based consumer activist, says: “The NCLT is a relatively new forum and cases are moving faster compared to the way they do in consumer courts, where there is delays. Home buyers of HDIL home projects have been waiting for the adjudication of their complaints, filed several years ago, by consumer commissions, while NCLT has (already) started the proceedings.”
When these home buyers approached the RP, they were advised to pay the balance and take illegal possession of the apartment without the Certificate of Occupancy to protect their right to the apartment. Gai says this is absurd as he compares it to jewelry stored in a bank locker that is auctioned off when a bank fails. “It may be in the bank, but that doesn’t make it bank property.”
Prepare to wait
Court cases in India are known to continue for months, often years. NCLT has a queue of 6,000 cases out of a total of 12,000 filed since June 2016. According to a report by Motilal Oswal Securities, the average time needed for case resolution was 410 days, as of March. On the other hand, the consumer courts have thousands of cases pending at the three levels: district forums (5.5 lakh), State Commission and the National Commission (3 lakh).
“It used to take five years before, now if consumers submit their applications online, it would take 2-3 years. District forums also take four years, ”says Wavikar. Vohra notes: “It is not a viable option. Today’s consumers face misery due to the law process: too many uncertainties, too much effort, and too many nuances. The mechanics of the law are in place, but implementation is a problem.”
Different courts can lead to opposing views
Even the judgments approved by each one are difficult to act and leave one perplexed. So if HDIL floor owners approach the Consumer Court, they would simply approve a service deficiency order by ordering the builder to complete construction, obtain the Certificate of Occupancy (OC), and turn in possession of the floors. “If the company is liquidated and it no longer exists, who is going to obtain the OC and the delivery of the apartment? Surely not the NCLT ”, asks Gai.
NCLT, on the other hand, would order the auction of flats during the liquidation proceedings, leaving the flat owners in the lurch. “It is extremely doubtful that apartment buyers can get their dues back, let alone obtain legal ownership of their apartment. Even the consumer forum cannot override the NCLT decision, ”adds Gai.
Currently, there is not much a customer can do, other than go to a consumer court or file a claim with the resolution professional and assess whether an asset sale would meet their obligations. Parallel resolution systems are a major pain point in the justice process. But as Gai says, “When the law is framed, all these factors must be taken into account and even judges must protect the rights of third parties.” Globally, Germany and Great Britain have revised their consumer laws. India also renewed its Consumer Protection Law (this month). But it remains to be seen whether this would lead to faster lawsuits for those whose money is stuck in bankrupt companies.