On Wednesday, in a major decision, the Apex Court directed the Centre to step in forthwith to protect the interests of around 30,000 homebuyers by taking over the troubled real estate firm's management in view of the forensic auditor's report that the company & its directors siphoned off more than 50 per cent of homebuyers' money.
A bench of Justice D Y Chandrachud & Justice M R Shah directed the Centre to suspend all directors of the group & replace them with independent directors to manage the affairs of the firm. It asked Attorney General K K Venugopal to inform the central authority concerned to take action. The court order came in the wake of audit firm Grant Thornton's startling report on the Unitech group & its subsidiary companies that thousands of crores of rupees of homebuyers' money was diverted for purposes other than construction & some of the funds were parked in offshore tax havens like Cyprus.
In an interim report, the audit firm said 29,800 homebuyers deposited around Rs 14,270 crore with the company while booking flats in 74 projects across the country but Rs 5,063 crore was not utilised for construction & another Rs 2,393 crore diverted money was not yet traceable. Together, this sum is around half of what homebuyers deposited.
Supreme Court asks Centre to file report in Unitech case by Jan 17
Senior Lawyer A M Singhvi, appearing for Unitech promoters Sanjay Chandra & his brother Ajay Chandra, said they be granted bail for 8 weeks to enable them to refund homebuyers’ money by selling their assets but the bench turned down the petition. The Chandra brothers have been in jail since Aug 2017 for allegedly cheating homebuyers as flats weren't handed over to them.
Hinting at massive financial irregularities by the group & its officials, the audit said the group took loans of over Rs 1,000 crore from banks & financial institutions, & the funds were diverted to undisclosed companies & parties. It said loans of hundreds of crores of rupees given by the group to subsidiary companies were not refunded & simply written off.
Some Rs 1,500 crore of homebuyers’ money, used for the construction of flats, was spent by the group for acquiring land & properties in India & abroad. The audit also said advance of Rs 600 crore was given to some persons 7 years ago but the money wasn't returned to the firm.
Taking the findings into account, the bench asked the Centre to conduct a probe into alleged financial fraud by the group & its promoters & file an action taken report before it on Jan 17.
Though the Centre proposed that the petition against the group be referred to the National Company Law Tribunal (NCLT) for proceedings under the Insolvency and Bankruptcy Code, homebuyers’ Advocate M L Lahoty & Advocate Pawanshree Agrawal, who is assisting the court as amicus curiae, strongly opposed the petition. They said homebuyers’ interests could be best safeguarded if the Top Court formalised a procedure for completing housing projects.
Referring to the Jaypee case, Lahoty said homebuyers were fighting a fourth round of legal battle in the tribunal with no relief in sight & asked the court to emulate the line taken by another bench in the Amrapali case where the court has pushed NBCC to take over the projects.
Financial institutions pleaded that they be allowed to recover their money from the group. Senior advocate Maninder Singh, appearing for Infrastructure Leasing & Financial Services, which gave loans of Rs 300 crore for the Mohali project, said the court should vacate its status quo order to recover the amount. The bench, however, said that it would examine the issue in the next hearing.
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