Builder-Bank Nexus In NCR: Supreme Court Allows CBI To Register 22 Cases; Asks Gurugram Judge To Enquire Into Coercive Orders Against Homebuyers

Considering's Central Bureau of Investigation's interim report on a "builder-bank nexus" in the national capital region, the Supreme Court yesterday allowed the agency to register 22 regular cases for further investigation.

Further, taking note of "problems" with Gurugram Courts, the top Court directed District and Sessions Judge, Gurugram to conduct a fact-finding enquiry into passing of coercive orders against homebuyers despite a stay order restraining any such action. The Sessions Judge was asked to file a report within 10 days. "This is a serious matter", commented Justice Surya Kant.

To recap, this is the matter where the Court earlier directed CBI to conduct 7 preliminary enquiries into an "unholy" nexus of builders and banks in NCR, noting that certain real estate companies, and banks which sanctioned loans to them for their projects in NCR, had taken poor homebuyers to ransom.

Yesterday, a bench of Justices Kant and N Kotiswar Singh gave 6 weeks' more time to CBI to complete the preliminary enquiry being carried out with respect to projects outside NCR. So far as the other 6 preliminary enquiries, CBI report suggested further course of action and registration of 22 regular cases.

Accordingly, the Court allowed the probe agency to register 22 regular cases to undertake further investigation in the matter in accordance with law. If the agency encounters any impediment in its investigation, or requires further logistic support, it shall be at liberty to approach the Court, the order added.

While placing on record its appreciation for CBI's efforts, the bench said,

"We appreciate the outstanding efforts made by CBI in completion of the 6 preliminary enquiries, for which we believe that more than 1000 persons have been examined and voluminous records have been looked into, besides visiting [58] project sites. We expect that even after registration of regular cases, the CBI will, having regard to the magnitude and gravity of issues, promptly investigate those cases so as to take the investigations to their logical conclusion."

A comprehensive note filed by Amicus Curiae Rajeev Jain was also before the Court, which was asked to be shared with Additional Solicitor General Aishwarya Bhati "for information and necessary action at the end of CBI or other agencies", considering that it was an 'eye-opener'. Justice Kant also impressed upon the ASG that certain relevant excerpts of the CBI interim report should be shared with the Amicus.

From the CBI report, the Court also noted that there were some homebuyers whose pleas prima facie lacked bonafides. They were offered possession in reasonable time, but just to avoid payments or to continue litigation, they raised grievances. The Court indicated that such homebuyers would be relegated to avail whatever remedy is available in law and not be allowed to enjoy writ jurisdiction.

An application alleging that Indiabulls Housing Finance Ltd. (now Sammaan Capital) sent rogues at the place of homebuyers in order to recover money was pointed out by Senior Advocate Mukul Rohatgi (for Sammaan Capital), who submitted that the company engaged no anti-social elements. Instead, an employee of the company went to the homebuyer, and he as well as the company's Managing Director were personally present before the Court.

The Court was further informed that bailable/non-bailable warrants (to secure presence of homebuyers) are being issued by Gurugram courts in some complaint cases involving Indiabulls. This led Justice Kant to comment, "There's a problem with our courts also in Gurugram, I'm getting lot of information". Ultimately, the bench ordered a fact-finding enquiry and called for a report from the Gurugram Sessions Judge. Further presence of Sammaan Capital's MD and official was exempted.

Background

The petitions were filed by homebuyers in the National Capital Region, who claimed that they were being forced by banks to pay EMIs without having obtained possession of flats due to delay by the builders/developers.

For context, the flats were invested in under a subvention scheme, in terms whereof, after the developers started defaulting on EMIs of sanctioned bank loan amounts, the banks initiated action against homebuyers.

As per the homebuyers, the loan amounts were illegally disbursed directly into the accounts of the builders/developers in violation of RBI guidelines. It was alleged that the homebuyers were used as a medium to get the loans sanctioned and the amounts transferred from the banks to the builders/developers.

In July last year, a bench of Justices Kant and Ujjal Bhuyan granted interim protection from coercive action to the homebuyers, making it clear that no such action, including in terms of a complaint under Section 138 of Negotiable Instruments Act (check-bounce), shall be entertained on behalf of the Banks/Financial Institutions or Builders/Developers against the homebuyers.

In March this year, in the backdrop of the builders and banks not giving details of delayed projects in NCR as well as the current status of their construction, the Court opined that an in-depth probe was needed to unearth the nexus between the builders and the banks. Subsequently, it called for a proposal from the CBI on how to carry out the investigation/enquiry.

In April, the Court ordered preliminary enquiries by CBI, with priority being given to Supertech Ltd. At the outset, the order recorded that the matter pertained to a batch of more than 170 petitions filed by over 1200 homebuyers/borrowers, and it raised an issue of paramount importance, that is, "systematic failure of statutory and governmental authorities to discharge their functions, circumvention of regulatory framework by banks and housing financial corporations, and the resultant illicit benefits alleged to have been drawn by builders/developers at the cost of the homebuyers who are now bearing the brunt of such failure".

Priority was given to Supertech Ltd, as it has over 21 projects in 6 cities. It entered into tripartite agreements with 19 banks/HFCs and there are approximately 800 aggrieved homebuyers. Of the 19 banks/HFCs, 8 figure in most of the 21 projects. Rest of the 11 banks/HFCs were in 3 or less projects. Further, Supertech alone secured loans of about 5157.86 crores since 1998.

Appearance: Senior Advocate Sanjeev Sen (for HDFC Bank); ASG Aishwarya Bhati (for CBI); Advocates Anshul Gupta, Aditya Parolia, Piyush Singh and Eshna Kumar (for homebuyers)

Case Title: HIMANSHU SINGH AND ORS. Versus UNION OF INDIA AND ORS., SLP(C) No. 7649/2023 (and connected cases)