New Delhi: The Supreme Court Tuesday ordered the Central Bureau of Investigation (CBI) to conduct a preliminary probe into the “unholy nexus” between builders and banks, who together, it said, have held “homebuyers to ransom”.
A bench of justices Surya Kant and N. Kotiswar Singh issued the order while dealing with a batch of petitions where homebuyers who had booked flats under subvention plans in various housing projects in the National Capital Region (NCR) alleged that they were being forced by banks to pay EMIs despite not getting possession of their flats due to inordinate delay by developers.
Under subvention schemes, banks disburse the sanctioned amount directly to the builders, who then pay the monthly instalments to the financial institutions till flats are handed over to homebuyers. However, in the present case the builders started defaulting in payment of the instalments in terms of the tripartite agreements and even failed to hand over possession of the flats. As a result, the banks started initiating action against the homebuyers to recover the payments.
Previously, the court had sought a report from the CBI on how it proposes to proceed with the investigation. The agency submitted its report Tuesday, following which the court issued the orders. It even went through a note prepared by former Intelligence Bureau officer and now an advocate, Rajeev Jain, who is assisting the court in the case.
The bench directed the CBI to register seven preliminary enquiries, as suggested in the agency’s affidavit, and said that it will supervise the probe and also issue directions from time to time. One of the companies against which a preliminary enquiry will be registered is Supertech. The company, the Supreme Court observed in its order, has more than 21 projects in six cities. 19 financial institutions had joined hands with this real estate company to attract homebuyers in its subvention scheme.
According to Jain’s report, the nexus between Supertech and eight banks should be investigated on a priority basis and three others could be done at a later date.
In its order the bench noted that the cases involved over 1,200 houses and that the cluster of over 170 petitions had raised a very important issue, which is the failure of the authorities to discharge their functions.
Since a majority of the projects are located in NCR, falling in the states of Haryana and Uttar Pradesh, the court also directed the states to shortlist names of officers who can be part of the Special Investigating Team (SIT) to be constituted by the CBI. That team will also comprise the agency’s own officers. Chartered accountants from the Institute of Chartered Accountants of India (ICAI) shall also be deputed to be part of the SIT, the bench said.
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Started defaulting in 2018-19
In its order, the court noted, builders had advertised schemes assuring that homebuyers would be given residences by a specified date and they began paying monthly instalments accordingly. Loans were mostly issued through tripartite agreements between banks, homebuyers and builders and developers.
While these projects were launched between 2013 and 2015, most builders and developers started defaulting in 2018-19. Thereafter, banks started demanding payments from homebuyers despite the fact that the units were incomplete, and coercive action was taken, the bench recorded in its order.
The Supreme Court had, in July last year, protected homebuyers when it prohibited banks and other financial institutions from taking coercive action against homebuyers or builders regarding non-payment of monthly instalments. They were also stopped from entertaining any complaint against them for cheque-bounce cases.
The aggrieved homebuyers had complained that they were victims of illegal disbursal of loans that was directly credited into the account of builders, which was in violation of the Reserve Bank of India (RBI) guidelines, which are statutory in nature.
In March this year, when the court last heard the case and asked for a blueprint from the CBI to conduct a probe into the illegal nexus, financial institutions had urged the court not to bring the agency into the picture as it would create instability and suggested the RBI to look into the matter. Their lawyers requested the court not to paint all banks with the same brush.
However, the court had then questioned the banks’ conduct by asking them as to how they could release money to the builders despite knowing that “not a brick was laid at the site”.
(Edited by Sanya Mathur)