Supreme Court Directs CBI To Conduct Preliminary Enquiries Into NCR's 'Builder-Banks Nexus'; Probe To Start With Supertech Ltd
Following grievances raised by homebuyers/borrowers, the Supreme Court today directed the Central Bureau of Investigation to conduct preliminary enquiries into an "unholy" nexus of builders and banks in the National Capital Region.To recap, this is the matter where the Court earlier hinted at a CBI probe, noting that certain real estate companies, and banks which sanctioned loans to them...
Following grievances raised by homebuyers/borrowers, the Supreme Court today directed the Central Bureau of Investigation to conduct preliminary enquiries into an "unholy" nexus of builders and banks in the National Capital Region.
To recap, this is the matter where the Court earlier hinted at a CBI probe, noting that certain real estate companies, and banks which sanctioned loans to them for their projects in NCR, had taken poor homebuyers to ransom.
Today, a bench of Justices Surya Kant and N Kotiswar Singh, after perusing a response filed by CBI as well as a note placed on record by Amicus Curiae Rajeev Jain, ordered that the preliminary enquiries be conducted by CBI in the manner proposed, with priority being given to Supertech Ltd.
"while we propose to issue directions from time to time...as of now, we deem it appropriate to direct the CBI to register 7 preliminary enquiries in the manner as suggested in the affidavit filed on its behalf...the first preliminary enquiry shall pertain to the projects of M/s Supertech Ltd...one preliminary enquiry for the projects of builders other than Supertech Ltd. falling outside NCR region (viz. Mumbai, Bangalore, Kolkata, Mohali and Allahabad)...5 preliminary enquiries (one each) for the projects only under one development authority - Noida, Greater Noida, Yamuna Expressway, Gurugram and Ghaziabad", the Court said.
In terms of a request made by the CBI regarding deputation of additional staff to support the exercise, and as majority of projects are located in the National Capital Region falling in the States of Haryana and Uttar Pradesh, the Court also directed the states to shortlist names of officials in their respective police force and forward them within 1 week to the Director, CBI. Thereafter, the Director, CBI shall constitute the requisite Special Investigation Teams comprising its own officers, officers of States of UP and Haryana on deputation (to be selected by the Director from the shortlisted names after necessary enquiry), Chartered Accountants from ICAI, etc.
The Court also directed notification of nodal officers by the concerned development authorities, the Ministry of Housing and Urban Affairs, RERA (UP) and RERA (Haryana), whose particulars shall be sent to Director, CBI within 1 week. It further said that the states of Haryana and Uttar Pradesh shall extend full cooperation and logistic support to the CBI/SIT for carrying out the enquiries.
It was also indicated that an endeavor would be made by the Court to take up the matter every month to consider the developments, so that the poor homebuyers "can be bailed out of the crisis".
The Court further passed orders for payment of honorarium and extension of assistance to the Amicus. Noting that Corporation Bank alone had provided loan of about Rs.2477.54 crores, it was directed that the bank start payment of honorarium as well as office expenses to the Amicus and his staff with effect from March 1. In this regard, the bank is to create a corpus and submit a proposal for proportionate sharing of the expenses by other banks, the Court said.
In response to a submission made during the hearing, Justice Kant expressed that merely because new faces have taken over the management in some cases (following insolvency proceedings), liability would not be absolved. In connection with a contention that some banks followed all norms and may not be roped in unnecessarily, the judge remarked that CBI conducting a preliminary enquiry is sufficient safeguard and "CBI is never in a tearing hurry to register an FIR unless it is satisfied that there is something".
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".
From the Amicus' report, the Court noted that Supertech Ltd 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. In this backdrop, it had been recommended by the Amicus that the probe into Supertech's nexus with the banks/HFCs be given priority.
In the CBI's affidavit, the Court observed, it was stated that the matter pertained to about 40 builders/developers and most petitions were filed in relation to projects of Supertech. To ascertain the criminality on part of the financial institutions, the CBI recommended had that 7 preliminary enquiries be registered and enquired into.
An interim status report is to be submitted by CBI by the next date of hearing.
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.
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)
Citation : 2025 LiveLaw (SC) 574