Alleging Diversion Of Jaypee Funds, Homebuyer Moves Supreme Court Seeking ED Probe, RBI Audit Of Banks' Exposure To Real Estate Projects

The Supreme Court on Wednesday issued notice to the Union Government and the Enforcement Directorate on a writ petition filed by a Jaypee homebuyer seeking a court-monitored investigation into alleged diversion of thousands of crores collected from homebuyers in the Jaypee Wishtown project in Noida.

A bench comprising Chief Justice of India Surya Kant and Justice Joymalya Bagchi issued notice returnable on July 15. Notice has also been issued to the Ministry of Corporate Affairs, the Reserve Bank of India, UP RERA, NOIDA, Jaiprakash Associates Ltd, Jaiprakash Infratech Ltd and related entities.

Advocate Prashant Bhushan, appearing for the petitioner, submitted: "Issue is, the ED, which has been investigating, has raised the doubt of 14,559 crores collected by JAL and JIL from more than 21,000 home owners. Substantial amount were diverted for non-construction purposes and siphoned off to entities etc. One of the larger issues that arises is that this has been happening in a large number of projects where funds have been collected from homeowners and diverted. The problem is home owners are left in a situation where diverted funds are not identified or not brought back in times because it has been diverted to other companies".

"We don't get any interest for the money paid 12 years ago. What we invested was, if we buy it today, it will cost us 3 times," he remarked.

The petition, filed under Article 32 by homebuyer Vandana Sabharwal, alleges large-scale diversion of homebuyers' funds, non-completion of real estate projects, regulatory failures and inadequate enforcement under the Prevention of Money Laundering Act (PMLA), the Real Estate (Regulation and Development) Act (RERA) and the Insolvency and Bankruptcy Code (IBC).

According to the plea, the petitioner had booked a residential unit in the “Kasablanca” project at Jaypee Wishtown, Sector 128, Noida, but neither received possession nor refund despite more than a decade having passed. The petition states that the grievance is not confined to an individual dispute but raises issues affecting a large number of homebuyers.

The petition refers to an Enforcement Directorate prosecution complaint dated January 8, 2026, which allegedly found that out of Rs 14,599 crore collected from homebuyers, Rs 13,833 crore was diverted by Jaypee Associates Ltd Executive Chairman Manoj Gaur. It states that Gaur was arrested on November 13, 2025 and remains in judicial custody. The plea further alleges that only around Rs 400 crore has so far been provisionally attached by the ED.

The petition claims that the diversion of funds took place through multiple channels, including transfers to Jaypee group entities, transfer of land and development rights to external developers at allegedly undervalued prices, and non-compliance with RERA requirements relating to escrow accounts and disclosures.

It further alleges that despite searches conducted by the ED at 15 locations on May 23, 2025, including premises linked to five external developer groups, no supplementary prosecution complaint or attachment proceedings were initiated against them even after nine months.

Among the principal reliefs sought, the petitioner has asked the Court to direct the ED to complete investigation into five identified “external developer transaction clusters” within 90 days and to file periodic status reports before the Court. The entities named include Gaursons India Pvt Ltd, Gulshan Homz Pvt Ltd, CRC Group, Mahagun Real Estate Pvt Ltd and entities linked to Honey Katiyal and Sunny Katiyal.

The plea also seeks directions to the Reserve Bank of India to conduct a supervisory audit of banks' exposure to real estate projects and examine end-use monitoring of funds. It asks for project-wise RERA escrow audits, prohibition on mortgaging project lands without homebuyers' consent and prior regulatory approval, and creation of independent construction monitoring committees under High Court supervision.

In addition, the petitioner has sought directions to Adani Group, the successful resolution applicant for Jaypee Associates Ltd, and Suraksha Realty, the successful resolution applicant for Jaypee Infratech Ltd, to initiate avoidance applications under Sections 43, 45 and 65 of the IBC in relation to allegedly undervalued pre-CIRP transfers. The petition seeks transparent auction of recovered assets with proceeds to be first utilised for homebuyer restitution.

Reliefs sought in the petition

Direction to the Reserve Bank of India to conduct a supervisory review/comprehensive audit of banks' exposure to real estate projects, including due diligence on project assets, end-use monitoring, and regulatory action.

Direction to the Directorate of Enforcement to complete investigation within 90 days into five external developer transaction clusters involving Gaursons, Gulshan Homz, CRC Group, Mahagun Real Estate, and Honey/Sunny Katiyal entities, file supplementary prosecution complaints, attach proceeds of crime, and submit status reports every 30 days.

Direction to RERA authorities to carry out project-wise audits of escrow accounts with continuous regulatory monitoring.

Direction prohibiting mortgaging or encumbering project lands without consent of homebuyer representatives and prior regulatory clearance.

Direction for creation of independent construction monitoring committees under the supervision of the respective High Courts.

Interim direction to ED to complete investigation within 30 days into Gulshan Homz projects in Sectors 128 and 129, Noida, and attach assets if proceeds of crime are found.

Direction that all proceeds recovered by ED through supplementary attachments/confiscations in the Jaypee matter be deposited in a court-monitored escrow account exclusively for completion of homebuyers' projects and restitution to homebuyers.

Direction to Adani Group and Suraksha Realty, as successful resolution applicants for JAL and JIL, to file avoidance applications under the Insolvency and Bankruptcy Code regarding undervalued external developer transactions, with recovered assets to be auctioned transparently and proceeds prioritised for homebuyers.

Direction to ED and CBI to investigate the role of intermediaries, including bank officials, sub-registrars, YEIDA officials, and UP RERA officials, in alleged asset-stripping transactions.

Direction to RBI to conduct a focused supervisory audit of Standard Chartered Bank and consortium lenders regarding end-use monitoring of loans, review of OTS approvals, and possible knowledge of back-channel arrangements, with regulatory or criminal action where necessary.

Case Details: VANDANA SABHARWAL Vs UNION OF INDIA|W.P.(C) No. 661/2026 Diary No. 27990 / 2026

Click Here To Read Order

Writ petition filed through AoR Abiha Zaidi.