'Poor Homebuyers In NCR Taken To Ransom, Nexus Between Banks & Builders Must Be Investigated': Supreme Court Hints At CBI Probe

Expressing the view that certain real estate companies, and banks which sanctioned loans to them for their projects in the National Capital Region, had taken poor homebuyers to ransom, the Supreme Court yesterday hinted at directing a CBI probe into a builder-banks nexus.

A bench of Justices Surya Kant and N Kotiswar Singh was considering grievances of 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.

"The homebuyer herein is pushed into the litigation for the amount which he himself has never seen or actually received. The acts of both builder and banks are in violation of tripartite agreement and also in violation of RBI/NHB statutory guidelines...Homebuyers are taken for a ride and there exists no legal framework to address the issues when the insolvency proceedings are initiated against the real estate developer, and banks still keep charging EMIs/Pre-EMIs even when the liability of repayment is of the real estate builder," the homebuyers claimed.

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 bench opined that an in-depth probe was needed to unearth the nexus between the builders and the banks.

"People invested their hard-earned money but poor homebuyers have been taken to ransom. SIT should be constituted to probe the nexus between builders and banks, and it will give a report to us. We will ask CBI to register a case...every bank must be brought in the investigation," the Court said.

The questions to be gone into by CBI are likely to be formulated by the Court on the next date.

Notably, the Court also indicated that interim resolution professionals (of companies facing insolvency proceedings) would not be spared. However, those who acted in a bonafide manner "need not worry". "We would like the conduct of resolution professionals to be also examined", the Court expressed.

In July last year, a bench of Justices Kant and Ujjal Bhuyan had 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. 

Appearance: 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