SC: CBI to probe unholy nexus of builders, banks

The Supreme Court on Tuesday took note of an “unholy nexus” between banks and builders that has duped thousands of unsuspecting homebuyers in Delhi-NCR. Directing the CBI to take action, the court ordered the registration of seven preliminary enquiries (PEs) against real estate developers, including Supertech Ltd, for alleged fraudulent practices.

Housing frauds

Supertech Ltd is accused of defrauding homebuyers, colluding with banks, which disbursed over Rs 2,700 crore to the builder

Thousands of homebuyers were affected by the subvention scheme where banks paid 60-70%t of home loan amount to builders without projects being completed

“We deem it appropriate to direct the CBI to register seven preliminary enquiries in the manner as suggested in the affidavit filed on its behalf. The first preliminary enquiry shall pertain to the projects of Supertech Ltd. One inquiry for the projects of builders other than Supertech Ltd falling outside the NCR region (namely Mumbai, Bengaluru, Kolkata, Mohali and Allahabad). Five preliminary enquiries (one each) for the projects only under one development authority -- Noida, Greater Noida, Yamuna Expressway, Gurugram and Ghaziabad,” a Bench led by Justice Surya Kant said.

The CBI conducting a preliminary enquiry was a sufficient safeguard as “the central agency is never in a tearing hurry to register an FIR, unless it’s satisfied that there is something (to investigate)”.

Noting that thousands of homebuyers were affected by the subvention scheme where banks paid 60 to 70 per cent of the home loan amount to the builders without projects being completed within the stipulated time, the Supreme Court on March 18 ordered the CBI to prepare a roadmap to unravel the “builder-banks nexus” defrauding them.

The CBI report stated that the matter related to about 40 builders/developers but most of the petitions were filed regard to Supertech projects. To ascertain the criminality on part of the financial institutions, the CBI recommended registration of seven PEs.

Taking note of the CBI report, the Bench, which included Justice N Kotiswar Singh, directed the UP and Haryana DGPs to give a list of DSPs, inspectors and constables to the agency to constitute a special investigation team (SIT) for the probe.

It ordered the CEOs/administrators of the Greater Noida Authority, Noida Authority, secretary, Ministry of Housing and Urban Affairs, RERA (UP) and RERA (Haryana), the Institute of Chartered Accountants of India and the RBI to notify one nodal officer each from among their senior-most officers within a week to assist the SIT.

The Bench made it clear that it would monitor the status of the probes on a monthly basis so that poor homebuyers “can be bailed out of the crisis”. The order came after amicus curiae advocate Rajiv Jain alleged that Supertech Ltd was the “main culprit” in defrauding homebuyers in collusion with banks. Corporation Bank advanced more than Rs 2,700 crore to builders through subvention schemes, Jain said.

Supertech Ltd had 21 projects in six cities and the company entered into tripartite agreements with 19 banks and there were 800 aggrieved homebuyers. Pointing out that Supertech alone secured a loan of Rs 5,157.86 crore since 1998, the amicus curiae said the nexus between Supertech and banks needed a close scrutiny on a priority basis.

The order came on petitions filed by several homebuyers who booked flats under subvention schemes in various housing projects in Noida, Greater Noida and Gurugram. The petitioners alleged that they were being forced by banks to pay EMIs despite not getting possession of flats.

Under the subvention scheme, banks disburse the sanctioned amount directly to the accounts of builders, who are then required to pay EMIs on the sanctioned loan amount until flats are handed over to homebuyers. After builders started defaulting on EMIs to banks, as per the tripartite agreement, the banks sought EMIs from the homebuyers.

The Bench noted that thousands of homebuyers were affected by the subvention scheme, where banks paid 60 to 70 per cent of the home loan amount to the builders without projects being completed within the stipulated time.