New Delhi: The Supreme Court of India has strongly condemned the rate at which the Central Bureau of Investigation (CBI) has been carrying out investigations into the alleged nexus amongst real estate developers and banks which are said to have defrauded thousands of homebuyers on the system all over the country.
The Chief Justice, Surya Kant, led a bench that was unhappy with the investigation being made in the case as it heard a batch of petitions filed by more than 1,200 homebuyers who had been affected by the problem. The petitioners claimed that they were a victim of a fraudulent action in subversion plans in a number of housing projects within the National Capital Region (NCR).
It could not afford to wait forever until the investigation is completed and warned it would deteriorate the situation of homebuyers who already became victims of the developer, who is allegedly acting in concert with banks and financial institutions.
The court in its ruling stated that further suffering to the homebuyers would not come with a delay or lack of action by the CBI to step up its investigations and transform preliminary investigations into a normal criminal case wherever it was deemed necessary.
The court was categorically ferocious about the recommendation by CBI that certain of the cases might be handed over to state investigative bodies. The judges turned down the suggestion and they said that any such action would create confusion, and it would not help in the investigation of the alleged scam in a coordinated manner.
Rather, the apex court directed the federal agency to proceed with the investigation of all the cases itself and have a thorough investigation on the alleged builder-bank collusion.
The case focuses on housing projects sold on so-called subvention schemes which were fashionable among developers in the past decade boom in the real estate market. In this model, banks advanced the amount of house loan to the builders, and the developers agreed to make the EMIs to the buyers until the owners received the flats.
But by the time a number of builders were claimed to have stopped making the EMIs, banks were now insisting on repayment of homebuyers according to the tripartite agreements which homebuyers had signed during the loans. This made most of the buyers pay EMIs on homes which were delayed or never completed.
The argument presented by the petitioners was that they had been tricked into such deals and that banks had never done their due diligence before letting huge sums of loans to developers. There were numerous projects that were not completed despite buyers having paid good amounts as loans and instalments.
The court proceedings showed that over 1,200 homebuyers were seeking relief at the apex court. A lot of them had rented apartments in the projects in cities like Noida, Greater Noida and Gurugram though under subversion schemes advertised in collaboration between builders and bank.
The homebuyers claimed that they were being compelled to make EMIs yet they had not been given possession of their homes. Some of the projects were stalled or delayed long.
It is estimated that the problem is experienced in various real estate projects in India and not only in the NCR. Previous guidelines of the Supreme Court permitted the CBI to enroll dozens of cases against developers and financial institutions suspected to have joined the scheme.
The bench gave a warning that in case the investigation persisted at a slow pace, it may even contemplate the establishment of a special monitoring committee to be chaired by a retired judge to supervise the investigation.
The judges further instructed the CBI to submit an affidavit on the status of an investigation in all the cases related and an explicit schedule of when the investigation would be done.
The court has highlighted that the responsibility should not be taken solely on developers, but also on bank officials who gave loans and made money be disbursed without ascertaining that projects would be completed. The court was dissatisfied that the officials of this bank had not been properly scrutinized in the investigation.
Accepting the intricacy of the case, the Supreme Court mentioned that in case the CBI was short of manpower, it might request the support of state police forces and its economic offences sections.
The court made it clear that this support is only meant to complement that work of the central agency, as opposed to substituting it. The bench said the purpose was to make the investigation go on quickly and effectively.
Besides, all stakeholders, such as homebuyers, builders and the financial institutions were requested by the judges to hand their claims, suggestions and recommendations to the court-appointed amicus curiae, Rajiv Jain. The amicus will visit the submissions and report pertinent findings before the court.
This issue has been under observation by the Supreme Court over a number of months. It had allowed the CBI to put several cases under the so-called nexus between banks and builders in different cities such as Mumbai, Bengaluru, Kolkata, Mohali and Prayagraj.
The court had also commissioned preliminary investigations into a number of developers who were suspected of abusing the subversion model of embezzling loan funds without completing projects.
Among the developers that were reported in report to the court was Supertech limited which was reported to be a significant beneficiary of loans that were funded under such schemes. The documents presented before the court show that the company took several financial institutions loans in the number of thousands of crores over the years.
According to legal experts, the case may have far-reaching consequences to the real estate business of India especially the ones funded by the project under subvention schemes. In case the malpractice is proved, developers and financial institutions could be subjected to criminal charges and increased regulatory oversight.
The case also reflects the greater issues of responsibility in the housing market where thousands of homebuyers have been impacted by delays in building and perceived financial anomalies.
To a large number of the affected families, the Supreme Court litigation is a very important step to finding redress after decades of uncertainty. As the court now urges the CBI to accelerate its investigation, the homebuyers have been hoping that the investigation will at last bring some accountability and solution to the stagnant housing projects.
The case will be revisited when the CBI provides the status report and schedule on when the investigation will be concluded.
