2019 (7) TMI 1233 - SC - Indian Laws

Completion of construction projects - failure to complete the projects in time - unable to allot/deliver booked flats on committed time - tri-partite agreement - siphoning off the amount of the buyers - permission to take into custody various Directors - Forensic Audit - HELD THAT - It is a shocking and surprising state of affairs that such large- scale cheating has taken place and middle and poor class home buyers have been duped and deprived of their hard-earned money and lifetime savings and some of them had taken a loan from the bank and they are not getting houses. Bank has made payment to the builder, owners have the liability of making payment of amount with interest, home buyers are still waiting for their dream houses to be completed. This is not only with respect to the Amrapali builders that projects have not been completed as reflected in the affidavits of Noida and Greater Noida Authorities. More than 70% of the projects have not been completed which were initiated way-back in the year 2008-09 and were supposed to be completed within 3 years. By the Amrapali Group, the buyers' money which has been obtained has not been invested in the construction activities, rather it has been diverted to a great extent. Money obtained from the banks has also not been invested in the projects and has been diverted elsewhere to acquire other assets. Whether the builders and promoters can be permitted to usurp and divert the money of home buyers and home buyers can be left in the lurch as a silent spectator? - HELD THAT - As per the Noida and Greater Noida authorities, in case the lease-deed is snapped, the entire constructed buildings shall have to be demolished within 3 months. As per the bankers, they have a charge on the property as the land has been mortgaged to them and until and unless their amount is paid, the builder will have no right on the property which has been constructed by their money, and the buyers have also to wait for the satisfaction of the dues. If the real estate business has to survive in India, it has to be answerable to the public and has necessarily to uphold the trust reposed in builders/promoters. They have been paid huge amounts not only by the home buyers but also, they have to pay a huge amount for the public land given to them on lease by Noida and Greater Noida Authorities for construction of houses. The land has been given to them by the authorities on a concessional basis by making payment of 10% amount at the time of allotment. The builders have to be accountable to public/home buyers as well as the authorities and bankers. It is a matter relating to housing needs dealing with shelter place, such an activity is of the public importance as the real estate sector plays a pivotal role in the fulfilment of needs of housing infrastructure. Public Trust Doctrine - HELD THAT - Once the Noida and Greater Noida Authorities knew very well that there were defaults, they could not have allotted further land to the Amrapali group without insisting for payment of its dues. Secondly, it was not open to the authorities to permit the sub-leases of plot of land executed by builders, thereby allowing the leaseholder to earn a huge amount without making payment of the amount due to them. The officials of the authorities have acted in clear breach of public trust. They have permitted the defaulting leaseholders to earn the amount by sub-leasing its land of which dues had not been cleared. Thus, apparently, the officials of the authorities acted clearly in collusion with the builders and overlooked the interest of the Authorities and home buyers while permitting the sub-leases of plot of land to be granted - The action of the officials of the authorities has the effect of causing unjust enrichment of builder from the land held by the concerned authorities. It was wholly an illegal exercise permitted. The officials of the Noida and Greater Noida authorities have acted clearly in a breach of public trust and apart from that, they have failed to act as per the statutory mandate, the regulations and the terms of the lease deed. The transfer of the plot by the lessee was only on fulfilment of certain conditions. The dues of lessor towards the cost of land were to be cleared in accordance with the schedule of payment. It is apparent that the officials of the concerned authorities have not discharged their duty in accordance with the trust enjoined upon them under aforesaid terms and conditions of lease deed, thus, by their inaction, enabled cheating of the home buyers at a large scale. They were well aware of what was happening on the spot. Mortgage - HELD THAT - By the collusion, the money paid by home buyers to builders which included money payable to the Authorities could be diverted, had the deposit made by home buyers been unutilised, money due under lease would have been paid to authorities before the creation of the mortgage. Money borrowed from bank, in fact, was not required for completion of these projects as the money paid by the buyers was enough for that purpose, but that was also diverted and the money obtained from the banks was also not utilised for the purpose it was taken and it was well within the knowledge of the bankers and Authorities that the funds were being diverted, but they remained mute spectators. Diversion of funds - HELD THAT - As a matter of fact, the bank has not been able to show what steps it has taken to stop the diversion of funds to third parties on the same date of disbursal of the amount - in view of the finding of the Forensic Audit that there was no necessity of obtaining the loan from the Bankers as Amrapali Group had sufficient money from the home buyers, which has also been diverted and has not been utilised in the construction activities. Other assets have been created with the help of the same and the borrowings have been used in order to siphon off the money by making payment of some unusual amount not only to J.P. Morgan, but also to IPFII Singapore in violation of the FEMA Rules and FDI Rules as found by the Auditors in the respective cases. The Noida and Greater Noida Authorities and the Bankers have permitted diversion of funds of home-buyers and the possession of other assets by Amrapali Group. The buyers' money had been diverted, which was meant for construction on payment of dues of Authorities in case they were paid timely by the Amrapali Group to the Authorities and to the Banks substantively liability would have been cleared. But by their inaction and rather conniving, the buyers were cheated by the Amrapali Group. Authorities did not object when mortgages were effected in favour of Banks in violation of conditions. Bankers could not have violated conditions. The concerned Authorities have to issue occupancy certificate as well as completion certificate with respect to the projects in which home buyers residing without insisting for the payment of their dues. This Court has to monitor the payment of the dues to the Authorities as well as the Bankers, from guarantors and other proprietors. The innocent buyers cannot be made to suffer for no fault on their part. Once Authorities have allowed 9000 home-buyers to occupy the premises without terminating the lease on the ground that occupation is illegal. Obviously, builders have put them in possession, they are not the encroachers and they have invested their valuable saving and have no other shelter place to live. They cannot be deprived of their houses and cannot be left without basic necessities of life like water, electricity, etc. - Wherever we seek any favour for home- buyers, we see that defrauding parties i.e., promoters/builders are further obliged by making certain concessions by the Government that would amount to perpetrating further fraud and unjust enrichment of builder. The case poses challenge to the law enforcement agencies to act in tandem to book such culprits. We direct the concerned Authorities to look into the violation of the FEMA and FDI norms as projected by the Forensic Auditors in their report and to submit progress report in this Court. Applicability of RERA - HELD THAT - he projects of Amrapali Group have registration under the RERA is an admitted fact. The provisions of the RERA are applicable is also not in dispute - A blatant violation of the provisions of RERA has been done by the Amrapali Group. Since RERA contemplates timely completion of projects once registration has been granted under Section 5 and extension of registration under Section 6, it is only in the event of force majeure in case there is no default on the part of the promoter, registration can be extended in aggregate for the period not exceeding one year. It is clear that RERA intends for completion of the project in case any fraud is committed by the promoter and the activity is not completed, the home-buyers cannot be left in lurch, allowing the prayer on behalf of Bankers as well as by the Authorities would amount to unfair treatment of home buyers in the facts of this case. It is too late for them to submit that home buyer has no rights in the teeth of the provisions contained in the RERA, which intends to prevent fraud - Once registration lapses on non-completion of project within the time stipulated or it is revoked the consequence ensue as enumerated in Section 8 of RERA, the Authority is enjoined upon the duty to consult with the appropriate Government to take such action as it may deem including the carrying out of the remaining development works by competent authority or by the association of allottees or any other manner as may be determined by the Authority. It is clear that is the duty of the promoter to abide by the time schedule of the completion of the project of the allottee. The time of completion of the project is fixed from the date of the agreement. Though the RERA has come into force after the mortgage had been created, the intendment of RERA is that after the execution of the agreement no such mortgage or charge should be created. The registration of Amrapali Group of Companies under RERA shall stand cancelled - The various lease deeds granted in favour of Amrapali Group of Companies by Noida and Greater Noida Authorities for projects in question stand cancelled and rights henceforth, to vest in Court Receiver - Noida and Greater Noida Authorities shall have no right to sell the flats of the home buyers or the land leased out for the realization of their dues. Their dues shall have to be recovered from the sale of other properties which have been attached. The direction holds good for the recovery of the dues of the various Banks also. NBCC is appointed to complete the various projects and hand over the possession to the buyers. The percentage of commission of NBCC is fixed at 8 percent - The home buyers are directed to deposit the outstanding amount under the Agreement entered with the promoters within 3 months from today in the Bank account opened in UCO Bank in the Branch of this Court. The amount deposited by them shall be invested in the fixed deposit to be disbursed under the order of this Court on phase-wise completion of the projects/work by the NBCC. Let the cases be listed for further hearing before us on 9.8.2019.

Summary

Here are the key points from the Supreme Court's order:

1. The registration of Amrapali Group of Companies under RERA has been cancelled due to serious fraud and violations.

2. The various lease deeds granted to Amrapali by Noida and Greater Noida Authorities stand cancelled, and rights vest in the Court Receiver.

3. Noida and Greater Noida cannot sell flats of homebuyers or leased land to recover their dues. Their dues will be recovered from sale of other attached properties of Amrapali.

4. NBCC has been appointed to complete the pending projects at 8% commission.

5. Homebuyers have to deposit outstanding amounts within 3 months in the designated bank account.

6. Enforcement Directorate and authorities directed to investigate FEMA violations, money laundering etc by Amrapali.

7. ICAI directed to take disciplinary action against the statutory auditor Anil Mittal within 6 months.

8. Companies/Directors holding homebuyers' money to deposit it in court within 1 month.

9. Central and State governments directed to ensure timely completion of such stalled projects and protect homebuyers' interests.

10. A senior advocate appointed as Court Receiver to execute tripartite agreements and ensure conveyance of title to homebuyers.

11. Noida/Greater Noida to issue completion certificates, execute conveyance deeds and provide water/electricity connections to homebuyers within 1 month.

The order aims to protect the interests of homebuyers who invested in Amrapali projects by ensuring completion of projects and conveyance of title, while holding the builders, officials and auditors accountable for the fraud.