SC allows CBI to file 22 cases against banks, builders over stalled housing projects

The court appreciated the progress made and observed that the findings raised serious concerns about the way the subvention scheme was misused by certain developers and banks

The Supreme Court on Tuesday allowed the Central Bureau of Investigation (CBI) to register 22 criminal cases against banks and real estate developers linked to stalled housing projects under the subvention scheme, citing “substantial evidence of an unholy nexus” uncovered by the agency in its ongoing probe.

The court was informed that the agency had examined seven preliminary enquiries (PEs) into the builder-bank nexus across housing projects in multiple states, with a specific focus on Delhi-NCR. One PE focused exclusively on developer Supertech, which had 21 projects in six cities under the scheme. (HT Archive)

The CBI, which was directed to investigate the matter by the court on April 29 following petitions from aggrieved homebuyers, submitted an interim report in a sealed cover. The court was informed that the agency had examined seven preliminary enquiries (PEs) into the builder-bank nexus across housing projects in multiple states, with a specific focus on Delhi-NCR.

One PE focused exclusively on developer Supertech, which had 21 projects in six cities under the scheme. Five others examined projects in the National Capital Region (NCR) — including Noida, Greater Noida, Yamuna Expressway, Gurugram, and Ghaziabad — while the seventh covered projects outside the NCR involving developers other than Supertech.

The CBI has completed six of the seven enquiries and sought six more weeks to conclude the final one. Based on its findings, the agency recommended filing 22 regular cases (RCs) for further investigation.

A bench of justices Surya Kant and N Kotiswar Singh accepted the recommendation and directed the agency to register the cases and continue its probe.

The bench noted that the CBI special investigation team, led by superintendent of police Ram Singh, examined over 1,000 individuals, visited 58 project sites, and reviewed voluminous documents. “We expect that, having regard to the magnitude of the issue, the CBI will promptly investigate and carry the cases to their logical conclusion,” the bench said.

The court appreciated the progress made and observed that the findings raised serious concerns about the way the subvention scheme was misused by certain developers and banks. Under the scheme, builders enter into a tripartite agreement with homebuyers and banks, under which the bank releases the home loan directly to the builder, who in turn pays EMIs until a specified date or until possession is handed over.

The petitioners, who had approached the court alleging high-handed recovery tactics by banks despite delays in possession, had purchased flats in projects developed by Supertech, Saha Infratech, and Logix City Developers Pvt Ltd.

The CBI report, presented in court by additional solicitor general (ASG) Aishwarya Bhati, was not shared with lawyers, but the bench observed that some petitioners may have misused the proceedings despite having received timely possession. “We will not allow them to enjoy the discretionary platform of writ jurisdiction. If it is found that they have misused [the process], we will relegate them to the appropriate forum,” the court said, directing the ASG to share relevant findings with the court-appointed amicus curiae.

The amicus, former Intelligence Bureau director and now practising lawyer Rajiv Jain, had earlier submitted a report detailing how Supertech entered into subvention agreements with 19 banks and housing finance companies (HFCs), covering nearly 800 homebuyers.

Since 1998, Supertech had availed loans totalling around ₹5,158 crore, Jain’s report said. Eight institutions featured most frequently across Supertech’s projects: Indiabulls Housing Finance (now Sammaan Capital), Punjab National Bank Housing Finance, Dewan Housing Finance, HDFC Housing Finance, ICICI Bank, India Infoline Housing Finance, L&T Housing Finance, and Aditya Birla Housing Finance.

Jain flagged a “deep nexus” between Supertech and these lenders and urged a priority probe into whether disbursals were made in violation of Reserve Bank of India and National Housing Bank guidelines, which prohibit upfront loan disbursals unlinked to construction milestones. He also cited instances of banks entering into bilateral loan arrangements with Supertech outside the scope of the subvention scheme — including loans extended by Corporation Bank, IDBI Bank, and Punjab & Sind Bank.

In a second report submitted Tuesday, Jain raised concerns about the imbalance of power between homebuyers and developers, called for greater transparency from regulators such as the Real Estate Regulatory Authority (RERA), and recommended a rethink of their role in protecting consumers from unfair practices.

Calling the report “an eye-opener”, the bench directed that a copy be shared with ASG Bhati for further action. The court will hear the matter next on July 30.