SC orders CBI to probe builder-banker nexus
The petitions sought an investigation into the systematic failure of statutory and government authorities, and banks
The Supreme Court on Tuesday directed the Central Bureau of Investigation (CBI) to undertake a probe to unearth a possible nexus between builders and banks in sanctioning huge amounts under so-called subvention schemes without following any due diligence.
A bench headed by justice Surya Kant passed the order on a bunch of over 170 petitions filed by homebuyers who approached the court complaining that huge loans were disbursed by banks to the builders under the scheme even before construction of the underlying projects was complete. After builders/developers defaulted on getting the flats constructed, the banks demanded EMIs for recovering the loan amounts from the homebuyers.
Subvention schemes involve a tripartite agreement between the buyer, banker, and developer. Under these, buyers typically pay between 5% and 20% up-front, while the bank loans the rest to the developer in instalments. The developer pays the interest on a loan for a certain fixed period, usually two to four years, until the buyer takes possession. The buyer starts paying back the loan in equated monthly instalments after this.
The petitions sought an investigation into the systematic failure of statutory and government authorities, and banks. The money was released to builders but the projects were never completed -- and banks then started pushing the buyers to pay back the loans for houses that had not been built.
In March, the court asked CBI to provide a road map on how to go about the probe. A status report by the probe agency said that it plans to register seven preliminary enquiries (PE) that will comprise one case exclusively to probe Supertech projects across the country, one case against other builders outside National Capital Region, and five cases to probe the nexus between builders and banks in projects in Noida, Greater Noida, along the Yamuna Expressway, Gurugram and Ghaziabad.
The bench, also comprising justice N Kotiswar Singh signed off on this.
As the exercise would require deployment of staff and officers for purposes of collecting evidence and conduct probe, the bench directed the Director Generals of Police (DGPs) of Uttar Pradesh and Haryana (since many projects are situated in the two NCR states) to depute officers of the rank of deputy superintendent of police (DSP), inspectors and head constables/constables to enable CBI to constitute a special investigation team (SIT) for probing the seven PEs.
A status report by CBI Superintendent of Police (Economic Offences) said that among the 1,200 homebuyers/borrowers represented before the Supreme Court, the majority pertain to Supertech, which is currently facing insolvency proceedings.
About 799 homebuyers/borrowers of Supertech are petitioners in the top court having their flats in the projects spread across Noida, Greater Noida, Yamuna Expressway, Gurugram, Ghaziabad, Kolkata, and other parts of the country.
The court was moved by their plight as they struggled to fight their legal battles across various fora – state Real Estate Regulatory Authorities (RERAs), consumer courts and the Delhi high court, which dismissed their plea in 2022, forcing them to approach the top court. The court observed an “unholy nexus” between banks and builders and in its March 18 order said, “We will send the matter to CBI...We want to get to the root of the matter.”
CBI in its status report said, “With limited information available at this stage, commission of cognizable offence on part of builders is not clear”. It added that its investigation would seek to find out what “ transpired, what was the modus operandi, and what criminality was involved.”
Looking at the vast expanse of the case concerning nearly 40 builders, several banks and housing finance companies and the role of regulatory and land owning authorities, the court had on March 18 appointed senior advocate and former Intelligence Bureau Director Rajiv Jain as amicus curiae (friend of the court).
Jain in his exhaustive report, informed the court on Tuesday that Supertech received a lion’s share of the loans under the subvention scheme.
According to Jain’s report, Supertech got loans of over ₹5,157 crore since 1998. He further pointed out that of the 19 banks and housing finance companies, eight figure in most of the projects and these include some major names such as India Bulls Housing Finance Limited, Punjab National Bank and PNB Housing, Dewan Housing Finance Corporation Limited (DHFL), and India Infoline Finance Limited.
Jain said that the underlying nexus between Supertech and the eight banks and finance companies deserves to be investigated. He also suggested a probe into the loans released by Corporation Bank, IDBI Bank, Punjab & Sind Bank to Supertech .
To ensure the probe is expedited, the court said: “CBI will constitute a SIT involving CBI officials as well as those taken from the police force (of UP and Haryana) on deputation, besides other experts”. Three chartered accountants from the Insititute of Chartered Accountants of India (ICAI) were directed to assist the SIT that will have to submit its interim report within a month.
To ensure effective cooperation of the agencies and authorities involved, the court directed nodal officers to be appointed by the chief executive officer/managing director of Noida Authority, Greater Noida Authority, YEIDA, GDA, Haryana Shahari Vikas Pradhikaran and Haryana State Industrial Development Corporation (HSIDC) within a week. These officers will be required to provide all information and documents required by CBI/SIT and be available for any enquiry or information.
Similarly, court directed that nodal officers be appointed by the ministry of housing, Reserve Bank of India, and RERA authorities in UP and Haryana, for the same purpose.
