SC pulls up HDFC bank over ‘homebuyer harassment’

The Supreme Court sharply criticised HDFC Bank Ltd for a homebuyer being harassed, suggesting bank officials be identified and investigated in cases where they may have colluded with builders.

The Supreme Court on Friday sharply criticised HDFC Bank Ltd for a homebuyer being harassed, suggesting bank officials be identified and investigated in cases where they may have colluded with builders.

“Banks must realise that consumers, especially homebuyers, are human beings and their interests must be considered...What banks have is after all the money of the consumers,” a bench of justices Surya Kant and Ujjal Bhuyan observed, delivering a scathing rebuke.

The case revolves around the bank disbursing a home loan to a real estate company, International Land Developers Private Ltd, for property purchase. While the property was not completed and delivered to the homebuyer, the bank had disbursed payments to the builder, and later began proceedings against its customer for not paying back.

The property was purchased by Soni under a subvention scheme where the bank disbursed the loan amount to the developer while the developer was expected to bear the interest cost till possession.

The court refused to entertain HDFC Bank’s appeal against a Punjab and Haryana high court order, which first noted the possibility of impropriety and sought an explanation for why an inquiry shouldn’t be initiated against bank officials for their alleged complicity with a builder.

Noting that the high court’s order was interim and limited to issuing a show-cause notice, the bench declined to interfere. “Are bank officers above the law? Banks must sensitise their officers. All bank managers have become property dealers,” the bench remarked.

The court emphasised the need to identify and act against officials found colluding with builders. “We have seen the order of the high court. It is an interim order. It’s an order of show cause. And why not? If it is found that bank officers are hand in gloves with the builders, there must be a probe and action. Black sheep have to be identified and acted against,” the bench said.

Justice Kant shared a previous case where a bank auctioned property in Panipat, Haryana, which was later purchased by a bank manager’s relative. “When an inquiry was ordered, it turned out to be true,” he said.

The bench suggested the high court could refer the matter to the Central Bureau of Investigation. “If this matter comes back to us in the future, perhaps we will do so,” it added.

HDFC Bank’s counsel argued the case stemmed from a simple loan default, with the homebuyer failing to pay 50 instalments. The court rejected this defence, stating: “It is not a case warranting our interference.”

The case involves homebuyer Santosh Soni, who entered into a tripartite agreement with HDFC Bank and International Land Developers Private Ltd. The bank disbursed the loan to the builder, who failed to deliver property possession. The bank then initiated proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act to recover the loan from Soni.

The high court’s October 28 order noted apparent collusion between bank officials and the builder. “Prima facie, it appears that the officials of respondent No.1/Bank and respondent No.2/Builder seemed to be hand in glove, resulting in the property not having been handed over to the loanee and recovering the amount of loan from him while the amount having been paid to respondent No.2/Builder,” the order stated.

The high court directed HDFC Bank and the builder to explain why the builder’s property shouldn’t be seized and auctioned for loan recovery. It also sought affidavits on why an inquiry shouldn’t be initiated against bank officials.

This ruling follows the Supreme Court’s August criticism of Noida authorities for their indifference to thousands of homebuyers waiting years for apartments. These buyers were caught between developers’ construction delays and authorities’ pursuit of developer dues.