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SC warns Parsvnath executives of jail over refunds
The Supreme Court on Monday escalated its crackdown on errant real estate developers, warning the managing directors, directors and senior officials of Parsvnath Developers Ltd and Parsvnath Hessa Developers Pvt Ltd that they would face the same fate as the former top executives of Unitech unless they refunded two Gurugram homebuyers within a week, while also clearing that insolvency proceedings would not come in the way of enforcing its orders and sending them to jail
The Supreme Court on Monday escalated its crackdown on errant real estate developers, warning the managing directors, directors and senior officials of Parsvnath Developers Ltd and Parsvnath Hessa Developers Pvt Ltd that they would face the same fate as the former top executives of Unitech unless they refunded two Gurugram homebuyers within a week, while also clearing that insolvency proceedings would not come in the way of enforcing its orders and sending them to jail.
A bench comprising Chief Justice of India Surya Kant and justices Joymalya Bagchi and V Mohana gave the developers a final opportunity to deposit the entire amount due to the two homebuyers – petitioners before it, along with 12% annual interest within a week, while directing that the freezing of all bank accounts of the companies and their top officials would continue.
“The next step is jail...that is all,” remarked the bench, refusing to entertain submissions that the company was undergoing insolvency proceedings.
“We are not concerned. We will send them to jail if they do not comply with our orders. You have duped people everywhere. You have made a mockery of all proceedings. The whole country has been suffering because of your harassment,” the bench told counsel appearing for the developers.
The court said it was prepared to adopt the same approach it had taken against Unitech’s promoters. “We will provide the same treatment as Unitech people were. These people have been making mockery of everything. The entire system has been hijacked,” it observed.
In the Unitech case, the Supreme Court had ordered the arrest of the company’s promoters Sanjay Chandra and Ajay Chandra for failing to refund thousands of homebuyers, and the two spent a considerable period in judicial custody while the court monitored the refund process and recovery of assets.
When the developers’ counsel submitted that insolvency proceedings had been initiated against the company since April this year, the bench brushed aside the objection.
“We will auction all properties under court orders. We will not bother about insolvency proceedings or anything else,” it said, adding that the directions were being issued in exercise of its extraordinary powers under Article 142 of the Constitution.
Rejecting the company’s offer to submit a repayment plan, the bench said: “No plan...deposit first and then talk. We are not bothered about pendency of any other proceedings. Let there be no misunderstanding about our order.”
The court further directed the developers to disclose details of all their bank accounts and indicate the account from which the refund would be made.
“You have only two choices -- deposit the entire amount with the stipulated interest or be ready to go to jail on the next date,” it said.
The proceedings arise from petitions filed by senior citizens Rita Tikku and Lokaish Tikku, who invested their life savings in flats in Parsvnath Exotica, Sector 53, Gurugram. Despite paying the entire consideration for flats booked nearly two decades ago, they neither received possession nor obtained compliance with Haryana Real Estate Regulatory Authority (RERA) orders passed in November 2021 directing the builder to hand over the flats and pay delay compensation.
Last week, the top court had frozen the bank accounts of the companies as well as those of their managing directors, directors and senior officials, restrained the creation of any third-party rights in the project and issued bailable warrants against the directors after noting that repeated recovery proceedings initiated by Haryana RERA had yielded “not a single penny”.
On Monday, the bench noted that Haryana had filed affidavits through the chief secretary and director general of police regarding compliance with its earlier directions that mandated the state administration and police to ensure strict implementation of its directions.
Recording that the developers had made only a “feeble attempt” to resist the proceedings by citing insolvency, the court granted them one final opportunity before execution of the non-bailable warrants earlier issued by RERA.
The matter will now be taken up next Monday, when the court will examine whether the developers have complied with its directions or whether coercive action, including imprisonment of the company’s top management, is warranted.
