The Supreme Court has issued notices to the Centre, Enforcement Directorate, RBI, Uttar Pradesh authorities, and several real estate firms. This follows a plea alleging diversion of thousands of crores collected from homebuyers in Noida and Yamuna Expressway projects. Advocate Prashant Bhushan highlighted a pattern of developers diverting funds and pushing projects into insolvency.
Synopsis
The Supreme Court has issued notices to the Centre, Enforcement Directorate, RBI, Uttar Pradesh authorities, and several real estate firms. This follows a plea alleging diversion of thousands of crores collected from homebuyers in Noida and Yamuna Expressway projects. Advocate Prashant Bhushan highlighted a pattern of developers diverting funds and pushing projects into insolvency.
The Supreme Court has sought responses from the Centre, Enforcement Directorate (ED), Reserve Bank of India (RBI), Uttar Pradesh authorities and several real estate firms on a plea alleging that thousands of crores collected from homebuyers in Noida and Yamuna Expressway housing projects were diverted and siphoned off.
A bench comprising Chief Justice of India Surya Kant and justices Joymalya Bagchi and Vipul M Pancholi on Wednesday issued notices to all respondents after hearing submissions by advocate Prashant Bhushan, appearing for petitioner Vandana Sabharwal. The matter has been listed for July 15.
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The court sought responses from the Union ministries of housing and urban affairs and corporate affairs, the ED, RBI, Uttar Pradesh RERA, Noida Authority and the Yamuna Expressway Industrial Development Authority (YEIDA).
Notices were also issued to Jaiprakash Associates Ltd (JAL), Jaiprakash Infratech Ltd (JIL), Standard Chartered Bank and developers including CRC Homes, CRC Greens, Gaursons, Gulshan Homz, Mahagun and Investors Clinic.
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In her plea, Sabharwal alleged that the case reflected a wider pattern across the real estate sector where developers allegedly divert homebuyers’ funds, transfer land and development rights to related entities and later push projects into insolvency proceedings, leaving buyers stranded.
Bhushan referred to findings of the ED, which is probing the matter under the Prevention of Money Laundering Act (PMLA), and told the court that nearly Rs 14,559 crore collected by JAL and JIL from over 25,000 homebuyers had allegedly been diverted for non-construction purposes and siphoned off to related Jaypee group entities.
“This issue keeps recurring project after project,” Bhushan told the bench. “Funds are collected from homebuyers, diverted elsewhere, and the companies eventually go into bankruptcy. Homeowners are left in a serious situation because the diverted funds are either never identified, or not identified and brought back in time.”
He further alleged that developers routinely shifted land and other assets to affiliated companies, making recovery difficult even after investigations established diversion of funds.
Bhushan said the ED had provisionally attached assets worth around Rs 400 crore, while the alleged diversion exceeded Rs 14,000 crore.
He urged the court to direct the ED to expedite its investigation and issue provisional attachment orders wherever proceeds of crime or diverted funds had been invested in land or development rights.
“What has been happening is that these assets are usually never recovered. Investigations reveal diversion to related companies, but if recovery does not happen, the benefit never reaches the homebuyers,” he said.
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Bhushan also sought directions to the RBI to conduct audits of banks that financed stalled housing projects, arguing that lenders too had suffered heavy losses.
“One of the things the RBI should do is issue directions because this is happening across the board and many banks are losing money in such projects,” he said.
Referring to proceedings before the National Company Law Tribunal (NCLT), Bhushan said homebuyers seeking refunds were being offered only the principal amount paid years ago, without interest, despite steep increases in property prices.
“If we want a refund today, we are being offered what was paid 12 years ago without any interest. Today, the same flat would cost three times more,” he said.
The bench observed that the matter involved “complex” issues and noted that in another case involving similar allegations, the Supreme Court had transferred the investigation to the CBI. However, in the present matter, the ED had already registered a case.
“Let us see what they have to say,” the bench remarked while directing the ED to place a status report on record detailing the progress of its investigation.
Bhushan informed the court that the ED’s enforcement case information report (ECIR) was based on multiple FIRs filed by the Economic Offences Wing of Delhi Police and Uttar Pradesh Police.
The Supreme Court directed all respondents to file their replies by July 15.
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