After many twists and turns, over 42,000 home-buyers battling the Amrapali group may finally receive some succour. In a landmark decision last week, the Supreme Court cancelled the RERA (Real Estate Regulation and Development Act) licence of the Amrapali group, upheld the claims of home-buyers over those of financial creditors and government authorities and directed the public sector NBCC to complete its unfinished projects. The decision pertained to writ petitions filed by home-buyers who, having booked flats and paid up 40-100 per cent of their dues 5-10 years ago, found themselves with no roof over their heads. Bankers to the project had meanwhile petitioned the NCLT questioning the rights of home-buyers as unsecured creditors, to file claims.
Having passed many strictures on Amrapali promoters and the local authority, the apex court appears to have been provoked into delivering this scathing indictment by their repeated stalling tactics. A forensic audit into Amrapali’s books has revealed alleged funds diversion on a grand scale. Over ₹5,000 crore of buyers’ funds are believed to have been diverted, via related-party deals and bogus bills, into unrelated ventures, including family weddings and cars for promoters. Statutory auditors kept mum while the company skipped preparing accounts for three years. The Noida and Greater Noida Authorities, who leased vast tracts of land to the group on token payments, did not cancel them on default. Bankers extended loans against doubtful security, not checking end-use. It is this evidence of gross negligence and possible connivance by bankers and civic authorities with the developer, that seems to have impelled the court to deliver such a stringent verdict. Invoking the RERA, the Supreme Court has held that it would be iniquitous to appropriate the incomplete projects, which have been funded mainly by home-buyers’ money, to settle claims of lenders or civic authorities who have turned a blind eye to fraud. Cancelling the RERA registration of the developer, it has asked the public sector NBCC to complete the pending work. It has ordered probes into FEMA, FDI and anti-money laundering violations by the group.
The unequivocal apex court verdict in favour of Amrapali home-buyers offers hope to thousands of their counter-parts across India who are in the same boat. But it also flags areas of concern. While NBCC has agreed to play White Knight to Amrapali home-buyers, it is a moot point if similar rescuers can be found for dozens of other stalled projects. Revelations in this case are also a telling commentary on the deep nexus between India’s real estate czars and lenders and civic authorities who are supposed to regulate them. RERA may be a well-intentioned law that puts buyers’ interests first. But its effective enforcement depends heavily on the State government, local authority, bankers and statutory auditors performing their fiduciary roles. As long as there is pervasive rent-seeking, home-buyers may have no recourse but to approach the courts for justice, even if delayed.