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SUPREME COURT OF INDIA
ARUN MISHRA, UDAY UMESH LALIT, JJ.
Bikram chatterji & ors. – Appellants
Versus
Union Of India & Ors. – Respondents
WRIT PETITION (C) NO.940, 947, 971, 942, 1041, 1018, 1116, 1144, 1156, 1206, 1242 of 2017, 8, 58, 21, 52, 91, 56, 57, 74, 134, 131, 160, 164, 182, 199, 226, 245, 281, 306, 298, 246, 267, 288, 460, 353, 378, 742, 829, 1397 of 2018, SPECIAL LEAVE PETITION (C) NO.1879 of 2018, SMC (CRL.) NO.4 of 2018
Decided on : 23-07-2019
(a) Housing – Booking of Apartments – Denial of possession despite substantial payment – Matter projects the issue of larger public interest – Real estate business has developed and it mainly survived by money invested by buyer for purchase of house – They have right to obtain houses – Large number of projects which have come up not only in Noida and Greater Noida, but most of them have not been completed by builders/promoters and they have siphoned buyers' money in large scale – No action has been taken by Noida and Greater Noida Authorities against builders for cancellation of leases due to violation to fulfil their obligation – Bankers have financed to builder certain loan on condition to invest in the projects, but they have also permitted money to be used as for other purposes – Forensic Auditors have reported that Amrapali Group used unfair means to promote themselves – It made false promises to lure public to invest in its projects, purposefully delayed construction, cheated home-buyers for title of flats and trapped home-buyers in rental returns – Amount disbursed by Banks was not utilised for constructions of projects and funds of home buyers as well as amount disbursed from Banks were diverted to unapproved uses – Banks acted as a mute spectator to unapproved diversion which was happening evidently in all banking transactions – Even, Noida and Greater Noida Authorities were grossly negligent in reviewing and monitoring progress of projects and did not take any action for non-payment of land dues and continued to allot land to Amrapali Group – Amount received by Companies from home-buyers was more than amount spent on construction and for payment of land – Sole objective of taking a loan was to divert funds to other ventures to create assets in name of family members and to make movies – Several companies were created solely for the purpose of routing funds. (Paras 8, 59, 61(g), (h),(i)(j) and (k))
(b) Housing – Booking of Apartments – Denial of possession despite substantial payment – involved – It is a shocking and surprising state of affairs that such large-scale cheating has taken place and middle and poor class home buyers have been duped and deprived of their hard-earned money and lifetime savings and some of them had taken a loan from bank and they are not getting houses – Bank has made payment to builder, owners have liability of making payment of amount with interest, home buyers are still waiting for their dream houses to be completed – This is not only with respect to Amrapali builders that projects have not been completed as reflected in affidavits of Noida and Greater Noida Authorities – More than 70% of projects have not been completed which were initiated way-back in year 2008-09 and were supposed to be completed within 3 years – If real estate business has to survive in India, it has to be answerable to public and has necessarily to uphold trust reposed in builders/promoters – Builders have to be accountable to public/home buyers as well as authorities and bankers – It is a matter relating to housing needs dealing with shelter place, such an activity is of public importance as real estate sector plays a pivotal role in fulfilment of needs of housing infrastructure. (Paras 69 and 72)
(c) Housing – Booking of Apartments – Denial of possession despite substantial payment – Public trust doctrine imposes on State and its functionaries a mandate to take affirmative action for effective management, and citizens are empowered to question its ineffectiveness – Land of farmers had been acquired for the purpose of housing and infrastructure needs by State Government and handed over to concerned authorities for construction – They are bound to ensure that builders act in accordance with objective behind acquisition of land and conditions on which allotment had been made – It was a duty of concerned officials – They are not only enjoined to ensure that rights of home buyers are protected but also interests of authorities and bankers – Public authorities are duty-bound to observe that leased property is not frittered away along with money of home buyers – Affirmative action was clearly enjoined upon them not only under statutory provisions of various enactments but also under public trust doctrine – Total dues of Noida and Greater Noida authorities are more than Rs.5426.09 crores; by now more than Rs.5500 crores – Once Noida and Greater Noida Authorities knew very well that there were defaults, they could not have allotted further land to Amrapali group without insisting for payment of its dues – It was not open to authorities to permit sub-leases of plot of land executed by builders, thereby allowing he leaseholder to earn a huge amount without making payment of amount due to them – Officials of authorities have acted in clear breach of public trust – They have permitted defaulting leaseholders to earn amount by sub-leasing its land of which dues had not been cleared – Action of officials of authorities has effect of causing unjust enrichment of builder from land held by concerned authorities – It was wholly an illegal exercise permitted – Officials of Noida and Greater Noida authorities have acted clearly in breach of public trust and apart from that they have failed to act as per statutory mandate, regulations and terms of lease deed – Officials of concerned authorities have not discharged their duty in accordance with trust enjoined upon them under terms and conditions of lease deed, thus, by their inaction, enabled cheating of home buyers at a large scale – It was not open to bankers to mortgage land in view of the conditional permission to create mortgage – Mortgage created in violation of condition cannot be said to be effective in accordance with law as land was owned by concerned authorities and lessees had right to mortgage only subject to fulfilment of conditions imposed by lessor/authorities – No effective action had been taken and officials have permitted wilfully contumacious violations of conditions of lease. (Paras 73,76, 77, 78, 81, 82, 84 and 85)
(d) Housing – Booking of Apartments – Denial of possession despite substantial payment – Authorities and Bankers have not acted in furtherance of public interest and failed to perform duties enjoined upon them – Kind of fraud that has taken place not only in Amrapali Group of Companies but at large as more than70 percent of various projects have not come up, is alarming to Courts to take affirmative steps with direction to prevent such frauds, restore money of home-buyers and to punish incumbents responsible for such act – At the same time to ensure that buildings are completed – 9000 families are residing for last several years out of sheer necessity of shelter place and they have not been provided with electricity connections and other facilities due to non-issuance of occupancy certificate by concerned authorities – Most of them have paid entire amount to builders – Amount outstanding as against home buyers have to be used in completion of building – Concerned Authorities have to issue occupancy certificate as well as completion certificate with respect to projects in which home buyers residing without insisting for payment of their dues – Apex Court has to monitor payment of dues to Authorities as well as Bankers, from guarantors and other proprietors – Innocent buyers cannot be made to suffer for no fault on their part – Central Government and Government of Uttar Pradesh directed to ensure that everything is done to protect interest of home-buyers without obliging builders – Concerned Authorities to look into violation of FEMA and FDI norms as projected by Forensic Auditors in their report and to submit progress report in this Court. (Paras 98, 101, 102 and 103)
(e) Real Estate (Regulation and Development) Act, 2016 – Sections 11, 17 and 18 – Booking of Apartments with Amrapali Group of Companies – Denial of possession by despite substantial payment by buyers – Blatant violation of provisions of RERA has been done by Amrapali Group – Since RERA contemplates timely completion of projects once registration has been granted under Section 5 and extension of registration under Section 6, it is only in event of force majeure in case there is no default on part of promoter, registration can be extended in aggregate for period not exceeding one year – RERA intends for completion of project in case any fraud is committed by promoter and activity is not completed, home-buyers cannot be left in lurch, allowing prayer on behalf of Bankers as well as by Authorities would amount to unfair treatment of home buyers in facts of this case – It is too late for them to submit that home buyer has no rights in teeth of provisions contained in RERA which intends to prevent fraud – In case promoter fails to complete or is unable to give possession of an apartment, plot or building, he shall be liable on demand to allottees – In case allottee wants to withdraw from project, without prejudice to any other remedy available, promoter has to return amount – RERA intends protection of home-buyers and aims at completion of buildings – Buildings have to be completed – Completion certificate is to be issued – Apex Court has to monitor payment of dues of Authorities and Banks and that outstanding are not going to create hurdle in execution of registered document/conveyance deed in favour of home buyers – It has to be executed by concerned Authorities as well as by Court Receiver and by home buyers – Amount which is due on part of home buyers has to be deposited in account which has been opened by Apex Court – It has to be utilised firstly for the purpose of completion of buildings and for providing other facilities – Money borrowed from banks was used to create other assets worth thousands of crores – Banks can realise their money from those assets and from guarantors and not from investment of home buyers, not from buildings in which loans granted by banks have not been invested, which have been erected partially or some are at nascent stage, for which hard-earned money has been paid by home buyers – It is for Courts to do complete justice between parties and to protect investment so made and interests of home buyers and to ensure that they get the perfect title and fruits of their hard earned money and lifetime savings invested in projects. (Paras 110, 111, 116, 117, 120, 124, 127 and 131)
(f) Real Estate (Regulation and Development) Act, 2016 – Section 11(4)(h) – U.P. Apartments (Promotion of Construction, Ownership, and Maintenance) Act, 2010 – Section 17 – Booking of Apartments with Amrapali Group of Companies – Denial of possession by despite substantial payment by buyers – Right and interest of allottee are safeguarded by virtue of provisions contained in section 11(4)(h) – As project was pending, provision intends to confer right on allottee and save allottees and also their interests from such liability – Even if provision is held not applicable on the ground that RERA came into force later, since there was no valid mortgage, it was incapable of affecting right or interest of allottee – Rights or interests of allottees are not at all affected by mortgage created by bankers or by dues of Noida or Greater Noida authorities – To claim compensation is at option of allottee if allottee wants to go out – That is an additional right, not the only right conferred under RERA – He cannot be left in lurch but is entitled to claim refund if he so desires – It is his option to claim refund along with interest and compensation which is to be determined under RERA – Rights of allottees are not restricted to only receiving compensation – Home buyers have right of enforcement of heir right for compensation due to undue delay in completion of project – Premium and other dues payable under lease deeds to Noida and Greater Noida Authorities, cannot be recovered from home buyers or projects in question – Dues as may be ordered shall be recovered by sale of other properties which have been created by diversion of funds and have been attached by Apex Court – Non-payment of dues of Noida and Greater Noida Authorities and banks cannot come in way of occupation of flats by home buyers as money of home buyers has been diverted due to inaction of Officials of Noida/ Greater Noida Authorities – They cannot sell buildings or demolish them nor can enforce charge against homebuyers/ leased land/ projects in facts of the case – Similarly, banks cannot recover money from projects as it has not been invested in projects – Home buyers money has been diverted fraudulently – Fraud cannot be perpetuated against them by selling flats and depriving them of hard-earned money and savings of entire life – They cannot be cheated once over again by sale of projects raised by their funds – Noida and Greater Noida Authorities have to issue Completion/ Part Completion Certificate, to execute tripartite agreement and registered deeds in favour of buyers on part-completion or completion of buildings, as the case may be or where inhabitants are residing, within a period of one month. (Paras 134, 136, 137, 150 and 153)
(g) Real Estate (Regulation and Development) Act, 2016 – Section 11(4)(h) – U.P. Apartments (Promotion of Construction, Ownership, and Maintenance) Act, 2010 – Section 17 – Booking of Apartments with Amrapali Group of Companies – Denial of possession by despite substantial payment by buyers – Registration of Amrapali Group of Companies under RERA shall stand cancelled – Various lease deeds granted in favour of Amrapali Group of Companies by Noida and Greater Noida Authorities for projects in question stand cancelled and rights henceforth, to vest in Court Receiver – Home buyers directed to deposit outstanding amount under Agreement entered with promoters within 3 months from today in Bank account opened in UCO Bank in Branch of Apex Court – Amount deposited by them shall be invested in fixed deposit to be disbursed under order of this Court on phase-wise completion of projects/work by NBCC – In view of the finding recorded by Forensic Auditors and fraud unearthed, indicating prima facie violation of FEMA and other fraudulent activities, money laundering, Enforcement Directorate and concerned authorities directed to investigate and fix liability on persons responsible for such violation and submit progress report in Court – Police also to submit report of investigation made by them so far – Directions issued. (Para 154)
Facts of the Case:
These writ petitions pertain to projects of various companies of Amrapali Group in Noida and Greater Noida. Various home buyers booked their apartments during period 2010-2014. Buyers signed Standard Form of Allotment-cum-Flat Buyers Agreement and even after payment of 40to 100 percent of total consideration, they are faced with threat of forfeiture of huge booking amount. Buyers invested their life savings and some of them had obtained the loan from Bank. Most of buyers have made the payment to the extent of 50 percent to 100 percent abiding by payment schedule. Dreams of buyers of obtaining house were given serious jolts when M/s. Amrapali Silicon City Private Limited and M/s. Amrapali Centurian Park Private Limited, respondent Nos.3 and 4 herein respectively were found in serious breach of their obligation to deliver flats within 36 months. They did not pay amount either to Noida or Greater Noida Authority and also to Banks. Several revised dates of possession were fixed unilaterally, but they failed to deliver flats. Amrapali Group has failed to comply with its obligation under subvention scheme, tenure of which was approved by bank/financial institution.
Findings of Court:
There was no valid mortgage created in favour of Banks and there was a huge diversion of money paid by homebuyers which were more than required for payment of dues of Noida/ Greater Noida Authorities and banks. Buyers have paid dues of Noida and Greater Noida authorities as a component of price for flats. Thus, premium and other dues payable under lease deeds to Noida and Greater Noida Authorities, cannot be recovered from home buyers or projects in question. Dues as may be ordered shall be recovered by sale of other properties which have been created by diversion of funds and have been attached by this Court.
Result : Directions issued.
No, banks cannot shift the burden of loans taken by the builder onto the buyers.
The judgment holds that no valid mortgage was created in favor of banks, as permissions from Noida/Greater Noida authorities were conditional on payment of premium/lease dues, which were not cleared, making mortgages ineffective [ (!) (!) (!) ]. Banks failed to monitor end-use of funds, which were diverted immediately upon receipt, not invested in projects [ (!) (!) (!) (!) ]. Home buyers' payments included components for authorities' dues, which builders diverted fraudulently [ (!) (!) ].
Under RERA Section 11(4)(h), post-agreement mortgages/charges do not affect allottees' rights/interests, safeguarding buyers [ (!) (!) (!) ]. Premium/lease dues and bank loans cannot be recovered from buyers/projects; banks must recover from diverted assets/guarantors, not home buyers' investments [ (!) (!) (!) (!) ].
Noida/Greater Noida authorities and banks have no right to sell flats/land for dues recovery; amounts from attached/diverted properties suffice [ (!) ]. Buyers' interests prevail; fraud vitiates claims against them [ (!) (!) ].
JUDGMENT :
Arun Mishra, J.
1. These writ petitions pertain to the projects of various companies of Amrapali Group in the Noida and Greater Noida.
2. It is submitted on behalf of the petitioners that in 2011 in Noida and Greater Noida various real estate projects for housing were started. In the various projects, the Amrapali Group of Companies proposed to construct approximately 42,000 flats. Various brochures were published and it was assured that the delivery of possession shall be made in 36 months and other world-class amenities were also promised.
3. Various home buyers booked their apartments during the period 2010-2014. The buyers signed the Standard Form of Allotment-cum-Flat Buyers Agreement and even after payment of 40 to 100 percent of total consideration, they are faced with the threat of forfeiture of huge booking amount. The agreement contained specific terms as to interest. Under Clause 14 of the agreement, the builder authorised itself to finance loan from any financial institution by way of mortgage/charge/securitization of receivable of the land and flats and the allottees will have no objection in this regard. Clause 15 also authorised the builder to keep full authority over the flat depriving the allottees of any lien or interest despite payment of entire amount thereof.
4. The builder under Clause 19(a) was obliged to complete the flats of M/s. Amrapali Centurion Park Private Limited within 30 months from the date of commencement of excavation/signing of the agreement, which may vary for plus/minus 6 months. Under Clause 19(c), builder fixed a paltry sum of Rs.5 per square feet super area per month for the period of delay, which would include any/all damages, compensation, claims for delayed possession.
5. The buyers invested their life savings and some of them had obtained the loan from the Bank. Most of the buyers have made the payment to the extent of 50 percent to 100 percent abiding by the payment schedule. The dreams of the buyers of obtaining house were given serious jolts when M/s. Amrapali Silicon City Private Limited and M/s. Amrapali Centurian Park Private Limited, respondent Nos.3 and 4 herein respectively were found in serious breach of their obligation to deliver the flats within 36 months. They did not pay the amount either to the Noida or Greater Noida Authority and also to the Banks. Several revised dates of possession were fixed unilaterally, but they failed to deliver the flats. The Amrapali Group has failed to comply with its obligation under the subvention scheme, the tenure of which was approved by the bank/financial institution. The builder had failed to comply with the abovementioned scheme as the buyer making the payment of EMIs to the banks, thereby causing a double loss. Some of the consumers approached the National Consumer Dispute Redressal Commission (for short, ‘the NCDRC') by filing Consumer Complaint No.213 of 2017 under Section 12(1)(c) of the Consumer Protection Act, 1986.
6. The Bank of Baroda had filed Company Petition No. (IB)-121(PB)/2017 before the National Company Law Tribunal (for short, ‘the NCLT’) under Section 7 of the Insolvency and Bankruptcy Code, 2016 for triggering the Corporate Insolvency Resolution Process in the matter of M/s. Amrapali Silicon City Private Limited, respondent No.3. The NCLT appointed the Interim Resolution Professional (in short, the ‘I.R.P'). Moratorium was also declared thereby restricting the institution of any suits against the corporate debtor including execution of any judgment, decree or order; transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal interest therein; and any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its prope
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