Subvention Scheme Crisis: Supreme Court Orders CBI Probe into Alleged Builder-Bank Nexus Affecting 1200+ Homebuyers - 2025-05-02

Supreme Court Orders Expansive CBI Probe into Alleged Builder-Bank Nexus in Subvention Schemes

NEW DELHI: The Supreme Court of India has ordered the Central Bureau of Investigation (CBI) to launch a series of Preliminary Enquiries (PEs) into allegations of an "unholy nexus" between builders and financial institutions concerning controversial 'subvention schemes', which have left over 1200 homebuyers in the lurch across multiple states.

The order, passed by a bench comprising Hon'ble Mr. Justice Surya Kant and Hon'ble Mr. Justice Nongmeikampam Kotiswar Singh , addresses a batch of over 170 petitions filed by aggrieved homebuyers, primarily in the case of Himanshu Singh & Ors. vs. Union of India & Ors. (SLP(C) No. 7649/2023 & connected matters) .

Background: The Subvention Scheme Trap

The core issue revolves around subvention schemes heavily advertised by builders between 2013-2015. Under these schemes, homebuyers took loans facilitated through tripartite agreements involving the buyer, the bank/Housing Finance Corporation (HFC), and the builder. The builders promised to pay the EMIs or pre-EMIs until possession was delivered.

However, as noted by the Court, most builders began defaulting on these payments around 2018-2019. Consequently, banks started demanding payments directly from the homebuyers and initiated coercive recovery actions, even though the housing projects remained incomplete and possession was never offered. The petitioners allege a systematic failure of regulatory authorities and collusion between financial institutions and developers, allowing builders to receive upfront loan disbursals disconnected from construction stages, ultimately burdening the homebuyers.

Court's Observations and Amicus Curiae Report

The Supreme Court had previously, on March 4, 2025, noted a prima facie "unholy nexus" between the banks/HFCs and the builders. To delve deeper, the Court appointed Mr. Rajiv Jain , former Director of the Intelligence Bureau, as Amicus Curiae.

Mr. Jain 's report highlighted the significant role of certain entities, particularly Supertech Limited , allegedly involved in 21 projects across six cities, impacting around 800 petitioners before the Court through agreements with 19 different banks/HFCs. The report recommended prioritizing investigation into Supertech's dealings with 8 specific financial institutions featuring prominently across its projects. The Amicus Curiae suggested a thorough CBI investigation, potentially including forensic audits, examination of joint development agreements, and scrutiny of the roles played by the RBI and NHB regarding loan disbursal guidelines.

CBI Proposal and Court's Directions

The CBI, represented by the Additional Solicitor General, submitted a proposal outlining a plan to register 7 Preliminary Enquiries (PEs) to systematically investigate the complex web of transactions and alleged collusion:

One PE specifically targeting M/s Supertech Ltd. projects.

Five PEs covering other builders' projects region-wise within the National Capital Region (NCR) : Noida, Greater Noida, Yamuna Expressway, Gurugram, and Ghaziabad.

One PE for projects outside the NCR (excluding Supertech).

Accepting the recommendations of both the Amicus Curiae and the CBI, the Supreme Court issued comprehensive directions:

CBI Investigation: Directed the CBI to register the 7 PEs as proposed.

Resource Augmentation: Ordered the Directors General of Police of Uttar Pradesh and Haryana to provide officers (DySPs, Inspectors, Constables) on deputation to assist the CBI.

Forensic Audit: Directed the President of the Institute of Chartered Accountants of India (ICAI) to deploy three Chartered Accountants experienced in forensic auditing to assist the CBI.

Nodal Officers: Mandated the appointment of senior Nodal Officers by key authorities (NOIDA, Greater NOIDA, YEIDA, GDA, HSVP, HSIIDC, Ministry of Housing and Urban Affairs, RERA U.P., RERA Haryana, RBI) to ensure timely information flow and coordination with the CBI.

State Support: Directed the Chief Secretaries and DGPs of U.P. and Haryana to provide full logistical support to the investigating teams.

Reporting: The CBI must submit an interim status report by the next hearing date.

Support for Amicus Curiae & Financial Accountability

Acknowledging the extensive work required, the Court fixed a monthly honorarium for the Amicus Curiae (Rs. 5 lakhs), his chosen AOR and assisting counsel (Rs. 50,000 each), and a Law Clerk (Rs. 40,000), along with secretarial and office expenses.

Initially, Corporation Bank (noted to have released substantial loans, including Rs. 2477.54 crores to Supertech) has been directed to bear these costs, starting from March 1, 2025. The Court clarified that these expenses "shall eventually be borne by the developer-cum-builders," suggesting a mechanism for proportionate sharing among banks will be considered later.

Next Steps

The Supreme Court has scheduled the next hearing for July 22, 2025 . Notices have been issued in all tagged matters where pending, including impleadment applications. The Court also issued a show cause notice for contempt proceedings in one application and granted interim protection regarding a residential unit in another.

This landmark order signals a significant step towards investigating the alleged irregularities in subvention schemes and potentially holding builders and financial institutions accountable, offering a ray of hope to thousands of distressed homebuyers.