Summary
Accepting the forensic audit of diversion of Amrapali homebuyers’ funds, the Court cancelled the group’s RERA registrations and project leases, vested lessee rights in a Court Receiver and directed completion through NBCC. In the exceptional facts, the authorities and banks could not recover their dues from buyers or the housing projects; recovery lay against other attached assets and responsible persons. Completion certificates, conveyances and utilities were directed, alongside buyers’ balance payments, restoration of diverted funds, investigations and disciplinary proceedings. The cases remained pending for supervision.
Issues
- Whether diversion of homebuyers’ funds and official failures warranted cancellation and supervised completion of the projects.
- Whether banks and development authorities could enforce their claimed charges against homebuyers and project land.
- What directions were required to secure completion, title, recovery of diverted funds and accountability.
Provisions considered
- Section 4(2)(l)(D), Real Estate (Regulation and Development) Act, 2016Required seventy percent of project receipts to be separately maintained for construction and land costs, with certified proportionate withdrawals and annual audit; diversion violated the statutory safeguards. (¶ 108–110)
- Sections 7 and 8, Real Estate (Regulation and Development) Act, 2016Fraud and defaults justified cancellation; lapse or revocation required arrangements to complete remaining development, rather than abandonment of buyers to a compensation claim. (¶¶ 110–112, 120, 136, 148, 154(i), 154(iv))
- Section 11(4)(h), Real Estate (Regulation and Development) Act, 2016Protected allottees against subsequent mortgages; independently, the purported mortgages failed the permission conditions, so the result did not depend solely on retrospective application of RERA. (¶¶ 113–114, 126–128, 134)
- Sections 17(1) and 19, Real Estate (Regulation and Development) Act, 2016Supported transfer of title and common areas, completion and possession rights, while retaining buyers’ duties to pay contractual balances. (¶¶ 115–124, 136–137, 154(v), 154(x)–(xi))
- Section 14, Uttar Pradesh Industrial Area Development Act, 1976Provided resumption and forfeiture for defaults; the authorities’ failure to act was examined, while cancellation here vested lessee rights in the Receiver and could not justify demolition prejudicing buyers. (¶¶ 95–98, 140, 149, 154(ii))
Held
- The accepted forensic audit established extensive diversion through dummy companies, bogus purchases, personal assets and manipulated transactions. Broad unsupported explanations did not answer the entries; failure to account and repeated noncompliance warranted cancellation of registrations and leases. (¶¶ 61–68, 142–149)
- Public authorities holding acquired land owed affirmative statutory and public-trust duties. Their collusive inaction and continued permissions despite chronic defaults helped the fraud; merely issuing reminders did not discharge those duties. (¶¶ 73–85, 95–98)
- The mortgage permissions depended on payment of premium and lease rent, which had not occurred. Banks failed to obtain effective clearance or ensure project use of loan funds; no enforceable project mortgage or charge arose on these facts. (¶¶ 83–88, 126–127, 150)
- Buyers had already funded the projects and paid the authorities’ dues as price components. In this exceptional factual setting, banks and authorities had to recover from other attached properties and responsible persons rather than sell project land or flats, demolish buildings or obstruct buyer conveyances. (¶¶ 97–102, 123–124, 133–140, 150, 153–154)
- RERA protected completion and possession rights in addition to an allottee’s option of refund and compensation. Lack of a registered title at the allotment stage did not render buyers’ contractual investments unprotectable. (¶ 131–137)
- Transfers of common areas reserved for the association or competent authority were void and inoperative. The defaulting promoters could not exploit or alienate further FAR to their own advantage. (¶ 121–122)
- NBCC was to complete the projects at eight percent commission. Buyers had three months to deposit contractual balances into the Supreme Court UCO Bank account for fixed-deposit investment and court-controlled phase-wise construction disbursement. (¶¶ 124–125, 154(iv)–(v))
- R. Venkataramani was appointed Receiver to secure conveyances and possession. Authorities were to issue certificates and execute documents for occupied projects within one month despite unpaid dues, with water and electricity connections forthwith. (¶¶ 153, 154(x)–(xi))
- Recipients of funds identified by the approved audit had one month to restore them and comply. ED and police investigations and reports, and ICAI proceedings against the statutory auditor within six months, were directed; these were accountability directions, not criminal convictions. (¶¶ 151–152, 154(vi)–(ix))
Result
Directions issued cancelling RERA registrations and project leases, vesting rights in the Receiver and securing NBCC completion, buyer payments, conveyances and utilities. Project assets protected from banks’ and authorities’ recovery on these facts; other attached assets remained available. Audit-based restitution, investigations, disciplinary action and government measures directed. Cases retained for further hearing on 9 August 2019.