Six years of IBC - impact on Real Estate sector

Six years of IBC 2016 www.infralive.com 32 InfraLIVE January 15, 2023 with Amrapali Group until further orders. Other Petitions for trigger- ing CIRPs in other Amrapali Group were not entertained by the NCLT in pursuance to the orders of the apex court. The Supreme Court stated that the real estate business has developed and it mainly survives due to the money invested by the buyers for the purchase of the house. They have the right to obtain houses. The Court noted that Noida and Greater Noida have allotted huge plots to the builders on payment of 10 per cent of the cost of land and in most of the cases, thereafter no money has been paid. The large number of projects have come up in Noida and Greater Noida, but most of them have not been completed by the builders/ promoters and they have siphoned buyers' money on large scale. No action has been taken by the Noida and Greater Noida Authorities against builders for cancellation of leases due to violation to fulfil their obligations. Bankers have given loans to builders on the condition to invest in the projects, but they have also permitted the money to be used for other purposes. July 2019order The Apex Court by its judgment dated July 23, 2019 issued several directions for taking measures for execution and completion of all pending projects of Amrapali. Cases of homebuyers awaiting execution of tripartite agreements and those awaiting completion of their projects were also dealt with by the Court. The directions were issued by the Apex Court related to the steps to be taken by central government, state government, Noida and Greater Noida Authori- ties, NBCC and various banks. R Venkataramani appointed asCourt Receiver The Supreme Court appointed R Venkataramani, senior advocate, as Court Receiver. Various lease de ed s g r an t ed i n f a vou r o f Amrapali Group by Noida and Greater Noida Authorities for projects in question were cancelled and the right of the lessee were vested in the Court Receiver and he was authorised to execute, through authorized person on his behalf, the tripartite agreement and do all other acts as may be necessary and also to ensure that title is passed on to home buyers and possession of the flats is handed over to them. The Apex Court in its July 2019 order had stated that it was apparent from the report of the forens i c audi t submi t t ed by Forensic Auditors that there is a serious kind of fraud played upon the buyers in active connivance with the officials of the Noida and Greater Noida Authorities and that of the banks. The money of the home buyers has been diverted. The directors diverted the money by creating dummy companies, realizing professional fees, creating bogus bills, selling flats at under- value price, payment of excessive brokerage etc. They have obtained investment from J.P. Morgan in violation of FEMA and FDI norms. The shares were overvalued for making payment to J.P. Morgan. It was adopted as a device for siphon- i n g o f f t h e m o n e y o f t h e homebuyers to foreign countries. In view of the hugemoney collected from the buyers and comparable investments made in the projects, there was no necessity to obtain a loan from banks. The amount so obtained was not used in the projects. the purchase of flat, and as such, they cannot be categorised as ordinary creditors to rank pretty low in the order of priority under Section 53 of IBC. Corporate builder heavily counts upon the home buyers as stakeholders to sus ta in in the market . They contended that Section 53 of the IBC, 2016 is irrational and violates the rights of the homebuyers guaranteed under Article 21, by subjecting the homebuyers to the liquidation proceedings of discrim- inatory nature. The very survival of homebuyers has been seriously jeopardised. Not only they are going to lose their entire money, they would also become financially crippled for all times to come. There was no equal protection under the IBC, 2016. The morato- rium imposed by NCLT had not only affected the homebuyers of a single subsidiary, but also similarly situated lakhs of homebuyers in various other projects. They cannot be deprived of their legal rights. Similar plights were averred by the homebuyers of several other projects. The Supreme Court admitted the writ petition Civil Petition No. 940/2017 (Bikram Chatterjee and Ors vs Union of India & ors) in December 2017, filed by the homebuyers. The SC ordered for forensic audit of the Amrapali Group and issued orders that NCLTs/ NCLATs will not deal/ intervene in any matter connected