Six years of IBC - impact on Real Estate sector

Six years of IBC 2016 www.infralive.com 33 InfraLIVE January 15, 2023 homebuyers and the serious kind of fraud committed upon the home buyers, the registration of all projects of Amrapali Group under the Real Estate Regulation and Deve l opment Ac t , 2016 was ordered to be cancelled. Because of the gross violations of the condi- tions of lease deeds executed by the Noida and Greater Noida Authori- ties in favour of Amrapali Group with respect to various projects, all lease deeds were also ordered to be cancelled and the rights thereupon were vested in the Court Receiver. The Apex Court held that 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 the Noida/ Greater Noida Authorities and banks. The homebuyers have paid the dues of Noida and Greater Noida authorities as a component of the price for flats. Thus, the premium and other dues payable under the lease deeds to the Noida and Greater Noida Authorities, cannot be recovered from the homebuyers or the projects in question. The Apex Court held that the dues as determined shall be recovered by sale of other proper- ties which have been created by the diversion of funds and have been attached by this Court. The banks have also failed to ensure that the money was used in the projects. As found in the forensic audit, there was no necessity of obtaining loans from the banks and it has not been used for the purpose it was obtained. The Authorities and Bankers have violated the doctrine of public trust and their officials, unfortunately, acted in collusion with builders. The dues of the banks are also to be recovered from the other attached properties. The Apex Court directed the Enforcement Directorate (ED) to investigate violations of FEMA and FDI norms in accordance with the law and submit quarterly reports to the Court. Money laundering aspect was also to be looked into by concerned authorities. The Court al so dec ided to moni tor the progress of the investigation in criminal cases registered by the police. The Supreme Court asked NBCC to complete the pending projects within a specified period. In June 2020, the court also ordered banks to fund the projects by releasing further instalments of the home loan sanctioned earlier irrespective of the fact whether those loans were declared NPAs or by sanctioning fresh loan. Banks were also directed to do long term restructuring of home loans, if required and release funds stage- wise. UP RERA c an c e l l ed t he registration of 43 real estate projects In pursuance to the orders of the S u p r eme C o u r t , UP RERA The mortgage deeds in favour of the banks were not permissible due to non-payment of dues of the Noida and Greater Noida Authori- ties. The Noida and Greater Noida Authorities issued conditional NOCs to create mortgages subject to payment of dues which were not paid. They issued such NOCs in collusion with builders. It was incumbent upon the bankers also to obtain clear unconditional NOCs which were not obtained and to ensure that the dues were paid to Noida and Greater Noida authori- ties. They permitted diversion of money immediately after sanction- ing of the loan and also in day-to- day transactions of Amrapali Group. Statutory Auditors failed in their duties No accounts were prepared for the years 2015-2018 and money withdrawn was diverted during the said period. The Statutory Auditor of Amrapali, Anil Mittal failed in his duties and was part of fraudu- lent activities as found in the Forensic Auditor's report. The money obtained from banks was diverted to unapproved uses such as for the creation of personal assets of directors, creation of assets in closely held companies by the directors along with their partners and relatives, for personal expenses of directors, to give advances without carrying interest for several years. There was total non-monitoring by the bankers. The mone y l aunde r i ng wa s resorted to by Amrapali Group/ directors. The Noida and Greater Noida Authorities were grossly negligent in reviewing and moni- toring the progress of the projects and in collusion with leaseholders failed to take action concerning non-payment of dues and illegally permitted the group to sub-lease the land without payment of dues. Bogus allotments of flats were made. There were other irregulari- ties galore. Be c au s e o f t he f a i l u r e o f Amrapali Group to fulfil their o b l i g a t i o n s t o w a r d s t h e