Corruption
SC Proposes CBI Probe Into Builders-Banks-Insolvency Professionals Nexus in NCR
New Delhi : The Supreme Court has taken strong exception to the exploitation of homebuyers in the National Capital Region (NCR) by real estate companies and banks, stating that poor buyers have been “taken to ransom.” The court has sought a response from the Central Bureau of Investigation (CBI) on conducting an investigation into the alleged builder-bank nexus and emphasized the need for a Special Investigation Team (SIT) probe.
A bench comprising Justices Surya Kant and N Kotiswar Singh criticized builders, interim resolution professionals (IRPs), and banks for failing to furnish crucial details regarding delayed housing projects, their construction status, and financial transactions. The court said that homebuyers, who have invested their life savings, are being harassed despite not receiving possession of their flats.
Subvention Scheme: A Financial Trap for Homebuyers
The case pertains to thousands of homebuyers who booked flats under subvention schemes, where banks disburse loan amounts directly to builders, who are then responsible for paying EMIs until the flats are delivered. However, as many builders defaulted on their EMI obligations, banks shifted the burden onto homebuyers, violating the terms of the tripartite agreement.
“This is a classic case where one rich man (banks/financial institutions) gave money to another rich man (builders), and the latter ran away without fulfilling his obligations. The poor homebuyer, who has neither received the money nor possession of the flat, is now being victimized and forced into litigation,” the petitioners argued.
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Supreme Court’s Directions & Investigation Focus
The apex court has directed the CBI to examine the conduct of banks, builders, and IRPs, making it clear that those involved in fraudulent practices will not be spared. However, those who acted in good faith need not worry.
The court had previously ordered petitioners, builders, and banks to furnish detailed project information, including:
- Payments made by builders to banks and homebuyers to banks/builders.
- Possession status of completed projects.
- Current completion status of ongoing projects.
- Recovery status from homebuyers.
- Amenities advertised vs. actual delivery in projects.
- Builders under insolvency proceedings and the status of such cases.
- Relief granted by statutory authorities such as RERA.
However, the failure of builders and banks to submit these details prompted the court to escalate the matter.
Supreme Court’s Protective Measures for Homebuyers
In July 2024, the Supreme Court protected homebuyers from coercive actions by banks and builders, restraining them from initiating EMI payments and cheque bounce cases. The petitioners argue that banks illegally disbursed loans directly to builders in violation of RBI guidelines, leaving homebuyers helpless in legal battles.
They emphasized that homebuyers were used as a medium to transfer money from banks to builders, without any legal safeguards when builders defaulted or entered insolvency proceedings. Despite this, banks continue to charge EMIs and pre-EMIs from buyers, disregarding the actual liability of the builder.
Court to Formulate CBI Investigation Scope
The Supreme Court has announced that it will formulate the specific scope of the CBI probe in the next hearing, ensuring that all banks are included in the investigation. The builder-bank nexus that has left homebuyers in distress is now under strict judicial scrutiny, with potential legal action on the horizon.