Amrapali case | Supreme Court puts proposal for creation of Sinking cum Reserve Fund on hold

The Supreme Court on July 12 put a proposal for the creation of a Sinking cum Reserve Fund on ‘hold until its merits are debated’ after counsels for homebuyers objected to a policy decision of the Supreme Court-appointed receiver asking homebuyers to deposit an additional amount of Rs 200 per sq-ft for their flats to meet the shortfall for the construction of incomplete housing units.

Counsels of homebuyers advocates M L Lahoty and Kumar Mihir have been asked to submit their objections to the proposal. The matter will be taken up on July 25.

A bench of Justices UU Lalit and Bela M Trivedi took note of the 'serious objections' raised by homebuyers’ counsels to the creation of such reserve cum sinking fund and that the creation of a reserve fund or sinking fund would put an additional burden on the buyers.

Noting that the cost of construction has gone up substantially, the Supreme Court-appointed court receiver R Venkataramani had proposed a separate Sinking cum Reserve Fund for which homebuyers had to deposit an additional amount of Rs 200 crore per sq ft of their flats.

“A Sinking cum Reserve Fund shall be created to make provision of shortfall in construction cost and interest cost if any. All the home Buyers across shall be asked to deposit a sum calculated @ Rs. 200/- per Sq. ft. for booked units in that fund, with the condition that such funds if not-utilized, shall be refunded back to them on overall completion of the projects. In case of part utilization of the amount, a proportionate amount shall be refunded to all the home buyers out of the unutilized money. This shall be applicable to all categories of home buyers of erstwhile Amrapali Projects,” a notice posted on the website managed by the court receiver had said.

Lahoty informed the court that of the over Rs 3600 crore due from homebuyers, they had deposited Rs 1100 crore which amounts to over 30 percent of the total amount. He said that creating a sinking cum reserve fund would create an additional burden on them as they are financially strained due to delays in receiving possession of their homes.

He told the Supreme Court that a total of Rs 11,320 crore was ordered to be recovered from various sources as per the apex court’s 2019 order and that despite that homebuyers were being burdened with an additional amount of Rs 200 per sq ft.

"On July 23, 2019, the judgment was delivered of which page 331 summarises the total recovery to be made from various sources to the tune of Rs 11,320 crore and that as per NBCC proposal dated September 4, 2018, a total of Rs 8,500 crore (reduced thereafter to Rs 8,000 crore (approximately) is required to complete all projects involving 46,474 units and connected facilities, " Lahoty said in a note submitted before the court.

The note said that as of June 30, 2022, NBCC has constructed a total of 3,334 units (as per the receiver's website) which is less than 10 percent of the total construction, out of the required fund of Rs 8,000 crore (approx..), NBCC has already received Rs 2,750 crore (approximately) which is almost 33 percent.

Of a sum of Rs 11,320 crore, the note said Rs 3,624.25 crore was supposed to be recovered from homebuyers, out of which Rs 1,100 crore approximately has been received, and the unsold inventory was for Rs 1,991.69 crore, out of which Rs 23.4 crore was approximately received (10 percent of Rs 234 crore from 408 units sold). And, Rs 4056.81 crore was supposed to be recovered from former Amrapali promoters, directors, CFO, etc. However, Rs 745.37 crore was approximately recovered so far (Rs 600 crore through recoveries plus Rs. 145.37 crore through DRT and MSTC, the note submitted by Lahoty said.

Lahoty's note said that from the promoters, directors, CFO, statutory auditor, and family members, over Rs 913 crore were to be recovered of which only a minuscule amount of Rs 13.25 crore has been recovered to date, although more than 15 orders were passed from October 14, 2019 to March 14, 2022.

It noted that to expedite the sale of 5,229 unsold flats and FAR, NBCC was appointed by the order dated October 29, 2020,  but several flats and FAR (floor area ratio) still remained unsold.

Kumar Mihir, counsel representing the homebuyers, said "Rs 825 crore have been received out of the total Rs 2,150 crore funded by SBI  Cap (Rs 650 crore) and bank consortium (Rs 1,500 crore). Homebuyers should therefore not be burdened with this additional Rs 200 per sq. feet to meet the shortfall."

“I hope the Supreme Court will find a way to avoid putting this additional burden on the homebuyers and sort out the impediments in sale of FAR and unsold inventories,” he told Moneycontrol.

The issue of sale of commercial units/shops by builders also came up for discussion on July 12. This pertained to a petition by homebuyer Joginder Singh. He had argued that the proceeds collected from the sale of commercial properties must be deposited in the Association of Allottees funds and that these cannot be sold to a third party.

Noida Authority has submitted that such a sale can take place provided it’s mentioned in the Deed of Declaration by Amrapali Group. The matter will be taken up on August 8.

During the hearing, Venkataramani apprised the court that around Rs 125 crore have been given to Noida Authority in two tranches, and the rest balanced amount will be paid soon for the Mahagun land deal (which was earlier under Amrapali Group and was recently sold to augment funds).

He informed the court that 1186 home buyers out of 3338 have taken possession of their flats so far and the rest had not responded to his communication. He said that the last date for receiving their responses has been fixed for August end after which the properties will be declared as unsold inventories and resold in the open market.

The Supreme Court in 2019 directed that the former directors of Amrapali Group, Anil Kumar Sharma, Shiv Priya, and Ajay Kumar, be jailed, and multiple cases have been lodged against them for allegedly diverting homebuyers’ money.