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MC Explains: Will SC order to Noida Authority not to insist on upfront payment of dues help homebuyers?

But the Noida Authority and Greater Noida Authority have raised serious objections on issues related to payment to them, saying huge stretches of land have been given to Unitech, which had failed various deadlines, including for starting construction at the site. They have argued that there are no homebuyers and that the Unitech Group wants to construct buildings without paying the dues.

The Supreme Court’s February 1 direction to the Noida Authority to approve the revised layout plans of Unitech’s projects in Noida and not insist on upfront payment of dues worth around Rs 10,000 crore, has elicited diverse views from stakeholders.

While some homebuyers invested in the projects have termed this a “welcome move’, others say that more measures need to be taken to build trust among buyers so that cashflows can be raised and construction work restart.

MC Explains

The SC order had said, “Having regard to the contents of the convenience note submitted by the Additional Solicitor General, it is apparent that a substantial number of homebuyers have now expressed their confidence in the proposed construction in the above sectors. At this stage, it would be appropriate if Noida processes the applications for approval of revised layout plans, building plans and ancillary approvals without insisting on upfront payment of dues. However, the Board of Unitech shall pay the current application fees / scrutiny fees as payable in law.”

This pertains to Unitech’s projects located in sectors 96, 97, 98, 113 and 117. Of the 340-odd acres in the embattled real estate company’s possession, only about 150 acres have so far been utilised in the first three sectors.

These projects include Amber, Burgundy and Willow 1 and 2. Sector 113 comprises the Unihomes 3 project wherein of the 30-odd acres, only around 18 acres have been utilised, and in Sector 117 comprising Unihomes 1 and 2, Uniworld Gardens, Residences and Exquisite spread over 70-odd acres, only around 50 acres have been used.

It should also be noted that Unitech’s new board that was constituted three years ago under retired IAS office Yidhvir Singh Malik has invited bids from civil contractors to complete the construction of around 35 projects. Sources said that the response has been “lukewarm.” There was no comment from Malik.

The revised layouts once cleared by the Authority following the February 1 order by the SC, would enable the Unitech board to construct fresh towers in undeveloped areas and make them generate much-needed cashflows to complete the stuck projects.

Legal experts concur with this view. “The biggest hurdle is the land dues owed to development authorities. And if that is taken care of and the revised plans are cleared, new inventory can come up making the projects viable and raising the much-needed cashflows,” Kumar Mihir, Advocate, who represents Unitech homebuyers, told Moneycontrol.

This is imperative for the construction of these projects to see the light of day. This is also the only solution, he said, adding that in similar circumstances, the SC had, in July 2022, ordered the Department of Town and Country Planning, Haryana to dispose of the applications and grant renewals within a period of four weeks without insisting on upfront payment of outstanding dues.

However, the court had clarified that the modalities for payment of outstanding dues shall be worked out after hearing the Department of Town and Country Planning, Haryana.

Pawanshree Agrawal, amicus curiae in the Unitech case, told Moneycontrol that with this order, at least construction can begin. “With the apex court directing the authorities not to insist on upfront payment, and to hold in abeyance the old dues, it will definitely help homebuyers and pave the way for construction to restart.”

What homebuyers want

Homebuyers want that construction should begin and that Unitech buyers be charged the same amount of service tax that is currently being levied on Amrapali buyers, which was a relief granted to them by the SC.

The resolution framework is expected to be discussed in the court on March 16.

“Currently, we are being charged GST at the rate of 12 percent. We should be charged 3.75 percent, the service tax that was prevalent at the time (in 2011) when we had bought the apartments. We should be given similar relief by the Supreme Court as was granted to Amrapali homebuyers,” said Vivek Tyagi, President of the All India Association of Unitech Homebuyers.

Buyers also want that they be allowed to shift back to the possession option, especially those who had opted for refund earlier as there is now hope that construction may begin. “This will help raise funds for completion of the projects. There are around 300 homebuyers who want to shift back to the possession option and we would want that the portal be reopened for homebuyers to exercise this option,” he said.

The February 1, 2023 order had noted that “…certain applicants have sought a direction for re-opening of the web portal since the applicants were unable to submit their claims within time.”

All individual RWAs should be taken on board for quality assurance of construction. This will help build confidence among homebuyers. “We had a meeting with the company recently and they have assured us that this concern would be addressed. We would want a similar assurance from the court as well,” he said.

He also said that a separate escrow account be opened for each project.

“This is a welcome order,” said Saurabh Agarwal, Treasurer of the Burgundy Welfare Association, adding that “we hope the Authority will grant clearances, and construction will restart.”

“The Authority should not act as an investment banker. It did not take action at the time the builder defaulted on dues. Instead, the builder’s payment plan was restructured time and again,” he said.

The story so far

At the hearing held on February 1, the SC had asked the Noida Authority to process the layout and building plans of Unitech Group, without asking for the upfront payment of dues.

During the hearing, Additional Solicitor General N Venkataraman, appearing for the board of Unitech Group, said that they have received approval of homebuyers for construction of housing society in sectors 96, 97, 98, 113 and 117 of Noida.

"We want that our building plans, layouts and other approvals be granted by the authority without asking for the upfront payment of dues," Venkataraman said, adding that they will be paying the current charges.

Senior advocate Ravindra Kumar, appearing for Noida Authority and Greater Noida Authority, had argued that there are no homebuyers and the Unitech Group wants to construct buildings without paying the dues.

"This court has to decide on the payment of dues to the Authority. In Haryana, the situation is different, as Unitech has purchased land there, but in Noida and Greater Noida, we have allotted them the land," he said.

A bench of Chief Justice D Y Chandrachud and Justice M R Shah noted that since homebuyers have expressed confidence in the construction of projects in sectors 96, 97, 98, 113 and 117, the Noida Authority may process the layout, building plans, and grant other approvals without asking for upfront payment of dues.

At the hearing, former Unitech promoters Sanjay Chandra and Ajay Chandra had urged the top court that either their bail pleas be heard by it or they be allowed to move the trial court for securing relief in a case of financial fraud in which they have been in custody for over five years.

A bench of Chief Justice D Y Chandrachud and Justice M R Shah was told by senior advocate Siddharth Dave, appearing for the Chandra brothers, that both of them are lodged in jail for over five years and six months in the case lodged by the Economic Offences Wing (EOW) of Delhi Police for financial fraud for which the maximum sentence is seven years’ imprisonment.

On August 17, 2022, the top court had asked the board of Unitech Group to upload on its website the timeline for completion of its stalled projects for the benefit of the hassled homebuyers.

It also asked the board to upload within 48 hours the newly revised payment plan under which the homebuyers were required to make payments and asked the flat buyers to give their suggestions or feedback, if any, to the board, which would facilitate the court in passing the orders in this regard. The top court had said that the funds receivable from the homebuyers or unsold inventories shall be used only for the purpose of construction and would not be allowed to be diverted for any other purposes.

It had also approved the plan of the committee headed by former SC judge A M Sapre in making refunds to homebuyers, especially those requiring funds to attend to urgent medical needs, after consulting with them for 15 days ― from September 15 to September 30, 2022. The top court had appointed Sapre to look into the policy and finalisation of standard operating procedure (SOP) for monetisation of project land assets and non-project land assets of Unitech.

At the hearing on the case expected on March 16, reports submitted by Justice Abhay Manohar Sapre and the Resolution Plan are likely to be taken up.

The Noida Authority and Greater Noida Authority have raised serious objections on aspects related to payment to them and said that huge stretches of land have been given to Unitech, which had failed all kinds of deadlines, including for starting construction at the site.

Former promoters of Unitech Sanjay Chandra and Ajay Chandra, are in jail since August 2017, are accused of allegedly siphoning off homebuyers' money.

Providing relief to over 15,000  homebuyers of Unitech, the top court had on January 20, 2020, permitted the Centre to take complete management control of the embattled firm and approved the name of retired Haryana cadre IAS officer Yudvir Singh Malik as Chairman and Managing Director (CMD) of the new board while directing the existing board of directors of the company be superseded.

On September 8, 2022, in a regulatory filing, Unitech informed that Niranjan L Hiranandani and Anoop Kumar Mittal, Non-Executive - Nominee Directors of the company, resigned from the board with effect from August 10 and August 16, respectively. The resignations were sent to the Ministry of Corporate Affairs (MCA).

Vandana Ramnani
Vandana Ramnani
first published: Feb 26, 2023 08:39 am