Relief for homebuyers: MCA proposes to take over management of Unitech

Agarwal also said that the MCA also proposed certain riders for the revival to take place. It has sought for a moratorium for pending cases so that the revival plan of the company can proceed.

The Supreme Court on Dec 18, 2019 had asked the government to look into the possibility of it taking over the Unitech Group and complete the pending housing projects to protect the interest of over 30,000 homebuyers. The court’s direction followed the submission of the forensic auditor’s report that said that the embattled firm and its directors had siphoned off almost half of the homebuyers' money.

Audit firm Grant Thornton’s report on the Unitech group and its subsidiary firms had said that thousands of crores of rupees of homebuyers' money was diverted for purposes other than construction and some of the funds were parked in offshore tax havens like Cyprus.

In an interim report, the audit firm had said that as many as 30,000 homebuyers had deposited around Rs 14,270 crore with the company while booking flats in 74 projects across the country but Rs 5,063 crore was not utilised for construction and another Rs 2,393 crore was not traceable.

A bench of Justices D Y Chandrachud and M R Shah had then asked the Centre to suspend all directors of the group and replace them with independent directors to manage the affairs of the firm. It had asked attorney general K K Venugopal to inform the central authority concerned to take action.

The bench had also directed the Centre to conduct an investigation into alleged financial fraud by the group and its promoters and file a report before it on January 17.

At the December hearing, the Centre had proposed that the plea against the group be referred to the National Company Law Tribunal (NCLT) for proceedings under the Insolvency and Bankruptcy Code. But this was opposed by the homebuyers' lawyer M L Lahoty and advocate Pawanshree Agrawal, who is assisting the court as amicus curiae.

Legal experts are of the view that a credible new board nominated by the government will be able to frame a resolution plan which can be approved by the Supreme Court under Article 142 of the Constitution. “Under such plan a project by project solution can be found including sale of projects to other developers. It’s a very positive move by the Government which will go a long way in unlocking stuck projects and restoring confidence of homebuyers in the real estate sector,” they said.

Speaking on the development, Shikha Sharma, a resident of The Residences in Sector 33 Gurgaon, said, "We welcome the Ministry of Corporate Affairs decision to take over Unitech. This is a respite for homebuyers who have been waiting for over 11 years for Unitech to deliver their homes. I hope that the MCA puts a Board of Directors which can deliver all stalled projects in a definite timeline."

Last year, Unitech homebuyers had proposed a few options for resolving the crisis, including a Satyam-like resolution plan for the embattled firm but emphasized that the process should focus on disbursing delay penalty to homebuyers.

It must be remembered that, NCLT on December 8, 2017, had suspended all the eight directors of the realty firm over allegations of mismanagement and siphoning of funds and had authorised the Centre to appoint its 10 nominees on the board.

But in its petition filed under section 241 of the Companies Act, 2013, the government had requested the tribunal to remove the eight directors and said that the company has over Rs 6,000 crore debt and over 16,000 undelivered units from a total of nearly 70 projects.

On May 9 last year, the apex court, irked over the non-cooperation of Unitech in the forensic audit, had withdrawn all the facilities given to its promoters, Sanjay Chandra and his brother Ajay Chandra who are lodged in Tihar jail for allegedly siphoning off homebuyers' money.

The top court had said the Chandra brothers should be treated like ordinary prisoners as per the prison manual of Tihar jail here where they have been lodged since 2017.

In 2017, the apex court had directed the jail authorities to facilitate the Chandras' meeting with their company officials and lawyers so that they are able to arrange the money for refunding homebuyers as well as for completing the ongoing housing projects.

The court had earlier sought assistance of the attorney general while warning that it could order a CBI probe.

The apex court had on January 23, 2019 refused to grant bail to the Chandra brothers. It said they had not complied with the October 30, 2017 order which asked them to deposit Rs 750 crore with the court registry by December 31, 2017. The court had directed the trial court which is seized of the criminal case against the Unitech promoters to proceed expeditiously in the trial.

The Chandras sought bail on the ground that they were complying with the apex court order and had deposited around Rs 481 crore till now.

On December 7, 2018, the apex court has directed a forensic audit of Unitech Ltd and its sister concerns and subsidiaries by Samir Paranjpe, Partner, Forensic and Investigation Services in M/s Grant Thornton India.

The realty firm is facing the wrath of the court in a case related to alleged siphoning of homebuyers' money. The matter pertains to a criminal case lodged in 2015 by 158 home buyers of Unitech projects' -- 'Wild Flower Country' and 'Anthea Project' -- situated in Gurugram.