Days after the Enforcement Directorate (ED) took the chairman of Supertech into custody until July 10, some homebuyers voiced their concern that their houses may not be completed and the developer may find it difficult to secure funding to finish the pending projects. Others, who have been waiting for almost a decade to get possession of their flats, believe that it ‘makes no difference’ because if the promoter had the intention of completing the units, he would have done so long back.
Some buyers are concerned that the real estate firm may find it difficult to secure funds to complete the project given that the promoter faces a case under the Prevention of Money Laundering Act (PMLA) for the alleged laundering of bank loans worth Rs 1,500 crore.
“How is taking the builder into custody going to solve my problem?’’ said Gautam Sethi, who had booked an apartment in Gurugram under a subvention scheme almost a decade ago, and has paid Supertech more than 90 percent of the amount. A subvention scheme is a home loan where the buyer does not pay the EMI for a certain period, and the builder bears the interest for the same.
Sethi had invested in a house in 2015 and had no clue whether he would get possession of his unit in a project called Hill Crest, which is part of a larger project known as Hill Town. “I am not worried that he has been taken into custody, because even when he was not behind bars nothing was accomplished. Ultimately, it is to do with intention. He had more than a decade to complete the project. As far as shortage of funds is concerned, we have been hearing this for the last 10 years,” he said.
Sethi and other buyers from the project have knocked the doors of all legal fora —the High Court, Supreme Court (SC), the Real Estate Regulatory Authority (RERA), the National Consumer Disputes Redressal Commission (NCDRC), and even filed an FIR with the Economic Offences Wing (EOW).
Amit Gupta, a buyer from Noida, is of the opinion that the arrest may hamper further construction in projects that are yet to be completed. “It may even become difficult to get information on financial dealings and documents, etc. Tribunals may get overburdened with cases with everyone wanting to recover their money. This may aggravate the problem instead of resolving anything,” he said.
Experts say that buyers had found themselves in a similar situation in the Amrapali case. It took a long time to get the financial documents and information about who all the assets had been pledged to.
Also, in 2019, when an SC bench of Justices Arun Mishra and U U Lalit asked the Noida authorities whether they would be able to complete the task, they said it would not be possible for them to do so.
“We are not technically competent and lack the expertise to do the task. Let some reputed developer complete the project, and a monitoring committee appointed by the court should keep an eye on it,” the lawyer appearing for the Noida authority had told the bench. The Greater Noida authority also took the same stand.
Amit Goenka, CEO, Nisus Finance, feels that when the promoter of a project is taken into custody, it becomes harder for someone else to complete the project given that the developer maintains all the records and is in control of the project. “Without the promoter’s intervention, it becomes difficult to resolve the issue even if the lenders were to enforce their rights under law. Procuring financial data becomes harder,” he explained.
D K Sinha, another buyer who had invested in a Supertech project in Greater Noida, said that while he received possession in 2016, there is no boundary wall and nor have any facilities been provided to the buyers as only a portion of the project is complete.
Advocate Aditya Porolia, who has handled several cases on behalf of homebuyers, said that funding may be difficult to come by under such circumstances. “We are in discussions with some homebuyers to move the courts to ask the government to take over the entire company and complete the project.”
Heena Chheda, Partner at Economic Laws Practice, a law firm, said that serious non-compliance by developers leading to legal action will make funding extremely difficult given the (tight) regulatory environment. The pool of funders will narrow down to corporates with high governance and a good track record in completing projects.
There was no response from the builder to queries sent by Moneycontrol.
On June 27, the ED had arrested Arora on charges of money laundering. He was taken into custody following a third round of questioning at the agency's office, the ED said in a statement on June 28.
The investigation by ED showed that in 2013-14, Supertech Group had siphoned Rs 440 crore of homebuyers’ money to purchase land in Gurugram at highly inflated prices, and they did not complete the projects in Noida. Instead, a new project was launched on this newly-acquired land and further advances were collected from hundreds of homebuyers, and loans were taken from banks / non-banking financial corporations (NBFC), which became non-performing assets (NPA). The lenders accused the builder of fraud.
Similarly, Rs 154 crore was allegedly misappropriated by Supertech for acquiring land in the name of another shell company in the same time period. Also, Rs 40 crore was allegedly siphoned off to another shell company and land was purchased in its name in Delhi, the ED statement said.
Funds were thus diverted to shell companies instead of being used for ongoing projects that are still incomplete. During this period, Arora was the main controlling and decision-making authority for Supertech Group, who decided to siphon the monies, the statement added.
In May this year, the company’s insolvency resolution plan was cleared by the Supreme Court.
The Delhi bench of the National Company Law Tribunal (NCLT) had ordered the initiation of insolvency proceedings against Supertech in March 2022 on a petition filed by the Union Bank of India for non-payment of dues of around Rs 432 crore.
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