The bench headed by Justice DY Chandrachud gave two months’ time to the new eight-member board to prepare the resolution framework for completing the pending projects and place the report before the Supreme Court.
In a development that will come as a relief for thousands of homebuyers, the Supreme Court on January 20 permitted the Centre to take over the management of embattled real estate firm Unitech and accepted the government's proposal to appoint the new board led by former Haryana cadre IAS officer YS Malik as Chairman and Managing Director.
The apex court also approved the other seven names proposed by the government to the new Unitech board.
“Seven members were proposed by the union of India. One more director, Prabhakar Singh, director general, CPWD, has been proposed by the court,” said Pawanshree Agarwal, amicus curiae in the Unitech case.
The government-proposed board is to supersede Unitech's existing board of directors.
The bench headed by Justice DY Chandrachud gave two months’ time to the new board to prepare the resolution framework for completing the pending projects and place the report before the Supreme Court, sources said.
The apex court also granted moratorium of two months to the new board from any legal proceedings against the management of the firm.
The Supreme Court also said that it would appoint a retired judge to monitor the preparation of the resolution framework by the new board.
Pending further orders, moratorium against institution of proceedings against Unitech and current proceedings shall stand suspended to help the new BoD take charge. "This means that no legal proceedings against the company can take place. It is like a period of calm," legal experts said.
Existing construction to go on with the new board at liberty to give a comprehensive proposal, including in respect of existing projects.
The Centre, in its note submitted earlier to the bench, headed by Justice DY Chandrachud, had told the apex court that it is agreeable to revisit its 2017 proposal to take over the management control of Unitech Ltd and complete the stuck projects.
It had suggested the names Haryana cadre IAS officer YS Malik as Chairman and Managing Director of the board; AK Mittal, former CMD of National Buildings Construction Corporation, as director; Renu Sud Karnad, chairman of HDFC Credila Financial Services Pvt Ltd, as director.
Jitu Virwani as director. He is the CMD of Bengaluru based real estate firm Embassy Group; Niranjan Hiranandani as director. He is currently the co-founder and managing director of Mumbai-based Hiranandani Group; Girish Kumar Ahuja as director. He is the the Centre’s nominee director of SBI; B Sriram as director. He is former MD and CEO of IDBI Bank Ltd and former MD of SBI.
A bench of Justices D Y Chandrachud and M R Shah also refused to appoint Unitech Group founder Ramesh Chandra, as a member of the new board saying that it would not be appropriate at this stage.
It said the committee headed by Justice S N Dhingra, tasked with selling the company's assets and utilising the money for completion of pending projects, would continue to work till the new board comes up with a resolution framework.
The Centre had also made it clear that it would not infuse any funds for completion of pending projects of the company.
The bench, however, did suggest that the board could consider the stressed asset fund for completing pending projects. “Funds will come in from whatever money is available with the court by sale of land held with the company. There are homebuyers who still have to pay up. The bench suggested that if required the board should consider applying for the stressed asset fund,” Agarwal told Moneycontrol.
"For the homebuyers, the order means that there is finally hope that construction of homes will begin, the board will examine all options to ensure that construction takes place. The money will come from monetization of assets," legal experts said.
Hiranandani told Moneycontrol that he would want the interim report to be ready within 30 days so that work can begin in 60 days.
"The idea is to hit the ground running by getting an interim report ready within 30 days. I think we will be able to start with 50% to 60% of the projects very quickly," he said.
Asked about liquidity issues, he said: "If there is a need, we may apply for the stressed fund."
"We thank SC for finally doing what was required to be done to safeguard homebuyers' interests. The good news is that assets of Unitech are more than liabilities even today as per Govt of India. So, no homebuyer should worry now, all will get refund or a home," said Vivek Tyagi, President, All India Association of Unitech Homebuyers.
The Supreme Court on December 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.
It must be remembered that in 2017, the Centre had moved the National Company Law Tribunal (NCLT) seeking suspension of the current directors and taking of control of the management of Unitech Ltd but had later withdrawn the proposal after a stay on its move from the apex court.
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.
The forensic auditors have also submitted their report which said that Unitech Ltd received around Rs 14,270 crore from 29,800 homebuyers mostly between 2006-2014 and around Rs 1,805 crore from six financial institutions for the construction of 74 projects.
The audit revealed that around Rs 5,063 crore of homebuyers' money and around Rs 763 crore of fund received from financial institutions were not utilised by the company and high value investments were made off-shore tax-haven countries between 2007-2010. The apex court had directed an investigation into the omission and commission of promoters of Unitech Ltd under Prevention of Money Laundering Act (PMLA).
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.
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.