Bikram Chatterji & Ors. vs Union of India & Ors.

Housing projects – By a Group of companies – Proposing to construct approximately 42,000 flats – The projects were registered under RERA – Booking of flats by various home-buyers during the years 2010-2014 – Standard Form of Allotment-cum-Flat Buyers Agreement stated that delivery of possession within 36 months – Builder got the land from Noida and Greater Noida Authorities on paying 10% of the land price – Builders also took loans from the Banks for the project on mortgaging the land with the Banks – Home-buyers paid the amount from 50% to 100% abiding by the payment schedule – Builders failed to deliver the flats within 36 months – They did not pay the balance amount towards the land to the Noida and Greater Noida Authorities and also failed to repay the loans taken from the Banks – Some of the consumers filed consumer complaint under Consumer Protection Act – Bank, for recovery of the loan, filed company petition under s.7 of Insolvency and Bankruptcy Code, 2016 – National Company Law Tribunal (NCLT) appointed Interim Resolution Professional (IRP) and declared Moratorium restricting institution of any suit against the corporate debtor – Thereupon writ petitions u/Art.32 were filed by home-buyers – Several orders by Supreme Court giving the builder opportunity to go ahead with project work and complete the same – Orders were not complied by the builder – Forensic audit of the companies of the builder directed by the Court – Court directed freezing of individual accounts of the Directors of all the 40 companies and also directed attachment of the properties in the individual names of the Directors – Held: The Noida and Greater Noida Authorities were grossly negligent in reviewing and monitoring progress of the project and in collusion with the builders, failed to take action for non-payment of its dues – They illegally permitted the builders to sub-lease the land – The officials of Authorities have acted in clear breach of public trust and have failed to act as per statutory mandate, Regulations and terms of the Lease Deed – The mortgage of the land with the Bank was without obtaining clear NOC which was a condition precedent for creation of Mortgage – Thus, no mortgage in the eye of law has been created – Moreover, the money borrowed from the Bank was not utilized for the project and the same was diverted for creation of other assets – The Bank also failed to check whether the money, in fact was required for the project and used for the same – Therefore, the Banks and the Authorities can realize their money only from those assets and from the Guarantors and not from investment of home buyers – There has been blatant violation of provisions of RERA – In the circumstances of the case, principle of ‘fraud vitiates’ is attracted and such transaction would become unenforceable and would be against the public trust doctrine – It is bounden duty of court not only to save the home-buyers but also to ensure that they are not cheated – Therefore, the registration of the builder companies under RERA is cancelled – The Lease-Deeds in favour of the Companies are also cancelled – Construction work in the projects is handed over to NBCC – Rights of the lessee shall vest in the Court Receiver – Real Estate Regulation and Development Act, 2016 – Uttar Pradesh Industrial Area Development Act, 1976.

Doctrines/Principles:

Principle of ‘fraud vitiates’ – Applicability of. Doctrine of ‘public trust’ – Applicability of.

Issuing directions, the Court

HELD : 1.1 In the instant matter, the question of larger public importance is involved. A large–scale cheating has taken place and middle and poor class home buyers have been duped and deprived of their hardearned money and lifetime. By the Amrapali Group, the buyers’ money which has been obtained has not been invested in the construction activities, rather it has been diverted to a great extent. Money obtained from the banks has also not been invested in the projects and has been diverted elsewhere to acquire other assets. This is not only with respect to the Amrapali builders that projects have not been completed as reflected in the affidavits of Noida and Greater Noida Authorities. More than 70% of the projects have not been completed which were initiated way–back in the year 2008–09 and were supposed to be completed within 3 years. [Para 69] [531-F-G]

1.2 If the real estate business has to survive in India, it has to be answerable to the public and has necessarily to uphold the trust reposed in builders/promoters. They have been paid huge amounts not only by the home buyers but also, they have to pay a huge amount for the public land given to them on lease by Noida and Greater Noida Authorities for construction of houses. The land has been given to them by the authorities on a concessional basis by making payment of 10% amount at the time of allotment. The builders have to be accountable to public/home buyers as well as the authorities and bankers. It is a matter relating to housing needs dealing with shelter place, such an activity is of the public importance as the real estate sector plays a pivotal role in the fulfilment of needs of housing infrastructure. [Para 73] [532-F-H]

2.1 It is apparent from the report of the forensic audit submitted by Forensic Auditors that there is a serious kind of fraud played upon the buyers in active connivance with the officials of the Noida and Greater Noida Authorities and that of the banks. The money of the home buyers has been diverted. The Directors diverted the money by the creation of dummy companies, realizing professional fees, creating bogus bills, selling flats at undervalue price, payment of excessive brokerage, etc. They have obtained investment from J.P. Morgan in violation of FEMA and FDI norms. The shares were overvalued for making payment to J.P. Morgan. It was adopted as a device for siphoning off the money of the home buyers to foreign countries. In view of the huge money collected from the buyers and comparable investments made in the projects, there was no necessity to obtain a loan from banks. The amount so obtained was not used in the projects. The mortgage deeds in favour of the banks were not permissible due to non-payment of dues of the Noida and Greater Noida Authorities. The Noida and Greater Noida Authorities issued conditional NOCs. to create mortgages subject to payment of dues which were not paid. They issued such NOCs in collusion with builders. It was incumbent upon the bankers also to obtain clear unconditional NOCs. which were not obtained and to ensure that the dues were paid to Noida and Greater Noida authorities. They permitted diversion of money immediately after sanctioning of the loan and also in day to day transactions of Amrapali group of companies. [Para 146] [580-D-H; 581-A]

2.2 No accounts were prepared w.e.f. the years 2015-2018 and money withdrawn was diverted during the said period. The Statutory Auditor, failed in duty and was part of fraudulent activities as found in the Forensic Report. The money obtained from banks was diverted to unapproved uses such as for the creation of personal assets of Directors, creation of assets in closely held companies by the Directors along with their partners and relatives, for personal expenses of Directors, to give advances without carrying interest for several years. There was total non– monitoring by the bankers. The money laundering was resorted to by Amrapali Group/ Directors. [Para 147] [581-B-C]

2.3 The statement filed on the expenditure of Rs.10,000 crores is nothing but a scrap of paper not supported by the books of account, supporting documents. It has to be outrightly rejected as there is an attempt made on siphoning off, apparent from the report of the Forensic Auditors also. [Para 142] [578-F-G]

2.4 The diversion of huge amount of Rs. 2,996.20 crores has been rightly detected on Forensic Audit. The Forensic Auditors have given the details in their report along with reasons. As to other amounts with respect to advances which are recoverable, the explanation that there is a surrender of shares etc. is not supported by books of accounts. There is no basis to contend so. No proper explanation has been given on behalf of Amrapali Group. The finding as to the diversion of home buyers’ funds is based on the figures worked on the basis of minute accounting as reflected in the auditors’ report. There is no proper answer to each and every entry which have been gone into by the Auditors. General and broad submissions have been made which are flimsy and have no legs to stand. [Paras 143, 144 and 145] [579-F-H; 580-A-B]

3.1 The public trust doctrine imposes on the State and its functionaries a mandate to take affirmative action for effective management, and the citizens are empowered to question its ineffectiveness. The land of the farmers had been acquired for the purpose of housing and infrastructure needs, by the State Government and handed over to the concerned authorities for construction. They are bound to ensure that builders act in accordance with the objective behind the acquisition of land and the conditions on which allotment had been made. It was a duty of concerned officials; they are not only enjoined to ensure that the rights of the home buyers are protected but also the interests of the authorities; and bankers. The public authorities are duty– bound to observe that the leased property is not frittered away along with the money of the home buyers. Affirmative action was clearly enjoined upon them not only under the statutory provisions of various enactments but also under the public trust doctrine. [Para 73] [533-A-D]

Noida Entrepreneurs Association v. Noida & Ors. (2011)

6 SCC 508 : [2011] 8 SCR 25 ; Natural Resources Allocation, In re, Special Reference No.1 of 2012 (2012) 10 SCC 1 : [2012] 9 SCR 311 ; Association of Unified Tele Services Providers & Ors. v. Union of India & Ors. (2014) 6 SCC 110 : [2014] 9 SCR 780 – relied on.

3.2 In the instant case, it is apparent that there are colossal dues of Noida and Greater Noida Authorities. There were several defaults in making the payment of the premium amount, lease money, even the money payable to the farmers as compensation for land acquisition has not been paid by the builders, though the builder has realised from home buyers the amount payable to authorities of Noida and Greater Noida as a component of the price payable by them. [Para 76] [535-F-H; 536-A]

3.3 The transfer of the plot by the lessee was only on fulfilment of certain conditions. The dues of lessor towards the cost of land were to be cleared in accordance with the schedule of payment. It was specifically provided in lease deed condition No.(ii)(c) that the lessee shall use the allotted plot for construction of group housing/flats/plots. Condition No.(ii)(c)(iii) deals with the part transfer of the plot. It lays down normally the permission for part–transfer of the plot shall not be granted under any circumstances. The lessee shall not be entitled to complete the transaction for sale, transfer, assign or otherwise part with possession of the whole or any part of the building constructed thereon before making payment according to the schedule specified in the lease deed of the plot to the lessor. By way of sub–lease of the plot, the transfer of plots could not have been made by the lessee. The lessee was required to start construction within 12 months from the date of possession. The date of execution of lease deed was to be treated as the date of possession. The lessee was required to complete the construction of minimum 15% of the total FAR of the allotted plot as per the approved layout plan and get occupancy/completion certificate within 3 years from the date of execution of the lease deed. Cancellation of lease deed was also provided in the case of violation of directions, or rules, regulations or in case of the default on the part of the lessee for breach or violation of terms and conditions of the registration/allotment/lease and/or non–deposit of allotment amount. [Paras 78, 80 and 81] [536-E-F; 538-D-F; 540-B-D]

3.4 The lease deed/allotment was to be governed by the provisions of the U.P. Industrial Area Development Act, 1976 and by the rules and/or regulations made or directions issued under the Act. The lessor w as required to monitor the implementation of the project. In larger public interest the lessor was also given a right to take back possession of the land/building by making payment at the prevailing rate. [Para 82] [541-C-E]

3.5 Once the Noida and Greater Noida Authorities knew very well that there were defaults, they could not have allotted further land to the Amrapali group without insisting for payment of its dues. Secondly, it was not open to the authorities to permit the sub–leases of plot of land executed by builders, thereby allowing the leaseholder to earn a huge amount without making payment of the amount due to them. The officials of the authorities have acted in clear breach of public trust. They have permitted the defaulting leaseholders to earn the amount by sub–leasing its land of which dues had not been cleared. Thus, apparently, the officials of the authorities acted clearly in collusion with the builders and overlooked the interest of the Authorities and home buyers while permitting the sub–leases of plot of land to be granted. The action of the officials of the authorities has the effect of causing unjust enrichment of builder from the land held by the concerned authorities. It was wholly an illegal exercise permitted. [Para 77] [536-B-D]

3.6 The leases had been granted by Noida and Greater Noida Authorities subject to the provisions contained in U.P. Industrial Area Development Act, 1976. Section 13 of the U.P. Industrial Area Development Act, 1976 deals with imposition of penalty and mode of recovery of arrears, which states that where any transferee makes any default in the payment of any consideration money or instalment thereof or any other amount due on account of the transfer of any site or building by the Authority or any rent due to the Authority in respect of any lease or where any transferee or occupier makes any default in payment of any amount of fee or tax levied under the Act, in addition to the amount of arrears, a further sum not exceeding that amount shall be recovered from the transferee or occupier by way of penalty. Under Section 13– A, any amount payable to the Authority under Section 13 shall constitute a charge over the property and may be recovered as arrears of land revenue or by attachment and sale of property in the manner provided under the provisions of Uttar Pradesh Municipal Corporations Act, 1959 (Act no.2 of 1959). Section 14 provides for the resumption of any site or building and forfeiture of whole or any part of the money if any paid in respect thereof. [Para 95] [549-B-E]

3.7 Public trust doctrine requires an affirmative action, which was envisaged not only statutorily but under the Scheme also. The Authorities were required to ensure that projects were completed within the stipulated period, otherwise, the very purpose of the grant would stand frustrated and colossal loss of public money. Amrapali Group did not pay even the amount due to be paid to the landowners on the part of land acquisition, it did not pay premium annual lease amount interest to Authorities. They have violated every condition, but still, Authorities were bent upon to condone everything. This reflects absolute dereliction of duty cast upon the Authorities. [Para 96] [550-B-C]

3.8 Thus, the officials of the Noida and Greater Noida authorities have acted clearly in a breach of public trust and apart from that, they have failed to act as per the statutory mandate, the regulations and the terms of the lease deed. [Para 78] [536-E-F]

4.1 With respect to the creation of mortgage deed in favour of bankers etc., Noida Authority has submitted that every mortgage permission is granted by the Noida Authority to the individual company of Amrapali group wherein a provision is made that Noida Authority has first charge/priority over all other charges including those created in favour of banks and financial institutions. One of the conditions on which permission to mortgage was that permission to mortgage was to be effective on making full payment of the premium and up to date annual lease rent of group housing plot and after execution of the sub– lease deed in favour of the allottee of the dwelling unit, the allottee/sub–lessee was to be governed by the terms and conditions of allotment/lease deed of the plot to be executed and sub–lease deed to be executed in favour of the allottee/sub–lessee. Since at no point of time, payment of premium due had been made and up to date annual lease rent had not been paid, no mortgage could have been created in favour of the bank in view of specific condition. [Paras 83 and 84] [542-B-C; 543-C-E]

4.2 In order to create a mortgage, it was necessary to obtain clear NOC in order to create effective mortgage deed. As that has not been done so far, no mortgage in the eye of law has been created in favour of the bank. It was not open to the bankers to mortgage the land in view of the conditional permission to create mortgage, the mortgage created in violation of condition cannot be said to be effective in accordance with law as the land was owned by the concerned authorities and the lessees had right to mortgage only subject to fulfilment of conditions imposed by the lessor/authorities. [Para 84] [543-F-G]

4.3 Issuance of conditional NOC was with ulterior motive, there was no reason to issue such a conditional permission, subject to which mortgage could have been made. They could not have issued any conditional permission for creation of a mortgage also without payment of amount due, permission has been issued obviously for being misused, in collusion with the officials of the bank and Authorities. It was incumbent upon the concerned authorities not to issue such an NOC for a mortgage and it was incumbent upon the bank officials in order to create a valid mortgage to ascertain from the Noida and Greater Noida Authorities that the condition imposed by them as condition precedent to create a mortgage had been fulfilled and to obtain clear NOC. But that is how in illegal manner the public money is obtained from banks for the purpose of construction activity and then it was not used for that purpose, and there was a diversion of money. [Para 85] [544-B-E]

4.4 The banks not only have failed to ensure that mortgage was effected in accordance with the law, but also they have failed to check whether money was in fact, required for the projects and was used for purpose it was lent. Money borrowed from bank, in fact, was not required for completion of these projects as the money paid by the buyers was enough for that purpose, but that was also diverted and the money obtained from the banks was also not utilised for the purpose it was taken and it was well within the knowledge of the bankers and Authorities that the funds were being diverted, but they remained mute spectators. It has been observed in extensive detail in the forensic audit report that the Banks did not monitor utilisation of funds and acted as a mute spectator to diversion which was almost happening evidently in all banking transactions. [Paras 85 and 86] [544-G-H; 545-A-C]

4.5 There was negligence on the part of Bank of Baroda and merely proceeding before the Court to recover the amount is not going to serve the purpose. More so, in view of the finding of the Forensic Audit that there was no necessity of obtaining the loan from the Bankers as Amrapali Group had sufficient money from the home buyers, which has also been diverted and has not been utilised in the construction activities. Other assets have been created with the help of the same and the borrowings have been used in order to siphon off the money by making payment of some unusual amount not only to J.P. Morgan, but also to IPFII Singapore in violation of the FEMA Rules and FDI Rules as found by the Auditors in the respective cases. [Para 93] [548-D-F]

4.6 The Noida and Greater Noida Authorities and the Bankers have permitted diversion of funds of home–buyers and the possession of other assets by Amrapali Group. The buyers’ money had been diverted, which was meant for construction on payment of dues of Authorities in case they were paid timely by the Amrapali Group to the Authorities and to the Banks substantively liability would have been cleared. But by their inaction and rather conniving, the buyers were cheated by the Amrapali Group. [Para 97] [550-D-E]

4.7 Whatever complete/incomplete structures are there, the Authorities are claiming that buyers have no right and they have the first charge on the structure as they have to recover the amount, only thereafter if anything is left out, can be paid to the buyers. In case the submission is accepted, it would amount to playing further fraud upon the fraud. It was incumbent upon the Authorities as well as the Banks to prevent the fraud. Now, if Banks, as well as the Authorities, are permitted to recover the amount from the home–buyers’ investment, in that case, it would be equally unjust and would be against the conscience of the law and nothing would be left for buyers not even a brick and the structures have come up by investing their money. Law never permits unjust gain based upon fraud. The principle “fraud vitiates” is clearly attracted and such a transaction would become unenforceable and would be against the public trust doctrine. Therefore, it is the bounden duty of the Court to act as parens patria not only to save the home–buyers but also to ensure that they are not cheated. [Para 97] [550-F-H; 551-A-B]

4.8 The kind of fraud that has taken place not only in Amrapali Group of Companies but at large as more than 70 percent of the various projects have not come up, is alarming to the Courts to take affirmative steps with the direction to prevent such frauds, restore the money of home–buyers and to punish incumbents responsible for such act. At the same time to ensure that buildings are completed. [Para 98] [551-C-D]

4.9 In the peculiar facts and circumstances of the case, it has to be secured and recovered by way of selling other attached properties and the one, which have been created out of the diverted funds of the home–buyers and property of guarantors etc. The banks’ borrowings have to be taken care of in a similar manner. The money payable to the Authorities had been diverted and huge amount of buyers’ money had not been invested in the projects neither any part of the money of bank borrowings, in fact, were spent in the construction as found by the Forensic Auditors. The promoters are held accountable for the diversion of the money paid by the buyers as component of price of flats even on account of payment to Authorities. [Para 123] [567-D-F]

4.10 The stand of the Noida is clear that without payment of land dues no mortgage could be effected. Thus, in fact in the eye of the law no mortgage could be created as there was no permission to mortgage unless the dues were paid and thus the bank could not have mortgaged the property before clearance of the dues of the Noida Authority, and secondly, the mortgage was permissible for the purpose of financing the investment in the project. As a matter of fact, when this was the stipulation, it was the banker’s duty to ensure that money made available was invested in the project. [Para 126] [568-E-F]

4.11 The Forensic Auditors’ report makes it apparent that Bankers have failed to ensure and oversee that the money was invested in the projects. It was diverted elsewhere as rightly found by the Forensic Auditors. Thus, no charge can be said to have been created by bank loans on the projects as the money, in fact, it has not been used in the projects as such home buyers cannot be saddled with liability and also the projects. The money borrowed from banks was used to create other assets worth thousands of crores. Thus, the banks can realise their money from those assets and from guarantors and not from the investment of home buyers, not from the buildings in which loans granted by banks have not been invested. Home buyers are not direct party to the bank loan, thus it was the duty of the bankers and Noida authorities, if they wanted to impose their charge, to ensure that no fraud takes place and money is invested in the projects for the purpose for which it has been taken not only the money paid by the home buyers but obtained from the banks and due to be paid to Noida authorities, is not usurped illegally by promoter/builder. Though it was realised as part of the component of the price of flat from the home buyers, by the promoters/builders its illegal diversion was permitted by Amrapali Group in connivance with the officers of the authorities and the bank. Thus, the very condition of investment in the project by bankers, subject to which the mortgage was permissible, had been violated. Thus, it cannot be said that any charge of the banks has been created on the projects. The charge would be on the property which has been purchased/created by dubious methods. It would be inequitable to fasten the charge against the investment made by the home buyers whereas they have not been benefited and rather have been cheated by the promoters for which bankers, as well as authorities, have to share the blame. [Para 127] [568-G-H; 569-A-E]

4.12 Though the home buyers may not be a secured creditor, they have a right to be treated in accordance with the law, fairly and they cannot be subjected to a fraudulent action by the promoters, that too in connivance with the bankers and officials of the Noida and Greater Noida authorities. [Para 128] [569-F-G]

4.13 No doubt about it as submitted on behalf of Amrapali group of companies, that the provisions of RERA are for protecting the interests of promoters also. No doubt about it that the RERA intends to protect the interests of the promoters and home buyers both. However, in the instant case, we have given the opportunity to the promoters to deposit the 10% of the amount in December 2017 and January 2018 but orders have met with non–compliance with all impunity. Thereafter on the assurance of the Amrapali Group that it would undertake the construction work and a joint plan was submitted after great wastage of time and energy and then order dated 17.5.2018 was passed that was also not complied with. It was passed on a condition that a sum of Rs.250 crores to be deposited which was also not deposited by the Amrapali group to show its bona fide. The Group never intended right from the beginning to complete the construction work, has been rightly observed by Forensic Auditors. Thereafter, we have assigned the work to the NBCC. But at the same time, the effort has been made by Amrapali Group/ its Directors to sell the property which has been created by diversion of home buyers’ funds. Incorrect facts have been stated and suppressions have been made in various affidavits filed in this Court that the certain properties are not encumbered. Various applications are being filed one after the other by the encumbered holders with respect to several properties that they have the charge over the said property. [Para 129] [570-A-E]

4.14 That apart, several attached properties have been put to sale by DRT under the orders of this Court. In most of the cases, no buyers have turned up and/or the price offered by forming a cartel are too low. The property cannot be sold at throw away price. Amrapali group is instrumental in not allowing the properties to be sold. There appears to be some invisible hand holding buyers out and even the bankers are not coming up to finance the purchasers, is the genuine grievance pointed out at the Bar. Be that as it may. Entire gamut of facts indicates the contumacious conduct of Amrapali Group, proper and correct disclosures on oath have not been made, even encumbrances are not being specified clearly in spite of repeated orders. They have sold several valuable properties during pendency of petitions as pointed out by the Forensic Audit Report. In the aforesaid circumstances, under the provisions of the RERA their interest cannot be protected. [Para 130] [570-E-H; 571-A]

4.15 Considering the serious kind of fraud unearthed on the forensic audit, formation of dummy companies, violation of norms of foreign investment, violation of FEMA, siphoning off the money of home buyers, making payment of dividend without profits and a methodology had been devised of valuing the shares on an unreasonable higher basis so as to siphon out the money of the home buyers to J.P. Morgan etc. The creation of a large number of assets with the help of money of the home buyers. Right from 2015, no construction activity has taken place. Account books had not been maintained and money has been transferred continuously. No audit was made. Money was taken out from banks, and fake purchases have been made. Thus, they are not at all entitled for any indulgence under the provisions of the RERA. In view of their unholy conduct, defying description, their contumacious fraudulent conduct totally disentitles them and they are required to be dealt with as sternly as possible so as to make it exemplary one that such fraudulent actions do not recur in future, in real estate business in India. [Para 130] [571-A-D]

4.16 There was no force majeure condition or any legal impediment and as such the period from 2011 to 2015 cannot be treated as a moratorium period vis-à-vis the dues of Noida and Greater Noida authorities. The submission made as to the farmers’ agitation etc. is too vague and 30% of the projects have come up; whereas 70% have not yet come up, out of the projects in Noida and Greater Noida alone. [Para 141] [577-F-G]

5.1 The Real Estate (Regulation and Development) Bill, 2013 (RERA) was intended to standardise business practices and transactions in the real estate sector. It intends to ensure consumer protection. It intends to regulate transaction related to both residential and commercial projects. It is apparent from the aims and objectives of RERA that the Act ensures greater accountability towards consumers and significantly reduce fraud and delays. Accountability standards have been laid down where duties cast upon promotors as well as the effort has been made to make consumer also responsible. [Paras 104 and 105] [554-F; 557-E]

5.2 In view of the provisions of the RERA Act, in the instant case, it was necessary to deposit the amount in the account. A blatant violation of the provisions of RERA has been done by the Amrapali Group. Since RERA contemplates timely completion of projects once registration has been granted under Section 5 and extension of registration under Section 6, it is only in the event of force majeure in case there is no default on the part of the promoter, registration can be extended in aggregate for the period not exceeding one year. Force majeure shall mean a case of war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature. The registration granted under Section 5 is valid for a period declared by the promoter. [Paras 109 and 110] [559-G-H; 560-A-B]

5.3 Section 7 provides that the Authority may on receipt of a complaint or suo motu or on the recommendation of the competent authority revoke the registration granted under Section 5 in case promoter makes default in doing anything required by or under the Act or the rules or the regulation made thereunder; the promoter violates any of the terms of approval given by the competent authority; the promoter is involved in any kind of unfair practice or irregularities. It is also independently provided that in case the promoter indulges in any fraudulent practices, the registration can be revoked. Upon revocation of the registration, the promoter shall be debarred from accessing the website in relation to that project under Section 7(4)(a). Under Section 7(4)(b), the Authority shall facilitate the remaining development works to be carried out in accordance with provisions of Section 8. [Para 110] [560-B-D]

5.4 It is clear that RERA intends for completion of the project in case any fraud is committed by the promoter and the activity is not completed, the home–buyers cannot be left in lurch, allowing the prayer on behalf of Bankers as well as by the Authorities would amount to unfair treatment of home buyers in the facts of this case. It is too late for them to submit that home buyer has no rights in the teeth of the provisions contained in the RERA, which intends to prevent fraud. [Para 111] [562-B]

5.5 Once registration lapses on non–completion of project within the time stipulated or it is revoked the consequence ensue as enumerated in Section 8 of RERA, the Authority is enjoined upon the duty to consult with the appropriate Government to take such action as it may deem including the carrying out of the remaining development works by competent authority or by the association of allottees or any other manner as may be determined by the Authority. The development work has to be completed and cannot be left in between. [Para 112] [562-C-D]

5.6 As per the provisions of Section 11, the promoter shall be responsible to obtain the completion certificate or the occupancy certificate. He shall also be responsible for providing and maintaining the essential services on reasonable charges, till taking over of the maintenance by the association of the allottees. The promoter shall enable the formation of an association or society or co–operative society or federation of allottees. He shall pay all outgoings until he transfers the physical possession to the allottee. After he has executed an agreement for sale for any apartment, plot or building, he may not mortgage or create a charge on such an apartment, plot or building and if any such mortgage or charge is made or created then notwithstanding anything contained in any other law for the time being in force, it shall not affect the right and interest of the allottee. [Para 113] [562-H; 563-A-C]

5.7 It is apparent that after the transfer of conveyance deed, the title vests in the allottee and of the common area in the association of the allottees or the competent authority as the case may be. No title remains with the promoter. In case promoter fails to complete or is unable to give possession of an apartment, plot or building, he shall be liable on demand to the allottees. In case the allottee wants to withdraw from the project, without prejudice to any other remedy available, the promoter has to return the amount received in respect of that apartment, plot, building with interest in this behalf including compensation in the manner as provided under the Act. [Paras 116 and 117] [564-E-G]

5.8 It is apparent that RERA intends protection of home– buyers and aims at completion of the buildings. The buildings have to be completed. The task has already been assigned to NBCC by the Court for completion of buildings as the promoters/builders have failed to complete the building within the time fixed and the time which could have been extended. Now, more than

10 years have passed and buyers were given the assurances that they would get flats within three years period by the promoter/builder. The maximum time fixed in RERA has also expired and extension could not have been beyond 1 year. It is clear that common areas as provided under Section 17 have to be ultimately handed over to the Association of Allottees or the Competent Authority as the case may be. Thus, any sub–lease, alienation or transfer affected by the promoter of the common areas as defined in the RERA and otherwise reserved under the plan shall be void and inoperative. [Paras 120 and 121] [566-F-H; 567-A]

5.9 The contention on behalf of the Bank is that the agreement of promoter/builder with home buyers is unregistered as such, no right has been created in the immovable property in view of the provisions contained in section 49 of the Registration Act. The contention ignores and overlooks the provisions of RERA which intends to prevent such frauds on home buyers and ensure completion of projects and that of the agreement between promoters and buyers. There are various rights under the agreement as well as under the RERA. The agreement entered into at the time of allotment is the basis of the investment in the projects made by home buyers, it cannot be said to be a scrap of paper. It is their valuable investment which is required to be protected and cannot be permitted to be taken away by builder or secured creditors in an illegal manner. The provisions of section 17 of the Registration Act no doubt provide that a document of title requires compulsory registration, no doubt registered document has to be executed that also has to be taken care of by the Court so as to protect the interest of home buyers. [Para 132] [571-G; 572-A-B]

5.10 The two expressions of the provisions of Section 11(4)(g) of RERA Act are significant. Firstly, which the promoter has collected from the allottees. Secondly “which are related to the project”. In the instant case dues of the Noida/Greater Noida authorities have been collected from the allottees by the promoters but the authorities have permitted diversion of said amount by not taking any action in view of the chronic default right from the beginning. Though they knew that the promoter had booked the flats, even the permission to grant sub–lease of the plot had been granted in totally illegal manner without payment of dues of premium and lease rent etc. Conditional permission to the mortgage was issued without payment of the premium lease money etc. so as to perpetuate the fraud being done by the promoters. The mortgage created ought to have been objected in view of the conditions subject to which it could have been done. Obviously, it was done by Amrapali Group in connivance with officials of Authorities including the bankers. Thus when the authorities have themselves permitted fraudulent action money has been diverted, which has been paid by home buyers for payment to Authorities also, as premium was component of price and as bankers have also permitted diversion of loan amount, mostly on same day, it cannot be said in the facts of the case, that any amount of the bankers or that of authorities remains invested in the project. The sine qua non is the expression “which are related to the project” would mean that that amount recoverable from the allottee is the one which has been invested in the project. A third person can be held liable for the money payable to secured creditors in case it has been invested in the project, in case it has not been spent in constructions, same cannot be permitted to be realised from the project/home buyers, the investment of home buyers cannot be frittered away and to fasten liability upon the innocent buyers/allottees in that event would tantamount to perpetrating yet another fraud on them. Accountability, as per law, has to be fastened on promoters/builders and all concerned. It would amount to total deprivation of money of home buyers without any fault on their part or legal liability. It would amount to fastening liability upon them once over again by misuse of the process of law. The provisions of the first and second charge cannot come to the rescue of Authorities/Bankers. Under Section 11(4)(g) the promoter has to pay all outgoings which he has collected from the allottees, the payment of outgoings includes land cost, ground rent, charges for water or electricity, maintenance charges etc. As per the proviso to Section 11(4)(g), the promoter shall continue to be liable, even after the transfer of the property, to pay such outgoings and penal charges, if any, to the authorities. Outgoings which have been collected by the promoter can be and have to be recovered in the facts and circumstance of the case from them as intended by section 11(4)(g) of RERA. [Para 133] [572-E-H; 573-A-E]

5.11 The Bank’s plea is that the provisions of section 11(4)(h) of RERA provides that the promoter, after he executes an agreement for sale for any apartment, plot or building, cannot mortgage or create a charge on such an apartment, plot or building, as the case may be, and if any such mortgage or charge is made or created then it shall not affect the right and interest of the allottee who has taken or agreed to take such apartment, plot or building, as the case may be. The provision has a non– obstante clause. As the provision has given an overriding effect by non–obstante clause, the provision is no help to the banks as the agreement had been by promoters with home buyers entered into earlier in point of time to the creation of the mortgage. There could not have been any mortgage created subsequently and even if validly created, it would not affect the right and interest of the allottee as intended by RERA. Thus, the right and interest of the allottee are safeguarded by virtue of the provisions contained in section 11(4)(h). As the project was pending, the provision intends to confer a right on the allottee and save the allottees and also their interests from such liability. Even if the provision is held not applicable on the ground that RERA came into force later, since there was no valid mortgage as held by this Court, it was incapable of affecting the right or interest of the allottee. Had it been ensured that the money due to Noida and Greater Noida authorities was paid by the promoters to the authorities, the fraud of siphoning of money would not have taken place to the extent it has been done. Moreover, the money borrowed from banks has not been invested in the projects. In fact, projects required no funding. It would be iniquitous to charge the allottees with the bankers’ money. Thus, in the peculiar facts and circumstances of the case, it is held that rights or interests of the allottees are not at all affected by the mortgage created by the bankers or by the dues of the Noida or Greater Noida authorities. [Para 134] [573-F-H; 574-A-D]

5.12 Section 4(2)(1) of the RERA requires the promoter to disclose the prior encumbrance. Therefore, the RERA contemplates the creation of encumbrance even before the project is registered and such a plot can be offered to allottees. Basically, a declaration is required under section 4(2)(l)(A) that the land is free from all encumbrances or as the case may be, details of the encumbrances, if any, on such land, should be disclosed. The intention is that the allottee should know about the encumbrance if any. The provision does not espouse the cause of the bank in any manner whatsoever. [Para 135] [574-E-F]

5.13 It is not correct that in view of the provision of section 19(4) of RERA, the right of the allottees is restricted to only receiving the compensation from the promoters. The provisions of Section 8 of the RERA which provides for completion of the development projects by the competent authority or by the association of allottees or in any other manner, as may be determined and the association of allottees shall have the first right of refusal for carrying out the remaining development work is the wholesome provision contained in the second proviso to section 8. To claim compensation is at the option of the allottee if the allottee wants to go out. That is an additional right, not the only right conferred under the RERA. He cannot be left in lurch but is entitled to claim the refund if he so desires. It is his option to claim the refund along with interest and compensation which is to be determined under the RERA. The rights of the allottees are not restricted to only receiving the compensation. [Para 136] [574-G-H]

5.14 As regards the plea that the RERA recognises and protects interests of the lenders and does not in any manner take away rights under any of the existing statutes such as T.P. Act, Debt Recovery Tribunal Act, SARFAESI Act, it is apparent from a perusal of RERA, which is a special Act, that certain rights have been created in favour of the buyers. The provisions of RERA have to prevail. When it comes to the question of protection of rights of buyers even if RERA had not been enacted, under aforesaid laws in the facts of the case, a different view could not have been taken. However, there is no dispute that the bankers would have the right to recover their dues. The provisions of RERA are beneficial to the home buyers and are intended to insulate them from fraudulent action, ensures completion of the building and it is the duty of the court to protect and ensure the home buyers’ interest and at the same time to hold them responsible for the duties enjoined upon them under the said statute. The home buyers are not observed from the discharge of their liability if any. At the same time, they have the right of enforcement of their right for compensation due to undue delay in completion of the project. [Para 137] [575-D-F]

5.15 In case the authorities are making allotment of plots at a paltry sum of 10% and giving the builders 8 years period to make payment of premium with a moratorium of 2 years then the period runs to 10 years and the project is to be completed within

3 years. It is clear that the authorities have to be very vigilant for securing their interests otherwise in every case even if the promoter has completed the project and realised the charges from the home buyers and has not deposited the amount due to the authorities, in case no action is taken by the Authorities, can it be taken after 10 years against home buyers. The authorities have to blame themselves for their inaction and have to wait for the realisation of dues by sale of other properties and as against guarantors etc. The projects have to be completed as mandated by Section 8 of RERA. [Para 139] [576-C-F]

5.16 No part of the building can be directed to be demolished. Buildings have to come up and completed even the ones which are at the nascent stage as mandated by RERA. No doubt about it that in case of failure to pay the dues the onus of payment of land dues has to be passed on to the buyers on pro– rata basis but in the instant case they have already paid the substantial amounts, huge amount has been permitted to be diverted by the authorities and bankers as such they have to wait for recovery and cannot act in a manner further detrimental to the interests of the home buyers. [Para 140] [577-B-C]

5.17 There is duty enjoined under the RERA, there has to be a Central Advisory Council as well as the role of the State Government is not ousted in order to protect against such frauds. The Central Government and the State Government are directed to take appropriate steps on the time–bound basis to do the needful, all other such cases where the projects have remained incomplete and home buyers have been cheated in aforesaid manner, it should be ensured that they are provided houses. [Para 141] [578-C-D]

6. As the basic obligations have not been complied with by the promoters, they cannot also be entitled to FAR. In the instant case, there is serious kind of fraud by the promotors as such they cannot be said to be entitled to avail the FAR to utilise it or to alienate and more so when they have failed to complete the projects and pay the dues. [Para 122] [567-B]

7.1 There appears to be non-issuance of the completion certificate, whereas the buildings are being occupied, completion certificate is directed to be issued. This Court has to monitor the payment of dues of the Authorities and Banks and that outstanding are not going to create hurdle in the execution of the registered document/conveyance deed in favour of home buyers. It has to be executed by the concerned Authorities as well as by the Court Receiver and by the home buyers. The amount which is due on the part of home buyers has to be deposited in the account, which has been opened, in the UCO Bank by this Court. It has to be utilised firstly for the purpose of completion of the buildings and for providing other facilities and the home buyers of incomplete projects also have to deposit the outstanding amount on their part in the aforesaid account opened in the UCO Bank and out of that amount, it has to be disbursed as per the orders to be passed by this Court for the purpose of construction and outstanding if any, shall be used for the purpose of payment of compensation to home buyers for the period of delay as per the agreement or as may be determined ultimately and other dues. [Para 124] [567-F-H; 568-A-B]

7.2 In the facts and circumstances of the case, it would be absolutely improper for the Authorities to deny issuance of occupancy or completion certificate, especially on the ground of non–payment of dues. The facts indicate that 9000 families are residing for the last several years out of the sheer necessity of shelter place and they have not been provided with electricity connections and other facilities due to non–issuance of occupancy certificate by the concerned authorities. Most of them have paid the entire amount to the builders. The payment to be made to concerned Authorities had also been collected by the builder from home buyers as component of price of flat, but has not been deposited with the concerned Authorities and the home buyers’ money had been diverted, which was more than the dues of the Authorities and the Banks taken together. Had timely action been taken by the Authority, no amount could have been diverted and the position would have been different as it stands today. The concerned Authorities have to issue occupancy certificate as well as completion certificate with respect to the projects in which home buyers residing without insisting for the payment of their dues. This Court has to monitor the payment of the dues to the Authorities as well as the Bankers, from guarantors and other proprietors. The innocent buyers cannot be made to suffer for no fault on their part. [Para 101] [553-C-E]

7.3 Once Authorities have allowed 9000 home-buyers to occupy the premises without terminating the lease on the ground that occupation is illegal. Obviously, builders have put them in possession, they are not the encroachers and they have invested their valuable saving and have no other shelter place to live. They cannot be deprived of their houses and cannot be left without basic necessities of life like water, electricity, etc. The concerned Authorities are responsible to provide electricity, water, and all other basic amenities to buyers as they have the right to occupy the premises. In the peculiar facts of the case, the Court has directed the Authorities to provide basic necessities forthwith. The Central Government and Government of Uttar Pradesh are also directed to ensure that everything is done to protect the interest of the home-buyers without obliging the builders. Obliging the builders by making certain concessions by the Government would amount to perpetrating further fraud and unjust enrichment of builder. The case poses challenge to the law enforcement agencies to act in tandem to book such culprits. [Para 102] [553-E-H; 554-A]

7.4 It is also apparent from the provisions of the Act of 1976 as well as RERA and also the case set up by the Authorities that partial occupation certificate can also be issued. The completion certificate can be issued partially also as per the provisions of Uttar Pradesh Apartment (Promotion of Construction, Ownership, and Maintenance) Act, 2010. [Para 123] [567-C-D]

8.1 Because of the failure on the part of the Builders to fulfil the obligations towards the buyers and the serious kind of fraud which has been played by them upon the home buyers, the registration of Amrapali group of companies under the Real Estate Regulation and Development Act, 2016 deserves to be cancelled. [Para 148] [581-D-E]

8.2 Because of the gross violations of the conditions of lease deeds executed by the Noida and Greater Noida Authorities in favour of Amrapali group of companies with respect to various projects, the lease deeds are liable to be cancelled and the rights thereupon shall vest in the Court Receiver. [Para 149] [581-E-F]

8.3 The criminal cases have also been registered by the police. The Court proposes to monitor the progress of the investigation. For violations of FEMA and FDI norms, the Enforcement Directorate is directed to make investigation in accordance with the law and submit reports quarterly to this Court. Money laundering aspect is also to be looked into by concerned authorities. [Para 151] [582-B]

8.4 It has been found in the Forensic Audit Report that there are several recoverable from various companies as well as from individuals, Directors and other incumbents. It is directed that as per the findings recorded by the Forensic Auditors, the money be deposited in this Court on a time–bound basis and other needful be done as observed by the Auditors. As the Court has approved the report, let the concerned companies/ Directors/individuals take steps in compliance with the observations and findings made by Auditors to refund the amount and or to do needful as suggested within one month. [Para 152] [582-C-D]

8.5 It has also beem found that non–payment of dues of the Noida and Greater Noida Authorities and the banks cannot come in the way of occupation of flats by home buyers as money of home buyers has been diverted due to the inaction of Officials of Noida/ Greater Noida Authorities. They cannot sell the buildings or demolish them nor can enforce the charge against homebuyers/leased land/ projects in the facts of the case. Similarly, the banks cannot recover money from projects as it has not been invested in projects. Homebuyers money has been diverted fraudulently, thus, fraud cannot be perpetuated against them by selling the flats and depriving them of hard–earned money and savings of entire life. They cannot be cheated once over again by sale of the projects raised by their funds. The Noida and Greater Noida Authorities have to issue the Completion/ Part Completion Certificate, as the case may be, to execute tripartite agreement and registered deeds in favour of the buyers on part–completion or completion of the buildings, as the case may be or where the inhabitants are residing, within a period of one month. [Para 153] [582-E-G]

8.6 The home buyers are directed to deposit the outstanding amount under the Agreement entered with the promoters within 3 months from today in the Bank account opened in UCO Bank in the Branch of this Court. The amount deposited by them shall be invested in the fixed deposit to be disbursed under the order of this Court on phase–wise completion of the projects/work by the NBCC. The percentage of profit of NBCC is fixed at 8 percent. As it is a Government Undertaking, NBCC has to ensure that DPR is prepared reasonably and the work to be completed as expeditiously as possible. [Para 154 iii and 125] [583-D; 568-B-C]

8.7 The Institute of Chartered Accountants of India is directed to initiate the appropriate disciplinary action against Mr. Anil Mittal, CA for his conduct as reflected in various transactions and the findings recorded in the order and his overall conduct as found on Forensic Audit. Let appropriate proceedings initiated and concluded as early as possible within 6 months and a report of action taken to be submitted to this Court. [Para 154 vii] [583-F-G]

8.8 Concerned Ministry of Central Government, as well as the State Government and the Secretary of Housing and Urban Development, are directed to ensure that appropriate action is taken as against leaseholders concerning such similar projects at Noida and Greater Noida and other places in various States, where projects have not been completed. They are further directed to ensure that projects are completed in a time–bound manner as contemplated in RERA and home buyers are not defrauded. [Para 154 ix] [584-B-C]

8.9 Shri R. Venkataramani, Senior Advocate is appointed as the Court Receiver. The right of the lessee shall vest in the Court Receiver and he shall execute through authorized person on his behalf, the tripartite agreement and do all other acts as may be necessary and also to ensure that title is passed on to home buyers and possession is handed over to them. [Para 154 x] [584-D]

8.10 The Court also directs Noida and Greater Noida Authorities to execute the tripartite agreement within one month concerning the projects where homebuyers are residing and issue completion certificate notwithstanding that the dues are to be recovered under this order by the sale of the other attached properties. Registered conveyance deed shall also be executed in favour of homebuyers, they are to be placed in the possession and they shall continue to do so in future on completion of projects or in part as the case may be. The Noida and Greater Noida Authorities are directed to take appropriate action to do the needful in the matter. The Water Works Department of the concerned area and the Electricity Supplier are directed to provide the connections for water and electricity to home buyers forthwith. [Para 154 xi] [584-E-G]