NEW DELHI: The Supreme Court has requested responses from the Centre, ED, RBI, and other parties, including certain real estate firms, regarding a plea claiming that significant amounts collected from homebuyers in Noida and Yamuna Expressway projects were misappropriated.
A bench consisting of Chief Justice of India Surya Kant and Justices Joymalya Bagchi and Vipul M Pancholi acknowledged the submissions by lawyer Prashant Bhushan, representing petitioner Vandana Sabharwal, and issued notices to the respondents due by July 15.
The bench also called for responses from the Union ministries of Housing and Urban Affairs, Corporate Affairs, as well as Uttar Pradesh RERA (Real Estate Regulation and Development Authority), Noida Authority, Yamuna Expressway Industrial Development Authority (YEIDA), and developers including Jaiprakash Associates Ltd (JAL), Jaiprakash Infratech Ltd (JIL), Standard Chartered Bank, CRC Homes, CRC Greens, Gaursons, Gulshan Homz, Mahagun, and Investors Clinic.
Sabharwal’s plea argues that this case highlights a broader issue in the real estate sector, where developers allegedly misdirect homebuyers’ funds, transfer land and development rights to associated entities, pushing projects into insolvency and leaving buyers in limbo.
Bhushan pointed to findings from the ED, which is investigating the case under the Prevention of Money Laundering Act (PMLA). He stated that JAL and JIL collected nearly Rs 14,559 crore from over 25,000 homebuyers, and “substantial amounts” were diverted for non-construction activities, benefitting related group entities, including Jaypee group companies.
“This problem recurs in project after project,” Bhushan noted. “Homebuyers’ funds are gathered, redirected, and companies end up filing for bankruptcy. Homeowners find themselves in a precarious situation as these misappropriated funds are either lost or not recovered in a timely manner,” he added.
He also mentioned that developers frequently transfer land and assets to affiliated companies, complicating recovery efforts, even when investigations confirm fund diversion.
Bhushan indicated that while the ED has provisionally attached assets worth around Rs 400 crore, the actual diversion involved assets exceeding Rs 14,000 crore. He urged the bench to instruct the ED to expedite their investigation and issue provisional attachment orders for any identified proceeds of crime or diverted funds linked to land or development rights.
“Typically, these assets are never recovered. Investigations highlight fund diversions to associated entities, but if recovery fails, homebuyers never see the benefits,” he said.
He also requested the RBI to conduct audits on banks financing such troubled housing projects, emphasizing that banks are incurring substantial losses as well.
“The RBI should issue guidelines because this issue is pervasive and many banks are facing financial setbacks due to these projects,” Bhushan asserted.
Referring to proceedings at the National Company Law Tribunal (NCLT), he noted that homebuyers seeking refunds are only being offered the principal amounts paid over a decade ago, without any interest, despite a significant increase in property prices.
“If we request a refund today, we are offered the amounts paid 12 years ago, lacking interest. Presently, the same flat would cost three times more,” he explained.
The Chief Justice remarked that the case involves “complex” issues and noted that in another similar matter, the court had assigned the investigation to the CBI, while the ED has already registered a case in this instance.
“Let’s see what they have to report,” the bench said, requesting the ED to submit a status report outlining the progress of its investigation.
Bhushan informed that the ED had filed an enforcement case information report (ECIR) based on various FIRs lodged by the Economic Offences Wings of the Delhi and Uttar Pradesh Police.
The bench has asked all respondents to submit their replies by July 15.
