The Supreme Court has raised serious concerns over an alleged nexus between banks and real estate developers in financing housing projects through subvention schemes in Noida, Greater Noida, and Gurugram. The court suggested a Central Bureau of Investigation (CBI) probe, stating that no bank appears to be free from suspicion.
Supreme Court’s Observations
A Bench comprising Justices Surya Kant and N Kotiswar Singh remarked that banks released payments to developers even before construction began. Expressing dissatisfaction with the banks’ conduct, the court noted that they seemed to be working in close coordination with builders, often to the detriment of homebuyers.
The court ordered the CBI to submit a detailed proposal for an investigation into these financial transactions.
Homebuyers’ Complaints
The case was brought before the court by homebuyers who had signed tripartite agreements involving banks, builders, and themselves under subvention schemes. These schemes allowed buyers to pay a small upfront amount (5-10%), while banks disbursed the remaining loan directly to the developers. However, many developers defaulted on their projects, leaving buyers in financial distress. Despite the developers’ failures, banks started demanding repayments from homebuyers, even though they had not received possession of their homes.
The Supreme Court acknowledged the buyers’ grievances and noted that many projects were either incomplete or had not even begun construction.
Legal Developments
Initially, the Delhi High Court directed the homebuyers to approach the Real Estate Regulatory Authority (RERA), citing contractual obligations. However, the Supreme Court took a broader view, highlighting potential collusion between banks and developers.
Senior Advocate Abhishek Manu Singhvi, representing one of the banks, argued that not all financial institutions were involved in wrongdoing. However, the court remained unconvinced and insisted on a deeper probe.
CBI Probe and Amicus Curiae Appointment
To ensure a fair investigation, the Supreme Court appointed Rajiv Jain, a former Intelligence Bureau Director and ex-member of the National Human Rights Commission (NHRC), as Amicus Curiae. He has been tasked with providing recommendations for an effective probe.
Justice Kant emphasized the urgency of the matter, stating, “So many helpless people are there. Something has to be done in a timely manner. A huge section of society is involved.”
The CBI has been directed to submit its investigation proposal within two weeks, with the next hearing scheduled for April 29.
