Content Provider | Supreme Court of India |
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e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | Principle of ‘frad vitiates Housing projects Doctrine of ‘public trust’ |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Act(s) Referred | Uttar Pradesh Industrial Area Development Act, 1976 (6 of 1976) Real Estate (regulation and Development) Act, 2016 (16 of 2016) |
Case(s) Referred | Referred Case 0 Referred Case 1 Referred Case 2 |
Case Type | Writ Petition |
Court | Supreme Court of India |
Disposal Nature | Directions Issued |
Headnote | Housing: 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. |
Judge | Hon'ble Mr. Justice Arun Mishra |
Neutral Citation | 2019 INSC 799 |
Petitioner | Bikram Chatterji & Ors |
Respondent | Union Of India & Ors. |
SCR | [2019] 9 S.C.R. 289 |
Judgement Date | 2019-07-23 |
Case Number | 940 |
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