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Fate of Indian real estate hangs in balance as SC hears builders’ challenge to IBC

Fate of Indian real estate hangs in balance as SC hears builders’ challenge to IBC

July 19, 2019 in Uncategorized

NEW DELHI: The Supreme Court of India on Thursday heard the constitutional challenge filed by over 100 builders against the right provided to the homebuyers as ‘financial creditor’ under the section 7 of Insolvency and Bankruptcy Code. The bench of justices Rohinton Fali Nariman, Sanjiv Khanna and Surya Kant took suo moto congizance and has directed the Additional Solicitor General (ASG) appearing for the government to provide a list of states where RERA authority, Appellate Tribunal and Adjudicating officer are not present. The order comes after the advocates Aditya Parolia and Piyush Singh, representing over 300 home buyers, pointed out that the RERA act has still not been adopted or proper implementation has not taken place in most of the states. “Many states have appointed government officers as temporary authorty,” said Parolia. The SC demanded a list of such states as well. The ASG will have to present this list to the court by Tuesday. Pioneer Urban Land and Infrastructure filed a plea in the Supreme Court in January 2019, challenging the validity of section 5(8)(f) of the IBC2016, where homebuyers were given the right to be considered as financial creditors. As many as 136 similar writs were filed by builders like Supertech, Parsvnath, BPTP, Ansal Hi-Tech Townships, Today Homes Noida, Ireo, SARE Shelters Projects, Wave MegaCity Centre, CHD Developers, Spaze Towers, Orris Infrastructure, AVP Buildtech, Three C Shelters, Emaar Hills Township, TDI Infrastructure, ATS Realty, among others. All these writs were attached to the original plea of Pioneer Urban Land and Infrastructure and are being heard together. According to the builders, home buyers must make their claim through RERA and consumer forums, and the amendment in IBC has only resulted in additional encumbrance upon them. They also say that the definition of 'default' occurring in such cases is not clear. The financial creditors can initiate the insolvency proceedings against a corporate debtor when it commits a 'default'. In case of delay of a project the definition of 'default' becomes vague. Also, according to builders, there have been cases where the delay has happened on the buyer's end paying the instalments. They also dispute the ambiguity about treating home buyers as secured or unsecured creditors. Hence, such cases when referred to insolvency forum turns into abuse of process of law and also sometimes lead to delay in project delivery. In the previous hearing held on July 10, the ASG had said that there was no illegality in amendment brought by it in IBC. The centre had said that the law was amended to protect the interest of home buyers who had invested their money to purchase flats. The amendment helped in their representation in the Committee of Creditors under IBC. The affidavit filed by the centre in the SC further said that the explanation was inserted under Section 5(8)(f), providing that the allottees under the real estate project are considered as financial creditors, was only for the purpose of abundant clarity. The case will next be heard on July 23.  Sources: realty.economictimes.indiatimes.com

NCLAT asks IDBI Bank to furnish conditions for fresh bidding for Jaypee

NCLAT asks IDBI Bank to furnish conditions for fresh bidding for Jaypee

July 18, 2019 in Jaiprakash Associates

The National Company Law Appellate Tribunal (NCLAT) Wednesday directed IDBI Bank, the lead lender of debt-ridden Jaypee Infratech, to file an affidavit listing out new terms and conditions if a fresh round of bidding is conducted. A two-member bench headed by Chairman Justice S J Mukhopadhaya has asked IDBI Bank to file an affidavit by Friday in this regard. The appellate tribunal has listed the matter for next hearing on Monday. "Counsel appearing for lenders is allowed to file new terms and conditions in case fresh bidding takes place," the bench said. In the second round of bidding, the committee of creditors (CoC) had first rejected the resolution plan of Suraksha Realty and then voted against state-owned NBCC's offer. In the voting that took place on NBCC's bid, 34.75 per cent of home buyers voted in favour, 1.44 per cent voted against, whereas 23.8 per cent did not vote. All the 13 banks, which constitute 40.75 per cent of CoC, voted against the bid by the state-run firm to acquire Jaypee Infratech. Home buyers have nearly 60 per cent voting rights in the CoC. In its hearing Wednesday, the appellate tribunal has suggested some guidelines for new terms and conditions. "All allottees would be given flats according to their builder buyer agreement. If allottee not present then CoC has to decide how it has to be adjusted," the bench said. "Land attached to the building and with common area amenities would remain with the allottees," it added. Meanwhile, NCLAT also orally suggested to the counsel representing the Adani Group to improve its bid. Adani has made an unsolicited offer to acquire the debt-laden realty firm. Jaypee Infratech went into insolvency in August 2017 after the National Company Law Tribunal (NCLT) admitted an application filed by an IDBI Bank-led consortium. In the first round of insolvency proceedings conducted last year, the Rs 7,350-crore bid of Lakshdeep, part of Suraksha Group, was rejected by lenders. Later in October 2018, the IRP started the second round of bidding process. Sources: realty.economictimes.indiatimes.com

Jaypee homebuyers oppose NCLAT order

Jaypee homebuyers oppose NCLAT order

July 17, 2019 in Jaiprakash Associates

NEW DELHI: A group of homebuyers has approached the Supreme Court challenging the National Company Law Appellate Tribunal (NCLAT) order allowing NBCC and creditor bank to thrash out resolution plan to take over Jaypee Infratech, even after the plan was rejected by a committee of creditors (CoC) which included homebuyers. The petition has been filed by a group 1000 homebuyers alleging that the NCLAT order passed on July 2 was in violation of Insolvency and Bankruptcy Code (IBC) as statutory period of 270 days for wrapping up Corporate Insolvency Resolution Process had expired and the tribunal had extended the deadline in violation of law. “The NCLAT’s impugned order while recording that the resolution plan submitted by NBCC was rejected by the CoC has sought to set aside such rejection and to further reopen such negotiations, usurping the powers/functions, of the NCLT, COC and Resolution Professional, especially when the statutory period for completion of CIRP as stipulated under IBC has expired,” the petition filed by advocate M L Lahoty said. With creditors rejecting NBCC’s bid to acquire Jaypee Infratech, the NCLAT had directed representatives of banks, allottees and other stakeholders to appear before it on July 17 to sort out differences on the NBCC attempt and consider how the bid could be tweaked for the benefit of homebuyers. During voting, majority of CoC had rejected NBCC’s bid to acquire Jaypee Infratech. Challenging the order, the petitioners said, “The NCLAT has erroneously usurped the functions/ powers of the resolution professional wherein NCLAT has sought to call the representatives of the financial creditors, the resolution applicant, the resolution professional, the allottees and the fixed deposit holders for conducting such renegotiation for the resolution plan on July 17 especially when the resolution plan has already been rejected once by the majority of the creditors after the expiry of the statutory period.” The homebuyers also expressed reservations against allowing NBCC to complete the unfinished housing projects of Jaypee and pleaded the apex court to pass order for protection of homebuyers. “The experience of over 48,000 homebuyers of Amrapali with regard to NBCC is extremely frustrating since NBCC refused to invest or arrange any funds for construction of the projects due to which no further construction work is being carried out,” the petition said. The apex court had on July 11 assured homebuyers that it would intervene to protect the interests of Jaypee homebuyers if the resolution plan under insolvency proceedings failed and asked all parties including NBCC and creditor banks to sort out differences. Sources: realty.economictimes.indiatimes.com

Indian real estate developers at risk as credit dries up

Indian real estate developers at risk as credit dries up

July 16, 2019 in Uncategorized

Indian developers are at risk of going belly-up as mounting stress in the nation’s credit market dries up funding even for those willing to pay decade-high rates. “With the worsening shadow-banking crisis, borrowing rates for most developers have surged to the highest in more than a decade, in some cases about 20%,” said Amit Goenka, managing director of Nisus Finance Services Co., which lends to developers. “Even at that cost, capital availability is limited.” India’s year-old credit woes that began after a shock default by the IL&FS Group continue to linger, with many mortgage lenders struggling to roll over debt amid downgrades in their credit ratings. Shadow banks that lent heavily to developers in recent years are among the worst hit, as the recovery in housing sales remains tepid amid a slowdown in the nation’s economic growth. Weak Demand Borrowing costs have increased by about four percentage points over the past year and the funds pool for developers is now one-fifth of the previous year’s average, said Goenka. The cash crunch has raised questions around solvency of real-estate companies, and threatens to push 70% of them out of business in the next two years, Goldman Sachs Group Inc. said in a note last week. Challenges to paying debt obligations amid a slump in apartment sales might force developers to sell assets, wherein lenders may face haircuts and exposure losses, India Ratings analysts, said earlier this month in a note. The dim outlook is reflected in the bond market, where dollar notes of property tycoon Mangal Prabhat Lodha have slumped amid weak liquidity and refinancing risks. “There are pre-sanctioned limits on our projects, but disbursal is not happening as per the committed amount,” said Parth Mehta, managing director at Paradigm Realty, a Mumbai-based mid-sized developer. Decision-making at lenders is taking long with negotiation time doubling to 90 days, he said. There’s hope that measures proposed in the budget on July 5, including lenders offering a partial credit guarantee for the purchase of high-rated pooled assets of sound non-bank finance companies, would help ease the cash crunch, Mehta said.  Sources: realty.economictimes.indiatimes.com

Accused in Emaar MGF-APIIC land scam appears before ED court

Accused in Emaar MGF-APIIC land scam appears before ED court

July 13, 2019 in Uncategorized

HYDERABAD: Koneru Rajendra Prasad and others accused in the Emaar-APIIC land scam case appeared before a special Enforcement Directorate (ED) court on Friday. Last week, the court had issued summons and directed them to be present in the court. The prosecution stated that APIIC land had been entrusted to Emaar for developing township and other facilities, but Emaar tied up with the Delhi based company, MGF. Emaar formed the joint venture Emaar- MGF with the company and sidelined APIIC to the detriment of the public exchequer. While the Central Bureau of Investigation (CBI) probed into the main crime, the ED went into the money laundering part of the crime. It made Koneru, Thummala Ranga Rao, N Sunil Reddy, G Vijaya Raghava, Koneru Pradeep, Manohar Reddy, I Syam Prasad Reddy and others as accused in the case. The court posted the case to August 21. Sources: realty.economictimes.indiatimes.com

Will protect your interests, SC tells Jaypee homebuyers

Will protect your interests, SC tells Jaypee homebuyers

July 12, 2019 in Jaiprakash Associates

NEW DELHI: The Supreme Court on Thursday said it would intervene to protect Jaypee homebuyers if the resolution plan under the insolvency proceedings failed. It may step in to stop liquidation of the company to safeguard buyers’ investment. It asked all the parties, including NBCC and creditor banks, to sort out differences over the plan. Having failed to come up with a policy to protect the interests of homebuyers, the Centre urged a bench headed by Justice A M Khanwilkar to adjourn the hearing as the case was listed before the National Company Law Appellate Tribunal (NCLAT) on July 17 for a final decision on the resolution plan. The court posted the hearing for July 18. It said the parties should explore all possibilities to pave the way for other builders to take over Jaypee Infratech Ltd which is facing insolvency proceedings. As the homebuyers urged the bench to pass an interim order to stop liquidation of the company, the bench assured them that their interests would be protected. “We should wait for the outcome of the tribunal proceedings. We also want the government to explore all possibilities. If the proposal (resolution plan) given to the tribunal is acceptable to all, then the problem will be solved,” the bench said. Jaypee Infratech went into insolvency in 2017 after the National Company Law Tribunal admitted an application by an IDBI Bank-led consortium seeking action under the Insolvency and Bankruptcy Code. With creditors rejecting NBCC’s bid to acquire Jaypee Infratech, the NCLAT had directed representatives of banks, allottees and other stakeholders to appear before it on July 17 to consider how the bid could be tweaked for the benefit of homebuyers. Sources: realty.economictimes.indiatimes.com

SC issues notice to Niranjan Hiranandani in provident fund case

SC issues notice to Niranjan Hiranandani in provident fund case

July 9, 2019 in Uncategorized

NEW DELHI: The Supreme Court has issued notice to the country's leading real estate developer Niranjan Lakhumal Hiranandani and 25 others in a case of criminal conspiracy to allegedly cheat the Employees' Provident Fund Organisation (EPFO) by not depositing provident fund dues of the company's employees amounting to Rs 9 crore. The order came on an appeal filed by the CBI challenging an April 2018 Bombay High Court order that quashed the case against Hiranandani and other accused. The CBI claims Hiranandani colluded with top-level regional EPFO officials to submit a forged list of employees and their documents with the retirement fund body. The agency's Anti-Corruption Bureau (ACB) had in 2008 filed an FIR against Hiranandani for not depositing provident funds of the employees of his group to the tune of Rs 9 crore. In its charge sheet filed in 2010, the ACB accused the realtor of cheating, forgery and criminal conspiracy. The charge sheet alleged that 137 employees of the Hiranandani group were not enrolled under the EPF Act, and "revealed a large scale evasion of provident fund dues, causing wrongful loss to the Department and wrongful gain to directors of the company". The High Court in its 2018 order termed the action by the CBI as "impermissible" and annulled the charge sheet against the 26 accused, including Hiranandani. In its petition filed before the Supreme Court, the CBI said: "A false list of the employees was prepared and false documents were used to cheat the EPFO." According to the CBI petition: "Investigation revealed that arrears of Rs 2.2 lakh of the Provident Fund for the period between October 1, 2005 to March 31, 2006, were deposited for 48 employees. Surprisingly, these employees were appointed on April 1, 2006." The petition claimed that the company asked its contractors to prepare false wage records with the intention to mislead the investigation and cheat the EPFO and "deprived the workers of their legitimate pecuniary benefits and social security of insurance and pension and these false records were seized during the search." The High Court while quashing the CBI charge sheet said no inquiry was conducted under Section 7A of the EPF Act. The CBI contended that the Section 7A was applicable when the provident fund was not paid and dispute arose in connection with the amount. "It may not be applicable to a case of conspiracy where documents were fabricated and wage records tampered with," it said. Sources: realty.economictimes.indiatimes.com

Refund to buyers should be with interest at par with home loan rates: NCDRC

Refund to buyers should be with interest at par with home loan rates: NCDRC

July 8, 2019 in Uncategorized

NEW DELHI: In order to ensure that homebuyers recover all the money invested by them, including interest paid on home loans, the National Consumer Disputes Redressal Commission (NCDRC) has said builders should refund money for delayed projects with interest at the rate at which a nationalised bank like SBI gave home loan during the corresponding period. The apex consumer commission has said builders have to pay compensation and litigation cost to homebuyers who seek refund. In the absence of any uniformity in the decisions delivered by various consumer forums on the issue of interest rate, a bench of S M Kantikar and Dinesh Singh has said linking it with rate of interest of home loan was “appropriate and logical”. The commission passed the order on a plea of 20 homebuyers who had invested around Rs 10 crore in Wave Garden housing project in Mohali in 2012. The builder — Country Colonisers Pvt Ltd — had promised to hand over possession of flats within three years but failed to complete construction in the last seven years. “In so far as refund of the amount deposited by the complainant with the builder is concerned, there can be no two opinions. The refund in full has necessarily to be made by the builder to the complainant. In respect of the interest on the amount deposited, it is always desirable and preferable, to the extent feasible and appropriate in the facts and specificities of a case, that some objective logical criteria be identified and adopted to determine an apt rate of interest,” the NCDRC said. “The rate of interest cannot be arbitrary or whimsical, some reasonable and acceptable rationale has to be evident, subjectivity has to be minimised. In our considered view, bearing in mind that the subject unit in question is a residential dwelling unit, in a residential housing project, the rate of interest for house building loan for the corresponding period in a scheduled nationalised bank (take, State Bank of India) would be appropriate and logical, and, if floating/varying/different rates of interest were/are prescribed, the higher rate of interest should be taken for this instant computation,” it added. It also directed the builder to pay Rs 1 lakh as compensation and Rs 1 lakh as cost of litigation to each homebuyer. The commission also slapped a fine of Rs 5 lakh on the company for indulging in unfair trade practices and directed it to deposit all the money within four weeks. The NCDRC said homebuyers were “put to loss and injury, a continuous position of mental agony and physical harassment, hardship and difficulty, uncertainty and helplessness” even after paying substantial amount and the builder has to refund the principal amount deposited by them with equitable interest besides the lumpsum compensation and cost of litigation. Sources: realty.economictimes.indiatimes.com

SC seeks centre’s proposal on ways to complete stalled Unitech projects

SC seeks centre’s proposal on ways to complete stalled Unitech projects

July 6, 2019 in Unitech Group

NEW DELHI: The Supreme Court Friday directed the Centre to come up with a proposal for construction of stalled projects of embattled real estate major Unitech Ltd within ten days, so that over 16,000 hassled homebuyers are not left in lurch. The top court said that the Centre should suggest the modalities and name of the third-party agency like the National Buildings Construction Corporation (NBCC) Ltd which could construct the pending projects of Unitech Ltd in a time bound manner. The Unitech Ltd resisted the suggestion that the pending projects be handed over to a third party like the NBCC and said they were not able to deliver even in the case of Amrapali, another embattled real estate major. A bench of justices D Y Chandrachud and M R Shah was told by Attorney General K K Venugopal that a third party could be involved in the construction of pending projects and a high-powered committee headed by a retired high court judge could oversee the construction. Venugopal said that after consulting with the officials concerned, he can suggest the modalities which can be approved by the court accordingly. Senior advocate Abhishek Manu Singhvi, appearing for Unitech, said that they have delivered over 17,000 flats out of 29,000. "Despite all odds, in a total of 74 projects, we have completed over 70 per cent of the work and handed over 17,000 flats to homebuyers," Singhvi said. He said that handing over of the projects to a third party would not serve any purpose as the court had seen the work of the NBCC in the Amrapali matter. Singhvi suggested a plan for completing the pending projects and said that the entire work will be completed in the next three years. "The homebuyers who are before us invested their money some 10-12 years back and now you are proposing another three years for completing the projects. Question is for how long do these homebuyers wait," the bench said. It said that Unitech was saying that the NBCC should not be trusted but the fact is the real estate firm's plan is such that it does not inspire any confidence and it is subject to availability of funds from a third party. "We can't keep the homebuyers who have approached us in lurch. The NBCC is accountable to the government and the government is accountable to its people. We want someone who can be held accountable. As the attorney general has said we will wait for the government to come up with some kind of proposal for completing the pending projects," the bench said. The court rejected the application of Unitech Ltd in which they sought court's permission to continue with the construction of the pending projects. The bench also granted two weeks' time to the senior officials of the Unitech Ltd to cooperate with the forensic auditors and provide them with all necessary details. It asked the forensic auditors to submit their reports in four weeks and posted the matter for further hearing on July 23. On May 9, the apex court, irked over the non-cooperation of Unitech in the forensic audit, had withdrawn all the facilities given to its promoters, Sanjay Chandra and his brother Ajay Chandra who are lodged in Tihar jail for allegedly siphoning off homebuyers' money. The top court had said the Chandra brothers should be treated like ordinary prisoners as per the prison manual of Tihar jail here where they have been lodged since 2017. In 2017, the apex court had directed the jail authorities to facilitate the Chandras' meeting with their company officials and lawyers so that they are able to arrange the money for refunding homebuyers as well as for completing the ongoing housing projects. The court had earlier sought assistance of the attorney general while warning that it could order a CBI probe. The court had said it would also like to hear from the attorney general on whether the government can take over the management of Unitech Group and its subsidiaries to protect the interest of homebuyers. The apex court had on January 23 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. On December 7, 2018, the apex court has directed a forensic audit of Unitech Ltd and its sister concerns and subsidiaries by Samir Paranjpe, Partner, Forensic and Investigation Services in M/s Grant Thornton India. Sources: realty.economictimes.indiatimes.com

OCs of 100 homes in Gurugram’s upscale areas cancelled

OCs of 100 homes in Gurugram’s upscale areas cancelled

July 4, 2019 in Dlf

GURUGRAM: The department of town and country planning on Wednesday cancelled occupation certificates (OC) of around 100 houses in DLF areas, Sushant Lok and Palam Vihar for violation of building norms and illegal commercial use. It has also asked the tehsildar of Gurgaon not to register such properties “without proper verification of records”. When an OC is cancelled, water, power and sewage connections stand withdrawn from the building. A DTCP team cancelled the OCs of 100 houses in DLF, Sushant Lok and Palam Vihar after it found that their owners violated sanctioned plans. The move followed a survey of the houses that got OCs since January this year under the self-certification scheme. Now, the total number of properties that lost their OCs in the past six months is 165. District town planner (planning) RS Batth told TOI the department has shared with the tehsildar a list of properties that no longer possess OCs. “We have requested him to update the same in his records so that the registration of these properties is not done,” he said. “The move is likely to check the menace as the property owners will not be able to sell the same without registration,” he added. Earlier in May, the planning wing of DTCP had cancelled occupation certificates of 38 residential buildings on Golf Course Road and in Sushant Lok 1 after a team of officials found that illegal commercial activities were going on in those properties. Officials of DTCP said these residential buildings were being used to run commercial activities, causing loss to the state exchequer to the tune of several crores every year. As per rules, commercial activities are not allowed in residential areas, be it licensed colonies that come under DTCP or plots in HSVP sectors. Sources: realty.economictimes.indiatimes.com

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