If Loans Diverted, Security Not Valid, Says Supreme Court In Amrapali Order 

The Supreme Court said bankers connived with the Amrapali Group in siphoning money from projects, leaving thousands of homebuyers without flats despite paying for apartments.

The top court ordered the Enforcement Directorate to conduct a money-laundering probe against the developer and its managing director and directors. The court also said banks that lent money won’t have any right over the projects and can recover dues from assets created by siphoned funds.

Nearly 42,000 buyers are seeking possession of homes in multiple projects of the debt-ridden group that couldn’t complete the apartment blocks. The Supreme Court ordered the Noida authorities to grant completion certificates to people already living in the homes.

Besides the company’s management, the court pinned the blame on bankers and civic officials of Noida and Greater Noida as well.

Loans which were not even needed for construction of the projects were advanced to the group without conducting proper due diligence, the top court said in its detailed judgment. Loans advanced for completion of the projects weren’t required, and were diverted, it said.

The whole exercise “was well within the knowledge of the bankers and authorities that the funds were being diverted, but they remained mute spectators”, said the bench of Justice Arun Mishra and Justice Uday Umesh Lalit.

“…Day-to-day transactions in the bank accounts were pointing out that the money was being siphoned and diverted for other purposes routinely, not being utilised for the purpose it was given,” the judgment said. “Thus, all of them (bankers and officials) helped in perpetuating the fraud.”

The forensic audit report observed that Bank of Baroda, Syndicate Bank, Bank of India Ltd. and Corporation Bank didn’t monitor utilisation of funds and acted as a mute spectator to diversion which was almost happening evidently in all banking transactions, the apex court said.

The judgment lists instances from the forensic audit report:

• In the case of Amrapali Zodiac Developers, Bank of Baroda advanced an amount which was diverted immediately on receipt. The details have been given in the forensic auditors’ report. There was no amount due as on the date of the transfer.
• In the case of Amrapali Princely Estate Pvt. Ltd., the details have been given with respect to Syndicate Bank and Bank of India as to how immediately on receipt, the funds were diverted to several parties.
• In the case of Amrapali Eden Park Developers Pvt. Ltd., there was a receipt from the Corporation Bank, and similar is the position. Immediately the funds were diverted to the third parties as detailed in the forensic report.

Bank of Baroda argued that it complied with the norms before sanctioning the loan and an independent engineer was appointed to monitor the contract. The court, rejecting the argument, said the bank failed to show steps taken to stop the diversion and its stand is “falsified by the Forensic Auditors Report”.

Banks Have No Right On Projects

The top court held that the banks hold no right over the projects from which money was diverted and they can recover their dues from the assets created by the diversion of money.

In the interest of homebuyers, the Supreme Court asked state-run NBCC (India) Ltd. to complete the pending projects of the group and directed the Noida and Greater Noida authorities to ensure delivery of water, electricity and other facilities.

The authorities will also have to give completion certificate to buyers who are already living in various projects of the Amrapali Group. NBCC will get an 8 percent commission for completing the apartment towers, and Amrapali’s Real Estate Regulatory Authority registration, and all of its land leases stand cancelled.