# BIKRAM CHATTERJI & ORS v. UNION OF INDIA & ORS

- **Citation:** [2019] 9 S.C.R. 289
- **Court:** Supreme Court of India
- **Decided:** 2019-07-23
- **Bench:** Arun Mishra, Uday Umesh Lalit
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bikram-chatterji-ors-v-union-of-india-ors-34250
- **Pages:** 296

## 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
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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.
Doctrines/Principles:
Principle of 'fraud vitiates' - Applicability of.
Doctrine of 'public trust' - Applicability of.
Issuing directions, the Court
HELD : 1.1 In the instant matter, the question of larger
public importance is involved. A large-scale cheating has taken
place and middle and poor class home buyers have been duped
and deprived of their hardearned money and lifetime. By the
Amrapali Group, the buyers' money which has been obtained has
not been invested in the construction activities, rather it has been
diverted to a great extent. Money obtai

## Text

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BIKRAM CHATTERJI & ORS.
v.
UNION OF INDIA & ORS.
(Writ Petition (C) No. 940 of 2017)
JULY 23, 2019
[ARUN MISHRA AND UDAY UMESH LALIT, JJ.]
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
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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.
Doctrines/Principles:
Principle of 'fraud vitiates' - Applicability of.
Doctrine of 'public trust' - Applicability of.
Issuing directions, the Court
HELD : 1.1 In the instant matter, the question of larger
public importance is involved. A large-scale cheating has taken
place and middle and poor class home buyers have been duped
and deprived of their hardearned money and lifetime. By the
Amrapali Group, the buyers' money which has been obtained has
not been invested in the construction activities, rather it has been
diverted to a great extent. Money obtained from the banks has
also not been invested in the projects and has been diverted
elsewhere to acquire other assets. This is not only with respect
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to the Amrapali builders that projects have not been completed
as reflected in the affidavits of Noida and Greater Noida
Authorities. More than 70% of the projects have not been
completed which were initiated way-back in the year 2008-09
and were supposed to be completed within 3 years. [Para 69]
[531-F-G]
1.2 If the real estate business has to survive in India, it
has to be answerable to the public and has necessarily to uphold
the trust reposed in builders/promoters. They have been paid
huge amounts not only by the home buyers but also, they have to
pay a huge amount for the public land given to them on lease by
Noida and Greater Noida Authorities for construction of houses.
The land has been given to them by the authorities on a
concessional basis by making payment of 10% amount at the time
of allotment. The builders have to be accountable to public/home
buyers as well as the authorities and bankers. It is a matter
relating to housing needs dealing with shelter place, such an
activity is of the public importance as the real estate sector plays
a pivotal role in the fulfilment of needs of housing infrastructure.
[Para 73] [532-F-H]
2.1 It is apparent from the report of the forensic audit
submitted by Forensic Auditors that there is a serious kind of
fraud played upon the buyers in active connivance with the officials
of the Noida and Greater Noida Authorities and that of the banks.
The money of the home buyers has been diverted. The Directors
diverted the money by the creation of dummy companies, realizing
professional fees, creating bogus bills, selling flats at undervalue
price, payment of excessive brokerage, etc. They have obtained
investment from J.P. Morgan in violation of FEMA and FDI
norms. The shares were overvalued for making payment to J.P.
Morgan. It was adopted as a device for siphoning off the money
of the home buyers to foreign countries. In view of the huge money
collected from the buyers and comparable investments made in
the projects, there was no necessity to obtain a loan from banks.
The amount so obtained was not used in the projects. The
mortgage deeds in favour of the banks were not permissible due
to non-payment of dues of the Noida and Greater Noida
Authorities. The Noida and Greater Noida Authorities issued
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conditional NOCs. to create mortgages subject to payment of
dues which were not paid. They issued such NOCs in collusion
with builders. It was incumbent upon the bankers also to obtain
clear unconditional NOCs. which were not obtained and to ensure
that the dues were paid to Noida and Greater Noida authorities.
They permitted diversion of money immediately after sanctioning
of the loan and also in day to day transactions of Amrapali group
of companies. [Para 146] [580-D-H; 581-A]
2.2 No accounts were prepared w.e.f. the years 2015-2018
and money withdrawn was diverted during the said period. The
Statutory Auditor, failed in duty and was part of fraudulent
activities as found in the Forensic Report. The money obtained
from banks was diverted to unapproved uses such as for the
creation of personal assets of Directors, creation of assets in
closely held companies by the Directors along with their partners
and relatives, for personal expenses of Directors, to give advances
without carrying interest for several years. There was total nonmonitoring by the bankers. The money laundering was resorted
to by Amrapali Group/ Directors. [Para 147] [581-B-C]
2.3 The statement filed on the expenditure of Rs.10,000
crores is nothing but a scrap of paper not supported by the books
of account, supporting documents. It has to be outrightly rejected
as there is an attempt made on siphoning off, apparent from the
report of the Forensic Auditors also. [Para 142] [578-F-G]
2.4 The diversion of huge amount of Rs. 2,996.20 crores
has been rightly detected on Forensic Audit. The Forensic
Auditors have given the details in their report along with reasons.
As to other amounts with respect to advances which are
recoverable, the explanation that there is a surrender of shares
etc. is not supported by books of accounts. There is no basis to
contend so. No proper explanation has been given on behalf of
Amrapali Group. The finding as to the diversion of home buyers'
funds is based on the figures worked on the basis of minute
accounting as reflected in the auditors' report. There is no proper
answer to each and every entry which have been gone into by the
Auditors. General and broad submissions have been made which
are flimsy and have no legs to stand. [Paras 143, 144 and 145]
[579-F-H; 580-A-B]
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3.1 The public trust doctrine imposes on the State and its
functionaries a mandate to take affirmative action for effective
management, and the citizens are empowered to question its
ineffectiveness. The land of the farmers had been acquired for
the purpose of housing and infrastructure needs, by the State
Government and handed over to the concerned authorities for
construction. They are bound to ensure that builders act in
accordance with the objective behind the acquisition of land and
the conditions on which allotment had been made. It was a duty
of concerned officials; they are not only enjoined to ensure that
the rights of the home buyers are protected but also the interests
of the authorities; and bankers. The public authorities are dutybound to observe that the leased property is not frittered away
along with the money of the home buyers. Affirmative action was
clearly enjoined upon them not only under the statutory provisions
of various enactments but also under the public trust doctrine.
[Para 73] [533-A-D]
Noida Entrepreneurs Association v. Noida & Ors. (2011)
6 SCC 508 : [2011] 8 SCR 25 ; Natural Resources
Allocation, In re, Special Reference No.1 of 2012
(2012) 10 SCC 1 : [2012] 9 SCR 311 ; Association of
Unified Tele Services Providers & Ors. v. Union of India
& Ors. (2014) 6 SCC 110 : [2014] 9 SCR 780 - relied
on.
3.2 In the instant case, it is apparent that there are colossal
dues of Noida and Greater Noida Authorities. There were several
defaults in making the payment of the premium amount, lease
money, even the money payable to the farmers as compensation
for land acquisition has not been paid by the builders, though the
builder has realised from home buyers the amount payable to
authorities of Noida and Greater Noida as a component of the
price payable by them. [Para 76] [535-F-H; 536-A]
3.3 The transfer of the plot by the lessee was only on
fulfilment of certain conditions. The dues of lessor towards the
cost of land were to be cleared in accordance with the schedule
of payment. It was specifically provided in lease deed condition
No.(ii)(c) that the lessee shall use the allotted plot for construction
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of group housing/flats/plots. Condition No.(ii)(c)(iii) deals with
the part transfer of the plot. It lays down normally the permission
for part-transfer of the plot shall not be granted under any
circumstances. The lessee shall not be entitled to complete the
transaction for sale, transfer, assign or otherwise part with
possession of the whole or any part of the building constructed
thereon before making payment according to the schedule
specified in the lease deed of the plot to the lessor. By way of
sub-lease of the plot, the transfer of plots could not have been
made by the lessee. The lessee was required to start construction
within 12 months from the date of possession. The date of
execution of lease deed was to be treated as the date of possession.
The lessee was required to complete the construction of minimum
15% of the total FAR of the allotted plot as per the approved
layout plan and get occupancy/completion certificate within 3 years
from the date of execution of the lease deed. Cancellation of
lease deed was also provided in the case of violation of directions,
or rules, regulations or in case of the default on the part of the
lessee for breach or violation of terms and conditions of the
registration/allotment/lease and/or non-deposit of allotment
amount. [Paras 78, 80 and 81] [536-E-F; 538-D-F; 540-B-D]
3.4 The lease deed/allotment was to be governed by the
provisions of the U.P. Industrial Area Development Act, 1976
and by the rules and/or regulations made or directions issued
under the Act. The lessor was required to monitor the
implementation of the project. In larger public interest the lessor
was also given a right to take back possession of the land/building
by making payment at the prevailing rate. [Para 82] [541-C-E]
3.5 Once the Noida and Greater Noida Authorities knew
very well that there were defaults, they could not have allotted
further land to the Amrapali group without insisting for payment
of its dues. Secondly, it was not open to the authorities to permit
the sub-leases of plot of land executed by builders, thereby
allowing the leaseholder to earn a huge amount without making
payment of the amount due to them. The officials of the authorities
have acted in clear breach of public trust. They have permitted
the defaulting leaseholders to earn the amount by sub-leasing
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its land of which dues had not been cleared. Thus, apparently,
the officials of the authorities acted clearly in collusion with the
builders and overlooked the interest of the Authorities and home
buyers while permitting the sub-leases of plot of land to be
granted. The action of the officials of the authorities has the
effect of causing unjust enrichment of builder from the land held
by the concerned authorities. It was wholly an illegal exercise
permitted. [Para 77] [536-B-D]
3.6 The leases had been granted by Noida and Greater Noida
Authorities subject to the provisions contained in U.P. Industrial
Area Development Act, 1976. Section 13 of the U.P. Industrial
Area Development Act, 1976 deals with imposition of penalty
and mode of recovery of arrears, which states that where any
transferee makes any default in the payment of any consideration
money or instalment thereof or any other amount due on account
of the transfer of any site or building by the Authority or any rent
due to the Authority in respect of any lease or where any transferee
or occupier makes any default in payment of any amount of fee or
tax levied under the Act, in addition to the amount of arrears, a
further sum not exceeding that amount shall be recovered from
the transferee or occupier by way of penalty. Under Section 13A, any amount payable to the Authority under Section 13 shall
constitute a charge over the property and may be recovered as
arrears of land revenue or by attachment and sale of property in
the manner provided under the provisions of Uttar Pradesh
Municipal Corporations Act, 1959 (Act no.2 of 1959). Section 14
provides for the resumption of any site or building and forfeiture
of whole or any part of the money if any paid in respect thereof.
[Para 95] [549-B-E]
3.7 Public trust doctrine requires an affirmative action,
which was envisaged not only statutorily but under the Scheme
also. The Authorities were required to ensure that projects were
completed within the stipulated period, otherwise, the very
purpose of the grant would stand frustrated and colossal loss of
public money. Amrapali Group did not pay even the amount due
to be paid to the landowners on the part of land acquisition, it did
not pay premium annual lease amount interest to Authorities.
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They have violated every condition, but still, Authorities
were bent upon to condone everything. This reflects absolute
dereliction of duty cast upon the Authorities. [Para 96]
[550-B-C]
3.8 Thus, the officials of the Noida and Greater Noida
authorities have acted clearly in a breach of public trust and apart
from that, they have failed to act as per the statutory mandate,
the regulations and the terms of the lease deed. [Para 78]
[536-E-F]
4.1 With respect to the creation of mortgage deed in favour
of bankers etc., Noida Authority has submitted that every
mortgage permission is granted by the Noida Authority to the
individual company of Amrapali group wherein a provision is made
that Noida Authority has first charge/priority over all other charges
including those created in favour of banks and financial
institutions. One of the conditions on which permission to
mortgage was that permission to mortgage was to be effective
on making full payment of the premium and up to date annual
lease rent of group housing plot and after execution of the sublease deed in favour of the allottee of the dwelling unit, the allottee/
sub-lessee was to be governed by the terms and conditions of
allotment/lease deed of the plot to be executed and sub-lease
deed to be executed in favour of the allottee/sub-lessee. Since
at no point of time, payment of premium due had been made and
up to date annual lease rent had not been paid, no mortgage could
have been created in favour of the bank in view of specific
condition. [Paras 83 and 84] [542-B-C; 543-C-E]
4.2 In order to create a mortgage, it was necessary to obtain
clear NOC in order to create effective mortgage deed. As that
has not been done so far, no mortgage in the eye of law has been
created in favour of the bank. It was not open to the bankers to
mortgage the land in view of the conditional permission to create
mortgage, the mortgage created in violation of condition cannot
be said to be effective in accordance with law as the land was
owned by the concerned authorities and the lessees had right to
mortgage only subject to fulfilment of conditions imposed by the
lessor/authorities. [Para 84] [543-F-G]
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4.3 Issuance of conditional NOC was with ulterior motive,
there was no reason to issue such a conditional permission,
subject to which mortgage could have been made. They could
not have issued any conditional permission for creation of a
mortgage also without payment of amount due, permission has
been issued obviously for being misused, in collusion with the
officials of the bank and Authorities. It was incumbent upon the
concerned authorities not to issue such an NOC for a mortgage
and it was incumbent upon the bank officials in order to create a
valid mortgage to ascertain from the Noida and Greater Noida
Authorities that the condition imposed by them as condition
precedent to create a mortgage had been fulfilled and to obtain
clear NOC. But that is how in illegal manner the public money is
obtained from banks for the purpose of construction activity and
then it was not used for that purpose, and there was a diversion
of money. [Para 85] [544-B-E]
4.4 The banks not only have failed to ensure that mortgage
was effected in accordance with the law, but also they have failed
to check whether money was in fact, required for the projects
and was used for purpose it was lent. Money borrowed from bank,
in fact, was not required for completion of these projects as the
money paid by the buyers was enough for that purpose, but that
was also diverted and the money obtained from the banks was
also not utilised for the purpose it was taken and it was well within
the knowledge of the bankers and Authorities that the funds were
being diverted, but they remained mute spectators. It has been
observed in extensive detail in the forensic audit report that the
Banks did not monitor utilisation of funds and acted as a mute
spectator to diversion which was almost happening evidently in
all banking transactions. [Paras 85 and 86] [544-G-H; 545-A-C]
4.5 There was negligence on the part of Bank of Baroda
and merely proceeding before the Court to recover the amount
is not going to serve the purpose. More so, in view of the finding
of the Forensic Audit that there was no necessity of obtaining the
loan from the Bankers as Amrapali Group had sufficient money
from the home buyers, which has also been diverted and has not
been utilised in the construction activities. Other assets have
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been created with the help of the same and the borrowings have
been used in order to siphon off the money by making payment
of some unusual amount not only to J.P. Morgan, but also to IPFII
Singapore in violation of the FEMA Rules and FDI Rules as found
by the Auditors in the respective cases. [Para 93] [548-D-F]
4.6 The Noida and Greater Noida Authorities and the
Bankers have permitted diversion of funds of home-buyers and
the possession of other assets by Amrapali Group. The buyers'
money had been diverted, which was meant for construction on
payment of dues of Authorities in case they were paid timely by
the Amrapali Group to the Authorities and to the Banks
substantively liability would have been cleared. But by their
inaction and rather conniving, the buyers were cheated by the
Amrapali Group. [Para 97] [550-D-E]
4.7 Whatever complete/incomplete structures are there,
the Authorities are claiming that buyers have no right and they
have the first charge on the structure as they have to recover
the amount, only thereafter if anything is left out, can be paid to
the buyers. In case the submission is accepted, it would amount
to playing further fraud upon the fraud. It was incumbent upon
the Authorities as well as the Banks to prevent the fraud. Now,
if Banks, as well as the Authorities, are permitted to recover the
amount from the home-buyers' investment, in that case, it would
be equally unjust and would be against the conscience of the law
and nothing would be left for buyers not even a brick and the
structures have come up by investing their money. Law never
permits unjust gain based upon fraud. The principle "fraud
vitiates" is clearly attracted and such a transaction would become
unenforceable and would be against the public trust doctrine.
Therefore, it is the bounden duty of the Court to act as parens
patria not only to save the home-buyers but also to ensure that
they are not cheated. [Para 97] [550-F-H; 551-A-B]
4.8 The kind of fraud that has taken place not only in
Amrapali Group of Companies but at large as more than 70 percent
of the various projects have not come up, is alarming to the Courts
to take affirmative steps with the direction to prevent such frauds,
restore the money of home-buyers and to punish incumbents
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responsible for such act. At the same time to ensure that buildings
are completed. [Para 98] [551-C-D]
4.9 In the peculiar facts and circumstances of the case, it
has to be secured and recovered by way of selling other attached
properties and the one, which have been created out of the
diverted funds of the home-buyers and property of guarantors
etc. The banks' borrowings have to be taken care of in a similar
manner. The money payable to the Authorities had been diverted
and huge amount of buyers' money had not been invested in the
projects neither any part of the money of bank borrowings, in
fact, were spent in the construction as found by the Forensic
Auditors. The promoters are held accountable for the diversion
of the money paid by the buyers as component of price of flats
even on account of payment to Authorities. [Para 123] [567-D-F]
4.10 The stand of the Noida is clear that without payment
of land dues no mortgage could be effected. Thus, in fact in the
eye of the law no mortgage could be created as there was no
permission to mortgage unless the dues were paid and thus the
bank could not have mortgaged the property before clearance of
the dues of the Noida Authority, and secondly, the mortgage was
permissible for the purpose of financing the investment in the
project. As a matter of fact, when this was the stipulation, it was
the banker's duty to ensure that money made available was
invested in the project. [Para 126] [568-E-F]
4.11 The Forensic Auditors' report makes it apparent that
Bankers have failed to ensure and oversee that the money was
invested in the projects. It was diverted elsewhere as rightly
found by the Forensic Auditors. Thus, no charge can be said to
have been created by bank loans on the projects as the money, in
fact, it has not been used in the projects as such home buyers
cannot be saddled with liability and also the projects. The money
borrowed from banks was used to create other assets worth
thousands of crores. Thus, the banks can realise their money
from those assets and from guarantors and not from the
investment of home buyers, not from the buildings in which loans
granted by banks have not been invested. Home buyers are not
direct party to the bank loan, thus it was the duty of the bankers
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and Noida authorities, if they wanted to impose their charge, to
ensure that no fraud takes place and money is invested in the
projects for the purpose for which it has been taken not only the
money paid by the home buyers but obtained from the banks and
due to be paid to Noida authorities, is not usurped illegally by
promoter/builder. Though it was realised as part of the component
of the price of flat from the home buyers, by the promoters/
builders its illegal diversion was permitted by Amrapali Group in
connivance with the officers of the authorities and the bank. Thus,
the very condition of investment in the project by bankers, subject
to which the mortgage was permissible, had been violated. Thus,
it cannot be said that any charge of the banks has been created
on the projects. The charge would be on the property which has
been purchased/created by dubious methods. It would be
inequitable to fasten the charge against the investment made by
the home buyers whereas they have not been benefited and rather
have been cheated by the promoters for which bankers, as well
as authorities, have to share the blame. [Para 127] [568-G-H;
569-A-E]
4.12 Though the home buyers may not be a secured creditor,
they have a right to be treated in accordance with the law, fairly
and they cannot be subjected to a fraudulent action by the
promoters, that too in connivance with the bankers and officials
of the Noida and Greater Noida authorities. [Para 128] [569-F-G]
4.13 No doubt about it as submitted on behalf of Amrapali
group of companies, that the provisions of RERA are for
protecting the interests of promoters also. No doubt about it that
the RERA intends to protect the interests of the promoters and
home buyers both. However, in the instant case, we have given
the opportunity to the promoters to deposit the 10% of the amount
in December 2017 and January 2018 but orders have met with
non-compliance with all impunity. Thereafter on the assurance
of the Amrapali Group that it would undertake the construction
work and a joint plan was submitted after great wastage of time
and energy and then order dated 17.5.2018 was passed that was
also not complied with. It was passed on a condition that a sum of
Rs.250 crores to be deposited which was also not deposited by
the Amrapali group to show its bona fide. The Group never
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intended right from the beginning to complete the construction
work, has been rightly observed by Forensic Auditors. Thereafter,
we have assigned the work to the NBCC. But at the same time,
the effort has been made by Amrapali Group/ its Directors to sell
the property which has been created by diversion of home buyers'
funds. Incorrect facts have been stated and suppressions have
been made in various affidavits filed in this Court that the certain
properties are not encumbered. Various applications are being
filed one after the other by the encumbered holders with respect
to several properties that they have the charge over the said
property. [Para 129] [570-A-E]
4.14 That apart, several attached properties have been put
to sale by DRT under the orders of this Court. In most of the
cases, no buyers have turned up and/or the price offered by
forming a cartel are too low. The property cannot be sold at throw
away price. Amrapali group is instrumental in not allowing the
properties to be sold. There appears to be some invisible hand
holding buyers out and even the bankers are not coming up to
finance the purchasers, is the genuine grievance pointed out at
the Bar. Be that as it may. Entire gamut of facts indicates the
contumacious conduct of Amrapali Group, proper and correct
disclosures on oath have not been made, even encumbrances
are not being specified clearly in spite of repeated orders. They
have sold several valuable properties during pendency of
petitions as pointed out by the Forensic Audit Report. In the
aforesaid circumstances, under the provisions of the RERA their
interest cannot be protected. [Para 130] [570-E-H; 571-A]
4.15 Considering the serious kind of fraud unearthed on
the forensic audit, formation of dummy companies, violation of
norms of foreign investment, violation of FEMA, siphoning off
the money of home buyers, making payment of dividend without
profits and a methodology had been devised of valuing the shares
on an unreasonable higher basis so as to siphon out the money of
the home buyers to J.P. Morgan etc. The creation of a large number
of assets with the help of money of the home buyers. Right from
2015, no construction activity has taken place. Account books
had not been maintained and money has been transferred
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continuously. No audit was made. Money was taken out from
banks, and fake purchases have been made. Thus, they are not
at all entitled for any indulgence under the provisions of the
RERA. In view of their unholy conduct, defying description, their
contumacious fraudulent conduct totally disentitles them and they
are required to be dealt with as sternly as possible so as to make
it exemplary one that such fraudulent actions do not recur in
future, in real estate business in India. [Para 130] [571-A-D]
4.16 There was no force majeure condition or any legal
impediment and as such the period from 2011 to 2015 cannot be
treated as a moratorium period vis-à-vis the dues of Noida and
Greater Noida authorities. The submission made as to the
farmers' agitation etc. is too vague and 30% of the projects have
come up; whereas 70% have not yet come up, out of the projects
in Noida and Greater Noida alone. [Para 141] [577-F-G]
5.1 The Real Estate (Regulation and Development) Bill,
2013 (RERA) was intended to standardise business practices and
transactions in the real estate sector. It intends to ensure
consumer protection. It intends to regulate transaction related
to both residential and commercial projects. It is apparent from
the aims and objectives of RERA that the Act ensures greater
accountability towards consumers and significantly reduce fraud
and delays. Accountability standards have been laid down where
duties cast upon promotors as well as the effort has been made
to make consumer also responsible. [Paras 104 and 105] [554-F;
557-E]
5.2 In view of the provisions of the RERA Act, in the instant
case, it was necessary to deposit the amount in the account. A
blatant violation of the provisions of RERA has been done by the
Amrapali Group. Since RERA contemplates timely completion
of projects once registration has been granted under Section 5
and extension of registration under Section 6, it is only in the
event of force majeure in case there is no default on the part of
the promoter, registration can be extended in aggregate for the
period not exceeding one year. Force majeure shall mean a case
of war, flood, drought, fire, cyclone, earthquake or any other
calamity caused by nature. The registration granted under
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Section 5 is valid for a period declared by the promoter.
[Paras 109 and 110] [559-G-H; 560-A-B]
5.3 Section 7 provides that the Authority may on receipt of
a complaint or suo motu or on the recommendation of the
competent authority revoke the registration granted under
Section 5 in case promoter makes default in doing anything
required by or under the Act or the rules or the regulation made
thereunder; the promoter violates any of the terms of approval
given by the competent authority; the promoter is involved in
any kind of unfair practice or irregularities. It is also independently
provided that in case the promoter indulges in any fraudulent
practices, the registration can be revoked. Upon revocation of
the registration, the promoter shall be debarred from accessing
the website in relation to that project under Section 7(4)(a). Under
Section 7(4)(b), the Authority shall facilitate the remaining
development works to be carried out in accordance with
provisions of Section 8. [Para 110] [560-B-D]
5.4 It is clear that RERA intends for completion of the
project in case any fraud is committed by the promoter and the
activity is not completed, the home-buyers cannot be left in lurch,
allowing the prayer on behalf of Bankers as well as by the
Authorities would amount to unfair treatment of home buyers in
the facts of this case. It is too late for them to submit that home
buyer has no rights in the teeth of the provisions contained in
the RERA, which intends to prevent fraud. [Para 111] [562-B]
5.5 Once registration lapses on non-completion of project
within the time stipulated or it is revoked the consequence ensue
as enumerated in Section 8 of RERA, the Authority is enjoined
upon the duty to consult with the appropriate Government to
take such action as it may deem including the carrying out of the
remaining development works by competent authority or by the
association of allottees or any other manner as may be determined
by the Authority. The development work has to be completed
and cannot be left in between. [Para 112] [562-C-D]
5.6 As per the provisions of Section 11, the promoter shall
be responsible to obtain the completion certificate or the
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occupancy certificate. He shall also be responsible for providing
and maintaining the essential services on reasonable charges,
till taking over of the maintenance by the association of the
allottees. The promoter shall enable the formation of an
association or society or co-operative society or federation of
allottees. He shall pay all outgoings until he transfers the physical
possession to the allottee. After he has executed an agreement
for sale for any apartment, plot or building, he may not mortgage
or create a charge on such an apartment, plot or building and if
any such mortgage or charge is made or created then
notwithstanding anything contained in any other law for the time
being in force, it shall not affect the right and interest of the allottee.
[Para 113] [562-H; 563-A-C]
5.7 It is apparent that after the transfer of conveyance deed,
the title vests in the allottee and of the common area in the
association of the allottees or the competent authority as the case
may be. No title remains with the promoter. In case promoter
fails to complete or is unable to give possession of an apartment,
plot or building, he shall be liable on demand to the allottees. In
case the allottee wants to withdraw from the project, without
prejudice to any other remedy available, the promoter has to
return the amount received in respect of that apartment, plot,
building with interest in this behalf including compensation in
the manner as provided under the Act. [Paras 116 and 117]
[564-E-G]
5.8 It is apparent that RERA intends protection of homebuyers and aims at completion of the buildings. The buildings
have to be completed. The task has already been assigned to
NBCC by the Court for completion of buildings as the promoters/
builders have failed to complete the building within the time fixed
and the time which could have been extended. Now, more than
10 years have passed and buyers were given the assurances that
they would get flats within three years period by the promoter/
builder. The maximum time fixed in RERA has also expired and
extension could not have been beyond 1 year. It is clear that
common areas as provided under Section 17 have to be ultimately
handed over to the Association of Allottees or the Competent
Authority as the case may be. Thus, any sub-lease, alienation or
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transfer affected by the promoter of the common areas as defined
in the RERA and otherwise reserved under the plan shall be
void and inoperative. [Paras 120 and 121] [566-F-H; 567-A]
5.9 The contention on behalf of the Bank is that the
agreement of promoter/builder with home buyers is unregistered
as such, no right has been created in the immovable property in
view of the provisions contained in section 49 of the Registration
Act. The contention ignores and overlooks the provisions of
RERA which intends to prevent such frauds on home buyers and
ensure completion of projects and that of the agreement between
promoters and buyers. There are various rights under the
agreement as well as under the RERA. The agreement entered
into at the time of allotment is the basis of the investment in the
projects made by home buyers, it cannot be said to be a scrap of
paper. It is their valuable investment which is required to be
protected and cannot be permitted to be taken away by builder
or secured creditors in an illegal manner. The provisions of
section 17 of the Registration Act no doubt provide that a
document of title requires compulsory registration, no doubt
registered document has to be executed that also has to be taken
care of by the Court so as to protect the interest of home buyers.
[Para 132] [571-G; 572-A-B]
5.10 The two expressions of the provisions of Section
11(4)(g) of RERA Act are significant. Firstly, which the promoter
has collected from the allottees. Secondly "which are related to
the project". In the instant case dues of the Noida/Greater Noida
authorities have been collected from the allottees by the
promoters but the authorities have permitted diversion of said
amount by not taking any action in view of the chronic default
right from the beginning. Though they knew that the promoter
had booked the flats, even the permission to grant sub-lease of
the plot had been granted in totally illegal manner without payment
of dues of premium and lease rent etc. Conditional permission to
the mortgage was issued without payment of the premium lease
money etc. so as to perpetuate the fraud being done by the
promoters. The mortgage created ought to have been objected
in view of the conditions subject to which it could have been done.
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Obviously, it was done by Amrapali Group in connivance with
officials of Authorities including the bankers. Thus when the
authorities have themselves permitted fraudulent action money
has been diverted, which has been paid by home buyers for
payment to Authorities also, as premium was component of price
and as bankers have also permitted diversion of loan amount,
mostly on same day, it cannot be said in the facts of the case, that
any amount of the bankers or that of authorities remains invested
in the project.