Supreme Court orders CBI probe into builder-buyer fraud, collusion between banks and developers

The Supreme Court on Tuesday ordered the Central Bureau of Investigation (CBI) to register seven preliminary enquiries (PEs) into the alleged nexus between builders and financial institutions that extended loans under subvention housing schemes in Noida, Greater Noida, Gurugram, Ghaziabad and beyond. [Himanshu Singh & Ors v. Union of India & Ors].A Bench of Justices Surya Kant and N Kotiswar Singh directed one inquiry specifically against Supertech, whose projects alone account for over 799 petitioners across 84 special leave petitions. The Court noted that Supertech had raised more than ₹5,157 crore since 1998 and had partnered with 19 different banks or housing finance companies (HFCs). Calling attention to the “unholy nexus” between banks and builders that surfaced through tripartite loan agreements, the Bench observed that preliminary material pointed to widespread regulatory failure, coercive recovery actions against homebuyers and disregard for Reserve Bank of India (RBI) and National Housing Bank (NHB) norms on disbursals..In its previous hearing on March 18, the Court had noted the worrying pattern of tripartite agreements under which banks released loans upfront to builders, many of whom later defaulted. This, the Court had remarked, led to banks hounding homebuyers even when no possession had been offered. “Not a single bank is free from doubt...We have seen their functioning and the kind of hobnobbing that they do. Before knowing whether a single brick has been laid the banks have released payments.".The Court was hearing a batch of over 170 petitions filed by more than 1,200 homebuyers, many of whom alleged that despite paying EMIs under subvention schemes, they never received possession of their homes and were now facing coercive recovery from banks.The schemes, typically marketed between 2013 and 2015, involved buyers paying a token amount while the rest of the loan was disbursed directly to builders by the banks. However, when builders defaulted around 2018-19, buyers were made liable for repayment, the Court was told. The Court had previously taken note of the issue and asked the CBI to submit a detailed investigation proposal. It had further appointed former Intelligence Bureau Director Rajiv Jain as Amicus Curiae. Jain submitted a report flagging Supertech as a key player, linked to 21 projects and 800 homebuyers across six cities. He identified eight banks and housing finance companies repeatedly involved in disbursing upfront loans under the builder’s subvention plans, calling for focused investigation into these entities.Based on Jain’s recommendations and the CBI’s own affidavit, the Court directed the agency to initiate seven preliminary enquiries. One will focus exclusively on Supertech. Five others will cover projects in Noida, Greater Noida, Gurugram, Ghaziabad and along the Yamuna Expressway. A seventh will cover projects outside the NCR region..To assist the wide-ranging investigation, the Court ordered that a Special Investigation Team (SIT) be constituted by the CBI, which may also include police officers from Uttar Pradesh and Haryana on deputation. The Court directed the DGPs of the two States to send shortlisted officials for deputation within a week.It further ordered the appointment of nodal officers by the RBI, NHB, Ministry of Housing and Urban Affairs, as well as the development authorities in the affected cities, to ensure timely access to documents and inter-agency coordination.Additionally, three forensic audit experts are to be appointed through the Institute of Chartered Accountants of India (ICAI) to assist the CBI.The Court expressed displeasure over banks proceeding with coercive actions despite petitions on the issue being pending. It granted liberty to affected parties to move appropriate applications highlighting instances where coercive measures or harassment are being undertaken despite the pendency of the matter..Further, Corporation Bank, identified as having disbursed over ₹2,477 crore in questionable loans, has been asked to create a corpus for covering the costs of the Court-appointed amicus curiae and legal team.Meanwhile, interim protection given to homebuyers will continue as per earlier orders of the Court..The matter will be heard next on July 22..[Read Order]