Builder-Bank Nexus In NCR: Supreme Court Seeks CBI Proposal On Probe; Flags 'Quid Pro Quo' As 60-80% Funds Released Without Single Brick Being Laid

In the matter where a probe into a builder-banks nexus in the National Capital Region was earlier hinted at, the Supreme Court today called for a proposal from the Central Bureau of Investigation on how to carry out the investigation/enquiry. The Court also appointed an Amicus Curiae for assistance on proceeding with the issues.

A bench of Justices Surya Kant and N Kotiswar Singh passed the order, asking that the proposal be placed before it in 2 weeks.

"We have impressed upon her (Additional Solicitor Genera Aishwarya Bhati) to discuss with CBI officers and put up a proposal as to how they would like to proceed with the enquiry/investigation into the issues that are briefly noticed in our order dated 4 March, 2025 and prior thereto. She assures that such a proposal shall be put up before the Court within 2 weeks. We are also of the view that an Amicus Curiae needs to be appointed, especially one who is having expertise and vast investigative, administrative experience besides legal intricacies...In this regard, we request Sh. Rajiv Jain...to assist the Court as an Amicus Curiae. He is also requested to submit a brief note as to how to further proceed in the matter", dictated Justice Kant.

At the outset of the hearing, ASG Aishwarya Bhati entered appearance for CBI and informed the Court that she had a discussion with the Ministry of Housing and Urban Affairs as well as CBI officials. If the Court so desires, it may direct a CBI probe, however, it may keep in mind that the task would be voluminous, she submitted. The ASG further suggested that the Court may permit starting probe with 1-2 projects of Greater Noida. "That is where the problem essentially is...and we may need officers on deputation", she commented.

"That's why we thought that you are the premier agency and on pan-India basis, there are only 1-2 agencies who operate...you have an expert team and these all matters involve economic offenses only, if at all a prima facie case is made out", remarked Justice Kant in response. The judge told the ASG to furnish a proposal as to how the "mess" can "really be gone into". Thereafter, whatever assistance is required by CBI, the Court could provide that and the task could be conducted on pilot basis, Justice Kant added.

Subsequently, the bench considered appointing an Amicus in the matter and settled on the name of Sh. Rajiv Jain. "Mr Rajiv Jain can be the best person to assist in this matter", opined Justice Kant.

Senior Advocate Dr Abhishek Manu Singhvi, appearing for one of the financers, contended that a few parties had acted bonafide and the financer was not at fault if a particular builder went into Corporate Insolvency Resolution Process. However, Justice Kant was quick to add that the financers were to be blamed for releasing more than half of the funds despite knowing that "not a brick had been laid" at the site.

"Your fault is that knowing very well that not even a brick has been laid at the site, you are releasing 60%, 70%, 80%...is it possible without any quid pro quo!? How can we accept that the officers' hands are clean?" exclaimed the judge, being of the view that there must have been vested interests involved on the part of management.

Justice Kant further added, "We will not certify a single bank free from doubt...we have seen their functioning...[it's] not the first time we are watching them...the kind of [...] they do, the way they have been indulging...you see in one of the matters on the other day...unfortunately CBI had to come before us in a matter that the High Court has thought of quashing everything. The bank people very smartly say as far as our officers are concerned, nobody has been found to be involved, but still it is a scam of Rs.380 crores being siphoned and therefore you register the FIR...you see the conduct of these institutions!"

When Singhvi submitted on instructions that, for the period till possession is given, his client is prepared not to charge interest, Justice Kant categorically said that that would not address the larger issue. "It's not going to cure the ailment the entire system is suffering...they have created a havoc...Lakhs and lakhs of people...Supreme Court is everyday handling poor people's plight".

The judge assured that the moment any investigating agency comes up with a finding that any party acted bonafide, the Court would not indulge in witch-hunting. However, if anything is found by the agency, the Court will not spare it even if it tries to "hide under the earth".

Eventually, Justice Kant clarified that CBI probe was non-negotiable and will be ordered by the Court. "We need to have some independent agency to look into this and submit report...if at this stage nothing is done, then we don't want to use the word, but we hope there is no mafia...", commented the judge.

"We are not going to today certify any institution as bad or good. CBI, we will definitely refer. We are very clear about it...Thousands of people are crying. We can't wipe their tears but atleast we must satisfy them that yes you [have been found wrong]...today somebody is crying outside the Court and we are not even able to address the issues, that is not acceptable...past instances are the eye-opener...Something very effective has to be done in timebound manner", Justice Kant added.

Pertinently, Singhvi and Senior Advocate Mukul Rohatgi tried to persuade the Court to appoint an Amicus as its first filter, saying that bringing in CBI would give the proceedings a different color. In reply, Justice Kant conveyed that the Court would not dictate CBI's course of action and would give the agency a freehand once the task is entrusted to it. The Amicus, the judge said, would offer expert assistance. "We don't want any reluctance on their part, this message must go to them...we definitely would like to go into the root of...to the extent it is required...we have got zero tolerance for...if they find that there is nothing, we will consider that."

Notably, when one of the counsels made reference to state police authorities, Justice Kant stated, "We have some reservations about state police. They have their own limitations....we don't want to comment on their expertise...we have no reason to doubt, CBI has an expert wing to look into these aspects. If any external assistance is required, we will provide".

Appearing for HDFC Bank, Senior Advocate Ranjit Kumar also brought to the notice of the Court certain reports (of February 2025) on the housing industry by the National Housing Bank as well as a document of September 2024. It was submitted that the referred reports/document contain certain data which may require to be seen, before the Court makes up its mind. Lastly, Singhvi suggested that the Court could direct an enquiry by the RBI (instead of CBI).

However, Justice Kant noted that RBI does not have an investigative team which could look into the conduct of the management officials of banks. Eventually, the matter was adjourned to await proposal of the Amicus and the CBI.

Background

The Court was considering grievances of homebuyers in NCR, who claimed that they were being forced by banks to pay EMIs without having obtained possession of flats due to delay by the builders/developers.

Previously, expressing the view that certain real estate companies, and banks which sanctioned loans to them for their projects in NCR, had taken poor homebuyers to ransom, the Court had hinted at directing a CBI probe into a builder-banks nexus.

For context, the flats were invested in under a subvention scheme, in terms whereof, after the developers started defaulting on EMIs of sanctioned bank loan amounts, the banks initiated action against homebuyers.

As per the homebuyers, the loan amounts were illegally disbursed directly into the accounts of the builders/developers in violation of RBI guidelines. It was alleged that the homebuyers were used as a medium to get the loans sanctioned and the amounts transferred from the banks to the builders/developers.

"The homebuyer herein is pushed into the litigation for the amount which he himself has never seen or actually received. The acts of both builder and banks are in violation of tripartite agreement and also in violation of RBI/NHB statutory guidelines...Homebuyers are taken for a ride and there exists no legal framework to address the issues when the insolvency proceedings are initiated against the real estate developer, and banks still keep charging EMIs/Pre-EMIs even when the liability of repayment is of the real estate builder," the homebuyers claimed.

In July last year, a bench of Justices Kant and Ujjal Bhuyan had granted interim protection from coercive action to the homebuyers, making it clear that no such action, including in terms of a complaint under Section 138 of Negotiable Instruments Act (check-bounce), shall be entertained on behalf of the Banks/Financial Institutions or Builders/Developers against the homebuyers.

Case Title: HIMANSHU SINGH AND ORS. Versus UNION OF INDIA AND ORS., SLP(C) No. 7649/2023