SUPREME COURT ORDERS CBI PROBE INTO NCR BUILDER-BANK NEXUS, STARTING WITH SUPERTECH:

In response to grievances raised by homebuyers and borrowers, the Supreme Court today directed the Central Bureau of Investigation (CBI) to conduct preliminary enquiries into what it described as an "unholy" nexus between builders and banks operating in the National Capital Region (NCR).

This case stems from earlier observations by the Court, where it had indicated the possibility of a CBI investigation, expressing concern that certain real estate developers—along with banks that had sanctioned loans for their NCR projects—had effectively held helpless homebuyers to ransom. Acting on this, a bench comprising Justices Surya Kant and N. Kotiswar Singh, after reviewing a response submitted by the CBI and a note presented by Amicus Curiae Rajeev Jain, ordered that preliminary enquiries be initiated by the CBI as proposed. The Court directed that the investigation begin with Supertech Ltd, which will be treated as a priority.

"while we propose to issue directions from time to time...as of now, we deem it appropriate to direct the CBI to register 7 preliminary enquiries in the manner as suggested in the affidavit filed on its behalf...the first preliminary enquiry shall pertain to the projects of M/s Supertech Ltd...one preliminary enquiry for the projects of builders other than Supertech Ltd. falling outside NCR region (viz. Mumbai, Bangalore, Kolkata, Mohali and Allahabad)...5 preliminary enquiries (one each) for the projects only under one development authority - Noida, Greater Noida, Yamuna Expressway, Gurugram and Ghaziabad", the Court said.

In response to a request made by the CBI for additional manpower to support the investigation, and considering that the majority of the real estate projects in question are situated in the National Capital Region, which spans the states of Haryana and Uttar Pradesh, the Supreme Court also directed the respective state governments to shortlist officials from their police forces. These names are to be forwarded to the Director of the CBI within one week. Following this, the Director shall constitute the necessary Special Investigation Teams (SITs), comprising CBI officers, deputed police officers from Uttar Pradesh and Haryana (selected after due vetting from the shortlisted names), Chartered Accountants from the Institute of Chartered Accountants of India (ICAI), and other relevant personnel.

Additionally, the Court ordered the concerned development authorities, the Ministry of Housing and Urban Affairs, as well as the Real Estate Regulatory Authorities (RERA) of Uttar Pradesh and Haryana, to designate nodal officers. The details of these officers must also be shared with the CBI Director within one week. The Court emphasized that the governments of Haryana and Uttar Pradesh are to provide full cooperation and logistical support to the CBI and SITs to facilitate the smooth conduct of the preliminary enquiries.

The bench further indicated that it aims to take up the matter on a monthly basis to review progress and ensure that the interests of affected homebuyers are safeguarded, with the hope that they can eventually be "bailed out of the crisis."

Moreover, the Court passed specific directions regarding the honorarium and support to be extended to the Amicus Curiae. It was noted that Corporation Bank alone had extended loans amounting to approximately ₹2,477.54 crores. Accordingly, the Court directed the bank to commence payments for the honorarium and office expenses of the Amicus and his team, effective from March 1. The bank was also instructed to create a financial corpus and present a proposal for proportional contribution by other banks involved in the matter.

During the proceedings, Justice Surya Kant also addressed a submission related to the change in management of certain entities following insolvency proceedings. He clarified that the mere change of leadership does not absolve the companies of liability. Responding to concerns that some banks may have followed all regulatory norms and might be unnecessarily included in the probe, the judge reassured that the CBI’s preliminary enquiry process offers a sufficient safeguard, stating that "CBI is never in a tearing hurry to register an FIR unless it is satisfied that there is something."

At the outset, the order recorded that the matter pertained to a batch of more than 170 petitions filed by over 1200 homebuyers/borrowers, and it raised an issue of paramount importance, that is, "systematic failure of statutory and governmental authorities to discharge their functions, circumvention of regulatory framework by banks and housing financial corporations, and the resultant illicit benefits alleged to have been drawn by builders/developers at the cost of the homebuyers who are now bearing the brunt of such failure".

Based on the report submitted by the Amicus Curiae, the Supreme Court noted that Supertech Ltd is involved in over 21 projects across six cities. The company had entered into tripartite agreements with 19 banks and housing finance companies (HFCs), and approximately 800 homebuyers have raised grievances. Among these 19 banks/HFCs, 8 are associated with the majority of the 21 projects, while the remaining 11 were involved in three or fewer projects. It was further highlighted that Supertech alone has availed loans amounting to approximately Rs. 5,157.86 crores since 1998. In light of these facts, the Amicus recommended that the investigation into Supertech’s dealings with banks and HFCs be given top priority.

The Court, referring to the affidavit submitted by the CBI, observed that the larger issue involves around 40 builders and developers, with the majority of petitions relating specifically to Supertech’s projects. In order to determine whether there was any criminal misconduct on the part of the financial institutions, the CBI recommended the registration and investigation of seven preliminary enquiries.

The Court also directed that the CBI submit an interim status report by the next date of hearing.

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