Bombay HC Refuses To Recall Order Restraining Financial Institutions From Recovering EMIs From Cheated Home Buyers In A Stalled Project [Read Order]

first_imgNews UpdatesBombay HC Refuses To Recall Order Restraining Financial Institutions From Recovering EMIs From Cheated Home Buyers In A Stalled Project [Read Order] Nitish Kashyap22 Sep 2020 9:43 PMShare This – xThe Bombay High Court on Tuesday dismissed an interim application filed by Housing Development Finance Corporation (HDFC) seeking recall of a previous order directing various financial institutions not to recover EMIs from home buyers who have majority of their savings stuck in a scam scheme floated by a developer wherein they were collecting fixed deposits from unsuspecting citizens and…Your free access to Live Law has expiredTo read the article, get a premium account.Your Subscription Supports Independent JournalismSubscription starts from ₹ 599+GST (For 6 Months)View PlansPremium account gives you:Unlimited access to Live Law Archives, Weekly/Monthly Digest, Exclusive Notifications, Comments.Reading experience of Ad Free Version, Petition Copies, Judgement/Order Copies.Subscribe NowAlready a subscriber?LoginThe Bombay High Court on Tuesday dismissed an interim application filed by Housing Development Finance Corporation (HDFC) seeking recall of a previous order directing various financial institutions not to recover EMIs from home buyers who have majority of their savings stuck in a scam scheme floated by a developer wherein they were collecting fixed deposits from unsuspecting citizens and had failed to repay the same on maturity.Division bench of Justice Ujjal Bhuyan and Justice Abhay Ahuja was hearing HDFC’s interim application filed in original writ petition filed by Anandghan Griharachana Sahakari Sanstha Maryadit, a co-operative housing society registered under the Maharashtra Co-operative Societies Act, 1960 that represents a group of flat purchasers who have purchased flats in the project called ‘Anandghan’.Previously, in an order dated June 26, 2019, the High Court had as an interim measure, restrained the financial institutions in the case (Respondents 3 to 26) not to recover the EMIs from the members of the petitioner i.e. home buyers till report is submitted by the Resolution Professional.Case BackgroundThe builder of this project namely, DS Kulkarni Developers Limited had declared a scheme for construction of residential flats in a plot of land measuring approximately 10,000 sq.mtrs. situated at Village Kirkatwadi, Taluka Haveli, District Pune. According to the petitioner, the project consisted of 11 residential towers, each having 12 floors of different areas. In all, there are about 930 flats in the said project.Following advertisement by the developer, several persons came forward to buy flats. As a matter of fact, 460 flats out of total 930 flats were booked. 426 have entered into flat booking agreements out of whom 34 have received allotment letters during the period 2014-15. It is stated that many of the flat purchasers had paid more than 90% of the cost of the flat to the developer prior to December, 2016. As per the agreement, the flats were to be handed over to the buyers on or before December, 2016.Notwithstanding such assurance, construction of the flats came to a halt in 2018 leaving the flat buyers high and dry. They had invested their life savings in the purchase of flats and had obtained housing loans from various financial institutions including banks. They had deposited the necessary amounts with the developer but possession of the flats was not handed over to them. On the contrary, they have been forced to pay EMIs to the respective banks.The developer had executed agreements with flat buyers under section 4 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963, which have been duly registered.Tripartite agreements were entered into between the respective bank, builder and flat buyer. The finance was made available under a scheme called ‘Aadhi Ghar Paise Nantar’ meaning that firstly the purchaser will get home and only thereafter he would have to pay. In view of such assurance, many of the flat buyers had booked flats. As per such agreement, the developer had agreed to pay the EMIs till possession of the flats was handed over to the flat buyer. Period of two years was specified on the basis of the promise made by the developer that possession would be handed over to the flat buyers within a period of two years. Since the flats were not ready despite the flat buyers having paid the entire agreed consideration in most cases, a request was made by the flat buyers to the developer to resume and complete the construction and thereafter to hand over the vacant possession of the respective flats to the buyers.However, in 2016-17, several FIRs came to be lodged against the directors of DS Kulkarni Developers Limited and its officials. The FIRs were primarily lodged for commission of various offences under the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999. Under the Prevention of Money Laundering Act, 2002. Directors of DS Kulkarni Developers Limited have been arrested and are presently in custody in Yerwada jail.The developer has been accused of running a scam scheme whereby and whereunder it was collecting fixed deposits from unsuspecting citizens and had failed to repay the same on maturity. Furthermore, the flat buyers were staring at a situation where they had invested all their hard earned money for purchasing flats and in addition had availed loans from financial institutions but construction of flats was nowhere near completion, not to speak of handing over possession of the flats to the buyers. While construction and delivery of flats have become completely uncertain, the flat buyers on the other hand are being compelled to pay EMIs to the banks and financial institutions.Thus in these circumstances, petitioner Society approached the Real Estate Regulatory Authority (RERA) seeking revocation of registration of the builder. However, the authority declined to intervene in the matter. In the meanwhile, Bank of Maharashtra i.e., respondent No.6 filed an application under section 7 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal, Mumbai against the developer. By order dated September 26, 2019, the Tribunal initiated the corporate insolvency resolution process against the developer.JudgmentAfter the previous hearing, Court passed an interim order directing respondent Nos.3 to 26 not to recover the Equated Monthly Installments (EMIs) from the members of the petitioner i.e., home buyers till report is submitted by the Resolution Professional i.e., respondent No.2 which should be informed to the Court.Advocate Prateek Seksaria appeared on behalf of the applicant HDFC bank which also happens to be respondent number 8 in the original petition and Senior Advocate Dr. Birendra Saraf appeared for TATA Capital HSG Finance Limited, also a respondent in the matter.Both sought recall of the interim order and submitted that no material particulars have been pleaded in the writ petition; who are the members of the petitioner, from which financial institution they had borrowed money for purchasing flats, quantum of such borrowings, amount repaid – nothing has been indicated. By making sweeping submissions, not backed by facts, an omnibus interim order has been obtained which is causing serious prejudice to the respondents like HDFC and Tata Capital HSG Finance Limited, they submitted.No notices were served upon the said respondents i.e., respondent Nos.3 to 26 and by making incorrect statements, interim order was obtained. That apart, dispute raised by the petitioner is purely private and civil; no element of public law is discernible. In such circumstances, this Court may not invoke the writ jurisdiction under Article 226 of the Constitution of India as the writ petition itself raising private grievance is not maintainable. Therefore, the interim order may be recalled, they argued.On the other hand, Advocate Neela Gokhale appeared for the petitioner society in the matter and submitted that in fact notices were served upon the respondents and to that effect, affidavit of service was filed by the petitioner before the Court. Despite having knowledge about the court proceeding, the said respondents watched from the sidelines without making any intervention. Only after the interim order was passed, the respondents that too two of them, have now come forward crying prejudice, Adv Gokhale contended.Furthermore, she argued that the related writ petition raises issues of considerable public importance and therefore, before finally hearing the writ petition, the interim order may not be recalled.Upon examining the facts of the case, Court concluded that HDFC was aware of the proceedings in the case but was trying to “hide behind technicalities” in the matter. Moreover, Court said that a Resolution Professional has been appointed who has initiated a corporate insolvency resolution process-“May be in the ultimate analysis, resolution of the grievance of the flat buyers as represented by the petitioner vis-a-vis the lending institutions perhaps may have to be looked into by the Resolution Professional. That was why we had directed that till the report is submitted by the Resolution Professional, EMIs should not be recovered by respondent Nos.3 to 26 from the home buyer members of the petitioner. This is of course a tentative view.In such circumstances, we are of the considered opinion that it may be too premature for us to recall the order dated 26.06.2020 at this stage by taking the view that the writ petition involves purely private dispute between the contracting parties without any element of public law involvement. This aspect may require further deliberation.”Thus, the prayer for recall of the earlier order was rejected but HDFC’s prayer seeking copies of its registration certificate, bye-laws and the list of its registered members with all details vis-a-vis availing of loan for purchase of flat as on the date of filing of the writ petition from the petitioner society was allowed.Click Here To Download Order[Read Order] Next Storylast_img read more