UP govt to crack down on erring builders amidst Jaypeee bankruptcy
26 August 2017
Amidst bankruptcy proceedings against realty major Jaypee Infratech, the Uttar Pradesh government has threatened to take legal action against builders cheating on investors and diverting funds away from housing projects.
The move follows Jaypee Infratech's defaulting on loans to its 27 housing projects that jeopardised the interests of nearly 32,000 investors who have invested in their housing projects.
Jaypee Infratech is facing insolvency proceedings initiated under section 7 of the Insolvency and Bakruptcy Code 2016 at the National Company law Tribunal (NCLT) and there is no guarantee that the 32,000 home buyers get their promised homes or their money back.
The insolvency resolution professional (IRP) appointed by NCLT handling the Jaypee Infratech case, Anuj Jain, has also ruled out the possibility of home buyers getting refunds, but said construction will restart and the projects will be completed.
While the NCLT proceedings under the Insolvency and Bankruptcy Code are under way, the board of directors of the company remain suspended and it is not known who will ensure the completion of the projects.
NCLT is engaged in the loan recovery process and that does not guarantee investors getting possession of flats as promised by the builders.
Now, in a bid to protect the interest of home buyers, the Uttar Pradesh government said it would take legal action against developers who have diverted funds collected from buyers. ''The chief minister has directed us to address issues of home buyers…Those developers who have diverted funds collected from buyers will face legal action,'' a senior official at the Greater Noida Authority said.
Reports said the authority is likely to hire a private agency to find out whether builders have diverted funds and the reasons for delay. ''If survey finds out builders are guilty, then law will take its own course,'' the official said, adding that buyers have accused builders of diverting funds collected from them.
Currently, about 203 housing projects are being constructed in Greater Noida. Recently, insolvency proceedings have been initiated against Jaypee Infratech's 27 housing projects for defaulting on approximately Rs526-crore of loans.
The National Company Law Tribunal has also admitted an insolvency plea from Bank of Baroda against Amrapali Group's firms, Ultra Homes, Silicon City and Amrapali Infra, which have projects in Noida as well.
The move has triggered panic among home buyers, who fear they will lose the money paid upfront and not get the promised homes.
Earlier this month, the Noida Authority had written to the state government for a forensic audit on the funds flow of all defaulting builders having projects in Noida.
A per the new law, the Real Estate Regulatory Authority (RERA) is empowered to carry out forensic audit on builders. Uttar Pradesh, however, is yet to have a proper body and office bearers to carry out the job.
Since, the RERA in UP is not functional, the state government can direct any other agency for an audit, officials said.
Meanwhile, about 82 housing projects in Greater Noida have not submitted their action plans regarding delivery of their respective projects. The official, however, refused to share the names and details of these builders or their projects.