In a crucial interim order, the Supreme Court has temporarily halted coercive recovery actions by banks, financial institutions, and developers against homebuyers of stalled housing projects in Delhi-Noida. This stay also includes proceedings under Section 138 of the Negotiable Instruments Act for cheque dishonour.
A bench comprising Justices Surya Kant and Ujjal Bhuyan reviewed several petitions from homebuyers contesting the recovery proceedings initiated by banks before the Debts Recovery Tribunal (DRT) and under the SARFAESI Act.
The petitions centred around tripartite agreements between homebuyers, builders, and banks, where loans were disbursed directly to builders. Homebuyers argued that banks violated Reserve Bank of India (RBI) guidelines by disbursing funds upfront rather than in instalments tied to construction progress.
Homebuyers cited RBI Circular No. RBI/2013-14/217 DBOD.BP.BC.No.51/08.12.015/2013-14, which advises against upfront disbursals for incomplete or under-construction housing projects. They argued that banks should not have released the entire loan amounts directly to builders.
Case reference
In one case, Himanshu Singh and others contested Punjab & Sindh Bank’s proceedings before the DRT for loan defaults related to Noida-based Future Estate Projects. After the Delhi High Court refused to intervene, the petitioners approached the Supreme Court.
Supreme Court’s Observations:
Petitioners contended that they were unfairly targeted for loan repayments for funds disbursed directly to developers. They neither completed the projects nor delivered the properties. They maintained that they had no control over the loan utilisation. Hence, were unfairly asked to repay loans for properties they did not receive or benefit from.
The Supreme Court, agreed to hear the matter. They issued notices to the respondents and passed an interim order to prevent any coercive actio. This included complaints under Section 138 of the Negotiable Instruments Act, by banks, financial institutions, or developers against the homebuyers.
Additionally, the Court directed the respondent builders and developers to submit a reply affidavit. It should detail their assets within two weeks. Thus, warning of coercive measures to ensure compliance.
This ruling offers temporary relief to numerous homebuyers facing financial and legal challenges due to stalled housing projects. Thus, providing them respite while the Court deliberates their cases.
