BIKRAM CHATTERJI & ORS versus UNION OF INDIA & ORS.

Citation: [2019] 9 S.C.R. 289 · Decided: 23-07-2019 · Supreme Court of India · Bench: ARUN MISHRA · Disposal: Dismissed not complying condition order

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Judgment (excerpt)

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289
BIKRAM CHATTERJI & ORS.
v.
UNION OF INDIA & ORS.
(Writ Petition (C) No. 940 of 2017)
JULY 23, 2019
[ARUN MISHRA AND UDAY UMESH LALIT, JJ.]
Housing:
Housing projects – By a Group of companies – Proposing to
construct approximately 42,000 flats – The projects were registered
under RERA – Booking of flats by various home-buyers during the
years 2010-2014 – Standard Form of Allotment-cum-Flat Buyers
Agreement stated that delivery of possession within 36 months –
Builder got the land from Noida and Greater Noida Authorities on
paying 10% of the land price – Builders also took loans from the
Banks for the project on mortgaging the land with the Banks –
Home-buyers paid the amount from 50% to 100% abiding by the
payment schedule – Builders failed to deliver the flats within 36
months – They did not pay the balance amount towards the land to
the Noida and Greater Noida Authorities and also failed to repay
the loans taken from the Banks – Some of the consumers filed
consumer complaint under Consumer Protection Act – Bank, for
recovery of the loan, filed company petition under s.7 of Insolvency
and Bankruptcy Code, 2016 – National Company Law Tribunal
(NCLT) appointed Interim Resolution Professional (IRP) and
declared Moratorium restricting institution of any suit against the
corporate debtor – Thereupon writ petitions u/Art.32 were filed by
home-buyers – Several orders by Supreme Court giving the builder
opportunity to go ahead with project work and complete the same –
Orders were not complied by the builder – Forensic audit of the
companies of the builder directed by the Court – Court directed
freezing of individual accounts of the Directors of all the 40
companies and also directed attachment of the properties in the
individual names of the Directors – Held: The Noida and Greater
Noida Authorities were grossly negligent in reviewing and monitoring
progress of the project and in collusion with the builders, failed to
take action for non-payment of its dues – They illegally permitted
   [2019] 9 S.C.R. 289
289
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290
SUPREME COURT REPORTS
[2019] 9 S.C.R.
the builders to sub-lease the land – The officials of Authorities have
acted in clear breach of public trust and have failed to act as per
statutory mandate, Regulations and terms of the Lease Deed – The
mortgage of the land with the Bank was without obtaining clear
NOC which was a condition precedent for creation of Mortgage –
Thus, no mortgage in the eye of law has been created – Moreover,
the money borrowed from the Bank was not utilized for the project
and the same was diverted for creation of other assets – The Bank
also failed to check whether the money, in fact was required for the
project and used for the same – Therefore, the Banks and the
Authorities can realize their money only from those assets and from
the Guarantors and not from investment of home buyers – There
has been blatant violation of provisions of RERA – In the
circumstances of the case, principle of ‘fraud vitiates’ is attracted
and such transaction would become unenforceable and would be
against the public trust doctrine – It is bounden duty of court not
only to save the home-buyers but also to ensure that they are not
cheated – Therefore, the registration of the builder companies under
RERA is cancelled – The Lease-Deeds in favour of the Companies
are also cancelled – Construction work in the projects is handed
over to NBCC – Rights of the lessee shall vest in the Court Receiver
– Real Estate Regulation and Development Act, 2016 – Uttar Pradesh
Industrial Area Development Act, 1976.
Doctrines/Principles:
Principle of ‘fraud vitiates’ – Applicability of.
Doctrine of ‘public trust’ – Applicability of.
Issuing directions, the Court
HELD : 1.1 In the instant matter, the question of larger
public importance is involved. A large–scale cheating has taken
place and middle and poor class home buyers have been duped
and deprived of their hardearned money and lifetime. By the
Amrapali Group, the buyers’ money which has been obtained  has
not been invested in the construction activities, rather it has been
diverted to a great extent. Money obtained from the banks has
also not  been invested in the projects and has been diverted
elsewhere to acquire  other assets.  This is not only with respect
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BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS.
to the Amrapali builders that projects have not been completed
as  reflected in the affidavits of Noida and Greater Noida

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