Supreme Court Issues Notice in Rs 14,000 Crore Real Estate Diversion Case
The Supreme Court has issued notices to the Centre, Enforcement Directorate (ED), Reserve Bank of India (RBI), and other relevant authorities on a plea alleging the diversion of Rs 14,000 crore collected from homebuyers in Noida and Yamuna Expressway projects. The case involves several real estate firms, with the ED probing alleged fund siphoning under the Prevention of Money Laundering Act (PMLA).
A bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and Vipul M Pancholi took note of the submissions made by lawyer Prashant Bhushan, who is representing petitioner Vandana Sabharwal. The bench issued notices to the respondents, including the Union ministries of housing and urban affairs and corporate affairs, ED, RBI, Uttar Pradesh RERA (Real Estate Regulation and Development Authority), Noida Authority, Yamuna Expressway Industrial Development Authority (YEIDA), Jaiprakash Associates Ltd (JAL), Jaiprakash Infratech Ltd (JIL), Standard Chartered Bank, and various developers.
Sabharwal's plea highlights a systemic pattern in the real estate sector where developers allegedly divert homebuyers’ funds, transfer land and development rights to related entities, and push projects into insolvency, leaving buyers stranded. Bhushan referred to findings of the ED, which is investigating the matter under the PMLA. According to the ED, out of nearly Rs 14,559 crore collected by JAL and JIL from over 25,000 homebuyers, substantial amounts were diverted for non-construction purposes and siphoned off to related group entities, including Jaypee group companies.
Bhushan emphasized that this issue keeps recurring project after project. Funds are collected from homebuyers, diverted elsewhere, and the companies eventually go into bankruptcy, leaving homeowners in a serious situation. He noted that the ED had provisionally attached assets worth around Rs 400 crore, but the alleged diversion involved assets exceeding Rs 14,000 crore. He urged the bench to direct the ED to complete its investigation expeditiously and issue provisional attachment orders wherever proceeds of crime or diverted funds were found invested in land or development rights.
He also sought directions to the RBI to conduct audits of banks that financed such stalled housing projects, arguing that banks too were suffering substantial losses. Bhushan said, 'One of the things the RBI should do is issue directions because this is happening across the board and many banks are losing money in such projects.'
Referring to proceedings before the National Company Law Tribunal (NCLT), he submitted that homebuyers opting for refunds were being offered only the principal amounts paid over a decade ago, without interest, despite a sharp rise in property prices. 'If we want a refund today, we are being offered what was paid 12 years ago without any interest. Today, the same flat would cost three times more,' he said.
The CJI noted that the matter involved complex issues and acknowledged that in another similar case, the court had handed over the probe to the CBI. However, the ED had already registered a case in the present case. The bench asked the ED to place a status report on record regarding the progress of its investigation and directed all respondents to file their replies by July 15.
Bhushan also mentioned that the ED had registered an enforcement case information report (ECIR) based on multiple FIRs lodged by the Economic Offences Wing of Delhi Police and Uttar Pradesh Police. The bench emphasized the need for a comprehensive response from all parties to address the systemic issues in the real estate sector and ensure justice for the affected homebuyers.
