“When you blame others, you give up your power to change.” -Dr. Robert Anthony

In the last decade or so, the real estate companies have seen some incredible highs, followed by some preposterous lows. Many real estate players have experienced their fair share of rags to riches story, while some have seen the reverse. The real estate sector has seen over the past couple of years falls of giants of the industry with companies such as Jaiprakash Associates and its affiliates, the most famous being Jaiprakash infrastructure Limited go under insolvency, the entire Amrapali Group going copout and also facing criminal sanctions not only from enforcement agencies but also from the Hon’ble Supreme Court of India, Cosmic Structures Limited going into liquidation, Parsavnath Developers going under insolvency among many others. While some of the companies have fallen due to corruption/ diversion of funds by the management of the company who was supposed to be protecting the interest of the company, while on the other hand some of the companies have felt the brunt of change of the government or change in the policies/ laws by the legislature.

Taking into context the curious case of Jaypee Group, which in 2013-14 had assets worth 10 lack crores rupees, spanning businesses across cement industry to thermal energy and most of all the real estate/ infrastructure industry. However, in the aftermath of the nationwide slow down in the real estate sector which saw huge declines in the value of wealth in the sector, Jaypee Group had to sell of 1/5th of its group assets to bring down its debt which still after the sale still stood at about 61,000 crores. At the start of the 21st century Jaypee group invested around 60,000 Crores in the real estate, power and cement sector and saw revenues of its companies such as Jaypee Power ventures Limited and JP Associates Limited grow at 26.92% & 32.08% respectively, between 1999-2000 and 2014-15. With the wind in its sail, Jaypee group decided to bid to bring Formula One Grand Prix racing in India. Along with the upcoming Formula One Track, it also envisioned to build a cricket stadium with a total capacity of around 1 lack people, a tennis stadium and five townships on the Noida- Greater Noida Expressway. However, due to various reasons, its flagship Yamuna Expressway Project, could not realize its potential return due to reasons such as power shortage in the state of Uttar Pradesh, the lack of transmission facilities which meant that even petrol pumps could not be installed along the expressway. Another key factor affecting the Jaypee group was the change of the state government from the Bahujan Samaj Party under the aegis of which all of the plans were cleared to the Samajwadi Party who did not conquer with the plans of the Jaypee Group. The newly elected Samajwadi Party due to reasons best known to them, did not think of Formula One as a prudent investment as a result of which the idea of having a Grand Prix failed after its second instalment causing not only huge losses to the Jaypee group but also to the state exchequer as well due to the potential taxes/ revenue the Formula One Grand Prix would have brought to the state of Uttar Pradesh. Combined with the losses from their flagship infrastructure projects and the loss from the failed Formula One Project, Jaypee Group is facing multifarious litigation all over the country, however, the promoters of the Jaypee Group are doing everything in their power to reduce the debts of its affiliates companies by selling of its assets but what transpires of the various companies of Jaypee Group is yet to be seen. This is one instance in which change in state legislation has led to the downfall of the entire group.

On the other hand, there are instances of widespread fraud, deceit,

mismanagement, siphoning of the funds by the management of the company who was entrusted to protect the interest of not only the company but also of its investors such as in the case of Amrapali Group. The Hon’ble Supreme Court of India in Writ Petition (C) 940/ 2017 in Bikram Chatterji vs. Union of India vide order dated 23.07.2019 has vide the detailed order relying upon the forensic accounting report of the Amrapali Group has found great illegality in the working and functioning of the management of the Amrapali Group with its statutory auditors. This is a case in which despite government sanctions and law in place, still the management of the group has been able to manipulate its books of accounts to get additional funding from financial institutions and also from investors/ home buyers and the same funds have been used by the management of various companies forming the Amrapali Group for their personal gains.

Then there is also a curious and interesting case of Supertech Limited which launched its most luxurious project- SuperNova. However, soon after the company has got all of the requisite permissions from the state bodies and had raised about 50% construction, the Hon’ble National Green Tribunal (‘NGT’) ordered that no construction is permissible within 5 kms radius of the Okhla Bird Sanctuary and the complete construction of the project came to a grinding halt. However, the company filed an Appeal before the Hon’ble Supreme Court of India, which was pleased to set-aside the order of the Hon’ble NGT and Supertech was allowed to carry on its construction. In this case despite no fault of the builder/ developer the complete project came to a standstill and the builder was facing the wrath of the investors/ homebuyer. However, the Hon’ble Supreme Court came to the rescue of the builder.

Like Jaypee, Amrapali, Supertech there are a number of cases in the real estate industry where due to one reason or another the project of the builder/ developer fails to take off which may lead to insolvency/ bankruptcy of the builder/ developer. However, one must see that it is not always the builder/ developer who is to blame. In cases such as Jaypee wherein due to change in the state government and the state laws, led to the associate companies of Jaypee Group making losses and eventually being dragged into courts by investors, home buyers, financial institutes and state authorities and on the brink of insolvency. In case of Supertech wherein due to the order of Hon’ble NGT, the project of the builder came to a halt and the builder despite raising about half of the total construction was ordered to stop the construction which led to various investors/ home buyers approaching the Hon’ble NCDRC seeking refund of their monies. In cases like this without no fault of its own, the builder is made to suffer losses owing no fault of its own due to change in certain by-laws of the state government. However, when one sees cases like Amrapali in which the management of the various affiliate companies of the Amrapali Group were hands in glove with its statutory auditors then the same also causes prejudice in the minds of the courts all over the country as to the working and functioning of all the builders.

What is being seen in the past couple of years is that there are two types of home buyers. One, who has invested in his future i.e, who has invested his hard-earned money to finally fulfil his dream of owning his/ her own home. On the other hand, there are the investors who had parted away with their excess money/ savings in hope that their money will multiply manifold. However, due to the slowdown in the economy coupled with demonetization & introduction of GST, these investors have seen their investment tumble. This has resulted in flooding of litigation especially, before the Hon’ble NCDRC. The Hon’ble NCDRC has in various cases directed the builder/ developer of such projects to refund the amounts paid by the said homebuyers who were actually the investor along with interest for the delay in project coupled with litigation cost and compensation despite the fact that the builder has completed the construction of the said project/ unit. That the said act not only leads to the builder incurring losses but also makes the investor greedy in order to extort money from the builder despite actually having been offered possession by the builder.

It would be worth to say that rather than directing the builder to repay the entire amount paid by the home buyer/ investor along with penal interest, cost and litigation expense on the project where possession is offered, it should be only some compensation that should be awarded on delay in handing over the project. If the builder is directed to repay the entire amount paid by the home buyer/ investor along with penal interest, cost and litigation expense on the project where possession is offered, would otherwise lead to many – many more builders going into insolvency and most probably into liquidation which is detrimental for the home buyers who have invested their lifelong savings with the Builders in the hope of owning their own home. That the very dream is turning into a nightmare as some of the investors are approaching the Hon’ble NCDRC/ other Courts/ Tribunals to get their money back instead of giving the chance to builders to complete the pending projects, thereby fulfilling home buyer’s lifelong dream.