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Centre agrees to take over Unitech, finish stalled projects

The Centre, in its six-page note submitted to a bench headed by Justice D Y Chandrachud, said it is prepared to revisit its proposal of December 2017, to remove the existing management of Unitech Ltd and appoint ten nominee directors of the government

twitter-logo PTI        Last Updated: January 18, 2020  | 18:06 IST
Centre agrees to take over Unitech, finish stalled projects
This will provide relief to 12,000 home buyers

In a major development, the Centre has told the Supreme Court that it is agreeable to revisit its 2017 proposal to take over the management control of embattled realty firm Unitech Ltd and complete its stalled projects to bring relief to around 12,000 hassled home buyers.

The Centre, in its six-page note submitted to a bench headed by Justice D Y Chandrachud, said it is prepared to revisit its proposal of December 2017, to remove the existing management of Unitech Ltd and appoint ten nominee directors of the government.

The Centre, however, said it would not infuse any funds for completion of pending projects of the company. It said the court, while ensuring a period of calm should direct a moratorium for 12 months.

For the proposed board, the government also suggested the name of retired Haryana cadre IAS officer Yudvir Singh Malik, as chairman and managing director of the board and names of members including A K Mittal, ex-CMD of National Buildings Construction Corporation (NBCC), Renu Sud Karnad, Chairman of HDFC Credila Finance Service Pvt Ltd, Jitu Virwani, CMD of Embassy Group, Niranjan Hiranandani , MD of Mumbai-based Hiranandani Group.

It said the court may appoint a retired judge of the Supreme Court for supervising the resolution framework finalised by the proposed board of directors.

"That this court may allow the proposed board of directors to appoint key managerial persons, professionals (legal, insolvency, financial advisors, real estate professionals, etc) for assisting the government appointed board and payment of requisite professional fees including the legal fees, thereof from the company accounts," the Centre's note said.

It also sought directions to the promoters, the present management of the company, forensic auditors, asset reconstruction companies, banks and financial institutions and state governments to extend cooperation to the proposed board of directors.

"That this court may issue directions to restrain the promoters from alienating, mortgaging, creating charge or lien or interest in the movable and immovable properties owned by them," the government said, adding, services of the committee headed by Justice S N Dhingra, appointed to sell the company's assets, be put on rest.

The government also sought immunity for the proposed directors in respect of the numerous litigations pending across the country, involving the company, management and its promoters.

It also sought permission for the proposed board of directors to raise funds due from the home buyers, sell the unsold inventory, monetising the unencumbered assets for completion of the stalled projects.

"That this court recognizes and directs that without any prejudice to any order, the government has the right to refer the company to liquidation or Insolvency and Bankruptcy Code (IBC), like resolution outside the framework of IBC, in case the assigned takeover is not viable in the absence of requisite resources, the government said.

On December 18, last year, the top court had asked the Centre if it was agreeable to revisit its 2017 proposal as there is urgent need for the projects of Unitech Ltd. to be taken up by a specialised agency, so as to ensure completion in a time bound schedule in the interest of the home buyers.

The top court had said, "Since the Union of India withdrew the application which it had submitted before the NCLT only for the reason that this Court was seized of the present proceedings, we are of the view that the Union of India should revisit the original proposal in the interests of home buyers and consider appointing independent Directors for the takeover of the management of Unitech Limited".

It had said that these deliberations may be conducted at the highest level and Attorney General K K Venugopal should apprise the court by January 15, about the modalities which have been worked out.

In 2017, the Centre had moved the National Company Law Tribunal (NCLT) seeking suspension of the current directors and an order of restraint on the alienation of assets by Unitech Ltd.

The NCLT in its order December 8, 2017, issued interim directions for suspension of directors of Unitech Ltd and restrained them from alienating, mortgaging, creating charge or lien or interest in the properties owned by them personally or that of the company till the conclusion of investigation.

However, the top court on December 13, 2017, stayed the NCLT's December 8, 2017 order and later the Centre agreed to withdraw its application from the tribunal.

In 2018, the apex court had directed a forensic audit of Unitech Ltd and its sister concerns and subsidiaries by Samir Paranjpe, Partner, Forensic and Investigation Services in M/s Grant Thornton India.

The forensic auditors have also submitted their report which said that Unitech Ltd received around Rs 14,270 crores from 29,800 home buyers mostly between 2006-2014 and around Rs 1,805 crores from six financial institutions for the construction of 74 projects.

The audit revealed that around Rs 5,063 crore of home buyers money and around Rs 763 crores of fund received from financial institutions were not utilized by the company and high value investments were made off-shore tax-haven countries between 2007-2010.

The top court ordered investigation into the omission and commission of promoters of Unitech Ltd under Prevention of Money Laundering Act (PMLA).

Unitech promoters Sanjay Chandra and his brother Ajay Chandra are currently lodged in Tihar jail for allegedly siphoning off homebuyers' money.

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