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SC allows Centre to takeover Unitech management; grants two months to prepare resolution plan

BusinessToday.In     January 20, 2020

The Supreme Court of India has accepted the Centre's proposal to take over the management control of Unitech Limited. Under this arrangement, the government will appoint 10 nominee directors on the Unitech board and complete pending projects of the company for providing relief to around 12,000 hassled homebuyers.

The Supreme Court bench, led by Justice DY Chandrachud, also granted two-month moratorium to the new board of Unitech from any legal proceedings against the company's management. The apex court also gave the new Unitech board two months to prepare the resolution for the embattled realty firm and submit its report. The bench directed the Unitech board to appoint a retired Supreme Court judge to monitor the preparation of resolution framework.

In a six-page note submitted before the apex court on Saturday, the Centre had said that it is prepared to revisit its proposal of December 2017, to remove the existing management of Unitech and appoint nominee directors. While the Centre agreed to finish stalled housing projects of the company, it said it would not infuse any funds for this purpose.

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Back on Saturday, the government had suggested appointing retired Haryana cadre IAS officer Yudvir Singh Malik as chairman and managing director of the board. Suggestions for other nominee directors included 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; and Niranjan Hiranandani , MD of Mumbai-based Hiranandani Group.

In 2017, the Centre had moved the National Company Law Tribunal (NCLT) seeking suspension of the incumbent directors of Unitech and an order of restraint on the alienation of assets by Unitech Ltd. On December 8, 2017, the bankruptcy court 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, on December 13, 2017, the Supreme Court had stayed the NCLT's December 8, 2017 order and later the Centre agreed to withdraw its application from the tribunal.

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In 2018, the Supreme Court had directed a forensic audit of Unitech, its sister concerns and subsidiaries by Samir Paranjpe, Partner, Forensic and Investigation Services in Grant Thornton India. The forensic audit report stated that Unitech received around Rs 14,270 crore from 29,800 home buyers mostly between 2006 and 2014, and around Rs 1,805 crore 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 crore of fund received from financial institutions were not utilised by Unitech, but instead, high value investments were made in off-shore tax-haven countries between 2007 and 2010. Following this, the Supreme Court had ordered investigation into the omission and commission of promoters of Unitech under Prevention of Money Laundering Act (PMLA). Presently, Unitech promoters Sanjay Chandra and his brother Ajay Chandra are incarcerated in Tihar jail for allegedly siphoning off homebuyers' money.

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.

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