Bombay HC upholds interim order directing financial institutions not to recover EMIs from homebuyers in DSK's Anandghan project

The Bombay High Court on Tuesday dismissed an application moved to recall a June 26 interim order restraining banks from recovering Equated Monthly Installments (EMIs) from homebuyers in the stalled Anandghan building project. .The order passed on Tuesday by the Bench of Justices Ujjal Bhuyan and Abhay Ahuja states,."... we are of the considered opinion that it may be too premature for us to recall the order dated 26.06.2020 at this stage by taking the view that the writ petition involves purely private dispute between the contracting parties without any element of public law involvement. This aspect may require further deliberation."Bombay High Court.The Housing Development Finance Corporation Ltd. (HDFC) had filed the interim application in a Writ Petition moved by homebuyers part of the Anandghan Griharachana Sahakari Sanstha Maryadit. .Case background.The homebuyers had moved the Court for relief after the building developer was accused of scam and the flat development was halted as a result. .The Writ Petition was filed urging the Court to direct the banks to desist from recovering EMIs from the flat-purchasers for loans taken to pay the buidling developers, i.e. DS Kulkarni Developers Ltd. .Most of the flat-purchasers paid more than 90% of cost of the flat to the Developer and the Developers had agreed to handover the flats by December 2016. .Several home buyers approached HDFC to avail housing loans for purchasing flats and HDFC advanced loans to home buyers which were to be repaid as EMIs as provided in the loan agreements. .Out of the 47 borrowers, 16 opted for a ‘Aadhi Ghar, Paise Nantar’ (House first, money later) scheme. .They entered into tri-partite agreements with developer and HDFC Ltd, as per which the developer has assumed the liability of the borrowers to pay the pre-EMI for a period of 24 months from the date of disbursement or till possession of flat whichever was earlier. .However, the developer failed to fulfil its commitment. There were FIRs filed against the developer and its officials under the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999. .Flat construction thereafter came to a standstill. However, the homebuyers were still asked to pay EMIs, prompting them to move the High Court..On June 26, the Court passed an order restraining financial institutions from recovering EMIs from the homebuyers until a Resolution Professional appointed by the NCLT, Mumbai in the matter, files his report. Insolvency proceedings had been initiated against the developers by the Bank of Maharashtra..In its interim order of June 26, the Bombay High Court Court directed:."... we direct respondent Nos.3 to 26 (Financial Institutions) as an interim measure not to recover the EMIs from the members of the petitioner i.e. home buyers till report is submitted by Resolution Professional i.e., respondent No.2 which shall also be informed to the court."Bombay High Court's June 26 order.HDFC moves plea to recall interim order.The June 26 interim order was passed after financial institutions failed to appear before the Court, although the petitioner submitted that notice had been served. An interim application was filed thereafter, seeking to recall the June 26 order. .Senior Advocate Prateek Seksaria, instructed by Nankani Associates, for HDFC Ltd., and Senior Advocate Birendra Saraf for Tata Capital Housing Finance Limited (Respondent no. 8 in the Writ Petition) argued for the recall of the interim order for the following reasons:.Non-service of notice: HDFC claimed that the email addresses to which they were served notice by the petitioners rejected the emails due to size restrictions.Inadequacy of material particulars in the Writ Petition: It was argued that the writ petition did not sufficiently detail the list of homebuyer members, details of loan transactions, names of financial institutions from which money was borrowed, amounts, bye laws of Society, etc. The dispute between the parties is a private dispute with no element of public law involvement: Therefore, it was contended that the homebuyers could not have moved a writ petition in the first place. .Too early to recall interim order: Court.The Court on Tuesday held that it was too early to recall the interim order. It observed that HDFC had continued to deduct EMIs from the account of the flat buyers to whom loans were advanced despite the interim order..The Court also took note of submissions advanced by Advocates Neela Gokhale with Yogita Ugale (appearing for the flat-purchasers) that they had served to HDFC on the email address mentioned on their website and even filed an Affidavit of Service thereafter. .The Court noted:."When the applicant HDFC had itself displayed details of its email address on its website through which its customers were required to communicate and correspond with them, it is not open to HDFC to say that the said email address is not frequently accessed by its officials. HDFC was fully aware of the court proceedings. Notice on the HDFC is to be construed as constructive notice and only on the said ground the interim order may not be vacated.".It was further noted that a Resolution Professional has been appointed in the insolvency proceedings against the developer. The Court observed that the resolution of the homebuyers' grievances vis-a-vis the lending institutions may have to be looked into by the Resolution Professional and informed.."That was why we had directed that till report is submitted by the Resolution Professional, EMIs should not be recovered by respondent Nos.3 to 26 from the home buyer members of the petitioner", the Court remarked..Thus, the Court proceeded to dismiss HDFC's interim application..However, the flat-purchasers were directed to furnish copies of the registration certificate, bye-laws, list of registered members with all the details pertaining to availing of loan as on the date of filing of the writ petition to the Court. HDFC and TATA Capital were asked to file its reply to the Writ Petition if required.