Arun Mishra and UU Lalit
Arun Mishra and UU Lalit

Supreme Court directs banks and financial institutions to restructure loans given to Amrapali home buyers

Debayan Roy

The Supreme Court today directed banks and financial institutions to restructure loans given to Amrapali home buyers and release the rest of the amount that was withheld so far. (Amrapali Final Order)

In a bid to ensure generation of funds and completion of stalled projects, the Bench of Justices Arun Mishra and UU Lalit has directed the Reserve Bank of India (RBI) to keep its circulars and guidelines related to Non-Performing Assets (NPAs) "in abeyance" for loans to the home buyers.

"In view of current social and economic conditions, the Court may direct the RBI to keep its circulars/guidelines relating to NPA in abeyance and permit all banking and financial institutions, etc. to disburse loans to home buyers notwithstanding the status of accounts as NPA."

Supreme Court

The two-judge Bench has also directed that banks and financial institutions work out a "long-term restructuring of all home buyers' loans about Amrapali Projects as well as any charges on the Amrapali project held by banks and financial institutions". The order states,

"We direct the banks and financial institutions to release loans to home buyers, whose loans have been sanctioned, notwithstanding the fact that their accounts are declared as NPAs. Let there be restructuring of the loan amount. It may be released under the current norms of the RBI for releasing loans and the rates fixed by the RBI thereof."

Supreme Court

The Apex Court noted in its order that considering the nature of real estate, projects were at a standstill, and thus the Noida authority cannot charge exorbitant rate of interest from the builder for delay in payment. The Court said that the rate of interest cannot be more than eight percent.

"Considering the current state of real estate, the projects are standstill, and in order to give impetus to such housing projects and mainly considering plight of home buyers and as pointed out by Noida and Greater Noida Authorities...

...we direct that rate of interest on the outstanding premium and other dues to be realized in all such cases at the rate of 8% per annum and let the Noida and Greater Noida Authorities do a restructuring of the repayment schedule so that amount is paid and Noida and Greater Noida Authorities are able to realize the same."

In the order, Justice Mishra further stated that "home buyers are not able to obtain fruits of the investment and are deprived of legal title of the flats". For this reason, the Noida and Greater Noida authorities were directed to work out a schedule of funds they would need in order to wrap up the projects.

The Court also ordered that the balance Floor Area Ration (FAR) of various Amrapali projects be also sold through court receivers, so as to generate more funds that can be used to complete projects.

Over 5,000 houses await completion in the Noida and Greater Noida regions, which covers more than 44,000 residential units.

In the earlier hearing, SBI Capital had agreed to fund the stalled Amrapali projects.

Senior Advocate Harish Salve, appearing for SBI Cap, had submitted that they would be funding the stalled (net surplus projects) of Amrapali only.

For this purpose, SBI CAP will create another company, which shall work in collaboration with the National Buildings Construction Corporation (NBCC).

The matter will be heard again next week.

[Read the order]

Amrapali Final Order.pdf
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