A bench headed by Justice DY Chandrachud gave two months to the new board of Unitech to prepare the resolution framework of the company and sought its report. The bench, also comprising Justice MR Shah, granted 2-month moratorium to the new board from any legal proceedings against the company’s management.
Prior Facts:
The Centre had on January 18, 2020 told the apex court that it is agreeable to revisit its 2017 proposal to take over the management control of Unitech Ltd and complete its stalled projects for providing relief to around 12,000 hassled homebuyers. The Centre, in its six-page note submitted to the court, had said it is prepared to revisit its proposal of December 2017, to remove the existing management of Unitech Ltd and appoint 10 nominee directors of the government. The Centre had however said it would not infuse any funds for completion of pending projects of the company. It said the court should direct a moratorium for 12 months. In 2017, the Centre had moved the National Company Law Tribunal (NCLT) seeking suspension of the current directors and taking of control of the management of Unitech Ltd but had later withdrawn the proposal after a stay on its move from the apex court. 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 crore from 29,800 homebuyers mostly in 2006-2014 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 homebuyers’ money and around Rs 763 crore of fund received from financial institutions were not utilised 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).
Key Features:
- In a respite to over 12,000 hassled homebuyers of Unitech Ltd, the Court allowed the Centre to take total management control of the embattled realty firm and appoint a new board of nominee directors.
- The top court approved the name of retired Haryana cadre IAS officer Yudvir Singh Malik as chairman and managing director (CMD) of the new board and directed that the existing board of directors of the company would stand superseded.
- It also refused to appoint Unitech Group founder Ramesh Chandra, as a member of the new board saying that it would not be appropriate at this stage.
- It also approved the names of members of the board which include 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, Managing Director of Mumbai-based Hiranandani Group.
- The top court ordered that existing management board of Unitech would stand superseded with the new board of directors taking charge.
- The bench however refused to agree with the contention of Senior advocate Kapil Sibal, appearing for existing management of Unitech, said that Ramesh Chandra and an accountant should be allowed to be appointed on the new board of the company as it would be of immense help to the homebuyers due to his experience and said that to avoid any misunderstanding, it would not be appropriate to appoint any member of the existing board on the new one.
- The bench clarified that the newly constituted board can take any commercial decision in the interest of homebuyers and with regard to any pending projects.
- The top court also directed the present management of the company, forensic auditors, asset reconstruction companies, banks and financial institutions and state governments to extend cooperation to the new board.
Judgement:
A bench headed by Justice DY Chandrachud gave two months to the new board of Unitech to prepare the resolution framework of the company and sought its report. The bench, also comprising Justice MR Shah, granted 2-month moratorium to the new board from any legal proceedings against the company’s management. It said the Board will appoint a retired apex court judge to monitor the preparation of resolution framework by the Board. The bench also observed that the idea of a professional board is to allow them to take control of the company and complete the pending projects in the interest of homebuyers. It said however that investigating agencies probing irregularities in the company would continue their work. It said the committee headed by Justice S N Dhingra, which was appointed to sell the company’s assets and use the money in completion of pending projects, would continue to work till the new board comes up with a resolution framework.
Edited by J. Madonna Jephi
Approved & Published – Sakshi Raje
