Banks stood as mute spectators as Amrapali diverted funds: Supreme Court

A general view of the Supreme Court. Photo: Aashish Aryan
In its judgment cancelling the Real Estate Regulation and Development Act (RERA) registration of debt-laden Amrapali Group, the Supreme Court has also pulled up the Bank of Baroda, Syndicate Bank, Bank of India, and Corporation Bank for not monitoring the utilisation of funds advanced by them to the real estate company. The top court also said that the lenders “acted as a mute spectator” to the fund diversion being carried out.

The judgment, delivered by a two judge Bench of Justice Arun Mishra and Justice U U Lalit, rapped the banks on the knuckle and said that there was no need for the Amrapali group to obtain any loan from banks in addition to the huge amount of money collected from the homebuyers. The banks, the top court said, kept funding the projects despite clear signs of fund diversion by the Amrapali group of companies.  

“It was incumbent upon the bankers also to obtain clear unconditional NOCs…they permitted diversion of money immediately after sanctioning of the loan and also in day to day transactions of Amrapali group of companies,” the top court said.

Citing the forensic auditor’s report, the top court said on Tuesday that as soon as the loans were advanced by the bank to the Amrapali group, they were diverted to other bogus companies of the Amrapali group.

“The submissions which have been raised on behalf of Bank of Baroda that due observance of norms was observed before sanctioning the loan, before disbursal and an independent Lenders' Engineer had been appointed in order to monitor the contract. Monitoring was done during and post disbursal of loan by Bank of Baroda. As a matter of fact, the bank has not been able to show what steps it has taken to stop the diversion of funds to third parties on the same date of disbursal of the amount,” the top court said.

The banks, the top court said on Tuesday, had also failed to ensure that the loans being advanced by them to the real estate group was used in the projects.

“As found in the forensic audit, there was no necessity of obtaining loans from the banks and it has not been used for the purpose it was obtained. The Authorities and Bankers have violated the doctrine of public trust and their officials, unfortunately, acted in collusion with builders,” the top court said.