Diversion of funds by builders a "malady", want to stop this "nonsense": SC

The Supreme Court today said diversion of funds collected from investors by real estate developers was a "malady" and it wants to stop this "nonsense" once and for all.

The apex court observed that if builders were diverting money invested by a person in a particular housing or commercial project to complete other projects, it, prima facie, amounted to misappropriation and criminal breach of trust.

A bench comprising justices Arun Mishra and U U Lalit observed this while it was hearing a matter related to embattled real estate major Amrapali Group.

The bench wondered as to how Rs 2,765 crore fund was allegedly diverted by the Amrapali Group for carrying out works in its other projects.

"How can they (chartered accountants) allow siphoning of money like this," the bench said, adding "money given by the investor to complete a particular project can not be used for other projects as it amounts to criminal misappropriation."

"This (diversion of funds) is the malady which is affecting all the builders. We want to stop this nonsense once and for all," the bench said.

Referring to the issue of diversion of funds, the bench told the counsel appearing for the Amrapali Group, "Stand on your legs and not on the shoulder of investors."

The top court said alleged diversion of funds by the group, prima facie, amounted to criminal breach of trust and it would deal with the issue after hearing the parties.

During the hearing, the bench said the Amrapali group was "too ambitious" and instead of completing projects, they spread their projects.

"If there is a will, there is a way. But they (Amrapali) are not willing," the bench said, adding that the group has also tried to befool the court.

The bench pulled up the group for not following its orders and said "serious kind of fraud" has been played by the firm not only with the investors but also with the top court.

"We want the results and if results are not forthcoming, we may call off the buy," the bench observed, posting the matter for further hearing tomorrow.

The court ordered attachment of all bank accounts and movable properties of 40 firms belonging to the group and also directed it to place before the bench details of all its bank accounts from 2008 till today.

The company had earlier told the court in an affidavit that it was not in a position to complete the projects and hand over possession of flats to over 42,000 home buyers in a time-bound manner.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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