No More EMI Pressure: SC Protects NCR Homebuyers in Subvention Scheme

NEW DELHI: In a major relief to numerous homebuyers in the National Capital Region (NCR) who are yet to receive possession of their flats due to prolonged delays by developers, the Supreme Court has ordered that no coercive actions be taken against them by banks or real estate builders regarding EMI payments. Additionally, no complaints related to cheque bounces will be entertained.

Subvention Scheme Issues

In line with the subvention scheme, the loan amount approved is paid directly into the builder’s account by the banks. Builders are then responsible for paying the EMIs until the flats are handed over to the homebuyers. However, most of the builders failed to pay these EMIs, and banks proceeded against the buyers to recover the EMI amounts.

Legal Battle

The affected homebuyers moved to the Delhi High Court in 2023 and were denied relief. They further ran to the Supreme Court, where they were granted interim protection.

Supreme Court’s Order

Compensating for the threats of cheque bounce cases, a bench of Justices Surya Kant and Ujjal Bhuyan, while passing an order on Monday, said it would not entertain any such complaints by the homebuyers till the time the matter is pending.

“In the meantime, there shall be an interim stay in all matters, ensuring that no coercive action, including complaints under Section 138 of the Negotiable Instruments Act, 1881, shall be entertained on behalf of banks, financial institutions, or builders/developers against the homebuyers,” the court’s order stated.

Homebuyers’ Plea

The homebuyers Challenging the High Court’s decision stating that their loss from the illegal disbursal of loans by the banks directly to the builders was in violation of RBI directives.

“This is a clear case where banks, oneself are (rich man) extended money to builders (rich man) who then ran away without fulfilling their obligations. The banks disbursed the loan money unlawfully to builders, leaving the homebuyers who remain unpaid a single rupee or their dream homes in the middle of litigation,” the petition by home buyers in NCR through advocate Anshul Gupta.

Allegations Against Banks and Builders

The homebuyers accused the respective banks of making the disbursals of the respective loan amounts to the builders without its linkage to the construction stages of the projects directly, blatantly violating RBI and National Housing Bank guidelines.

“The High Court failed to note that both the builders and banks colluded. Homebuyers were merely used as a means to get the loan sanctioned and transferred from the bank to the builder. These actions breached the tri-partite agreement and violated RBI/NHB guidelines,” the petition stated.

Lack of Legal Framework

This issue was supported by the fact that there is no legal regime to regulate matters when insolvency proceedings are initiated against real estate developers. However, banks continue charging EMIs/pre-EMIs, even though the repayment responsibility lies with the developers.

Supreme Court’s Directive

Accepting the homebuyers’ complaint, the Supreme Court said that the real estate builders and developers had to file a reply affidavit within two weeks and state their assets. The court gave the order that if the parties refused to adhere to the order, the court would have to resort to compelling them to do so.