The Supreme Court’s stand that the NCLT’s decision of allowing the centre to appoint directors in Unitech will not have an impact on the court’s focus to protect the interest of homebuyers will come as a welcome relief to them. The National Company Law Tribunal (NCLT) has allowed the corporate affairs ministry to appoint 10 nominee directors for Unitech, who would be subject to tribunal nod, saying that the existing directors will not be allowed to sell company’s or personal assets. The NCLT has also permitted permitted the ministry of corporate affairs (MCA), to suggest names of 10 new nominee directors by 20 December.
“The man is already in jail. New directors have been permitted to be appointed. Their first responsibility is to comply with the Supreme Court’s order and protect the interest of homebuyers,” Chief Justice Dipak Misra and Justices A M Khanwilkar said, referring to Unitech MD Sanjay Chandra.
Ahead of listening to Unitech’s plea today, the CJI said, “We will hear the appeal on Tuesday. Since the Union government has moved the NCLT for taking over Unitech management, let it be present through its counsel during the hearing. “We are more concerned about homebuyers than other investors. Homebuyers are not investors.”
Earlier, the ministry of corporate affairs had approached the NCLT to take over the management of Unitech, alleging mismanagement and siphoning of funds by the management. On hearing the company a few hours after the initial order was issued, the tribunal asked the firm to file a reply to the government’s petition. The firm had said the tribunal was not informed by the government of a Supreme Court bar on any coercive action against it.
The slump in real-estate demand, mainly due to incomplete projects, left companies like Unitech, Jaypee and Amrapali in the lurch, forcing the government to seek control of the former on grounds of mismanagement and diversion of funds, while two others are facing insolvency and repeated raps from the Supreme Court. But, as the real-estate business failed, it put enormous risks on home-buyers, who did not get their house even after investing their hard earned money.
Moving for insolvency when the companies are failing to either deliver their promised projects and repay their loans seems as the only option but homebuyers get nothing from it as they are not treated as secured creditors such as the banks and financial institutions. Unitech has failed to deliver despite the apex court refusing to grant bail to Managing Director Sanjay Chandra.
Bank of America Merrill Lynch says that government taking control of a company is indeed a rare event, and appears to be be most plausible solution. In its note, the global firm said that the case will set a precedent for other stranded real estate projects. “Resolution of stranded assets will expedite industry consolidation,” noted the research firm.