Delhi High Court: A PIL filed by the Court on its own motion by converting a letter of Vinod Kumar Naugain wherein the issuance of directions are sought to the Central Government to draft and implement a comprehensive scheme to address the grievances of home buyers availing home loans, including those buyers who haven’t been given possession of their flats by their builders and are still paying monthly instalments towards EMI payment, and are thus, unable to claim tax benefits on the payment of such monthly interest amounts. A division bench of Satish Chandra Sharma, CJ., and Subramonium Prasad, J., dismissed the plea as there is a proper regimen available to redress the grievances of a home buyer and in view of the Master Circular dated 01-07-2015, titled as “Master Circular – Loans and Advances – Statutory and Other Restrictions”, and “Master Circular – Housing Finance” issued by the Reserve Bank of India.
The Complainant further seeks the formulation and implementation of a scheme that conclusively addresses the grievances of other home buyers who may not have the capacity to approach courts/forums to seek redressal against builders. It is the complainant’s grievance that banks should be held responsible for the inordinate delay in real estate projects, inasmuch as banks only sanction loans for projects that are verified as genuine, after proper scrutiny.
The petition further seeks issuance of directions to the government to formulate a comprehensive scheme for extending tax benefit vis-à-vis the payment of interest and principal amount of EMI as extends to those home buyers that have already gained possession of their dwelling units/homes. The Complainant also alleged that the builders misuse the provisions of Insolvency and Bankruptcy Code, 2016, by resorting to declaration of insolvency in order to escape payment of dues to their creditors, who include home buyers and to this extent.
The Court noted that the statutory directives issued by RBI are done in the exercise of powers under Sections 21 and 35-A of the Banking Regulation Act, 1949. The master circulars in the counter affidavit filed by the RBI set out extensive detailed norms for lending activities which would include housing loans, for banks to follow and implement. Thus, RBI being a regulatory body, is equipped with requisite expertise to advise on and to formulate economic policies that have a binding effect on the banking system which is backed by statutory force.
The Court further noted that on a perusal of the Master Circular, RBI has given advice to various banks as to which all projects’ loans should be advanced and the precautions which the banks must take while extending loans. The Master Circular also advises that the quantum of loans which are to be granted by the banks for housing finance and to maintain loan to value ratio in case of individual housing loans.
The Court opined that the guidelines specify that the housing loans sanctioned to individuals who invest in housing projects are linked to the stages of construction of housing projects. However, it cannot be said that it is the banks’ responsibility to get the project completed and the bank cannot assume the role of the builder to complete the project. When the projects proponent defaults in completing a project, it is always open for the banks to approach the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 for getting an Insolvency and Resolution Professional appointed and to take measures to ensure that project is revived, and the project is completed because the banks are also anxious to recover their money.
The Court held that no interference is needed as there is a proper regimen available to redress the grievances of a home buyer considering that other than the remedies in Insolvency and Bankruptcy Code, 2016, it is always open for the home buyers to approach the Real Estate Regulatory Authority (RERA) to ensure that the project is completed along with the Master Circular issued by the Reserve Bank of India.
[Court on its own motion v Govt of NCT of Delhi, 2023 SCC OnLine Del 1546, decided on 13-03-2023]
Judgment By: Justice Subramonium Prasad
Advocates who appeared in this case :
Mr. Gautam Narayan, ASC for Respondent 1/ GNCTD;
Mr. Ramesh Babu, Ms. Manisha Singh & Ms. Jagriti Bharti, Advocates for Respondent 2/ RBI;
Mr. Kirtiman Singh, CGSC with Mr. Waize Ali Noor, Mr. Madhav Bajaj, Ms. Kunjala Bhardwaj, Ms. Shreya V. Mehra & Mr. Yash Upadhyay, Advocates for Respondent 3/ UOI;
Mr. Siddharth Panda, Advocate for Respondent/ L&B Deptt, GNCTD.