India invokes rare step to seize realty firm
new delhi — India’s bankruptcy court allowed the government to appoint new management for real-estate giant Unitech in a rare move, as the corporate affairs ministry sought to take control of the embattled company.
The National Company Law Tribunal agreed on Friday to the government’s plea and issued notices to Unitech’s existing directors, who are now restrained from acting as board members. The two-member bench said the government can appoint 10 nominee directors, whose names it will examine on December 20.
The petition hinges on allegations of fund diversion adversely affecting public interest and marks the second time that the ministry has taken control of a company, people with knowledge of the matter said, asking not to be identified as they are not authorised to speak publicly.
Thousands of buyers across India have been left in the lurch by indebted developers such as Unitech and Jaypee Infratech after a slump in sales forced them to slow or halt construction of projects. Unitech’s managing director Sanjay Chandra, part of the founding family, was arrested in April this year following a complaint by people who weren’t given possession of their flats. The Supreme Court denied Chandra bail until the company deposited funds with it to protect the interests of such buyers, according to court documents.
There are currently about 19,000 home buyers awaiting possession of flats or houses, while the company has defaulted on payment of ₹6 billion ($93 million) to more than 15,000 small depositors, according to the petition, sections of which have been seen by Bloomberg. The company has also defaulted on ₹8.8 billion of loans and debentures, including interest due, it said.
“We want to avoid insolvency of this company, otherwise the 19,000 home buyers will be left high and dry,” said Additional Solicitor-General Sanjay Jain.