Supreme Court Directs CBI Probe into Builder-Bank Nexus in Subvention Scheme

The Supreme Court has directed the Central Bureau of Investigation (CBI) to undertake a probe into the possible nexus between builders and banks in sanctioning huge amounts under so-called subvention schemes without following any due diligence. A bench headed by Justice Surya Kant passed the order on a bunch of over 170 petitions filed by homebuyers who complained that huge loans were disbursed by banks to builders under the scheme even before the construction of the underlying projects was complete. After builders defaulted on delivering the flats, banks demanded EMIs for recovering the loan amounts from homebuyers. Subvention schemes involve a tripartite agreement between the buyer, banker, and developer, where buyers typically pay between 5% and 20% upfront, while the bank loans the rest to the developer in installments. The developer pays the interest on the loan for a fixed period, usually two to four years, until the buyer takes possession. The petitions sought an investigation into the systematic failure of statutory and government authorities, and banks in releasing money to builders for projects that were never completed. The Supreme Court had earlier asked the CBI to provide a roadmap on how to proceed with the probe. The CBI plans to register seven preliminary enquiries, including one case exclusively to probe Supertech projects across the country, one case against other builders outside the NCR, and five cases to probe the nexus between builders and banks in projects in Noida, Greater Noida, along the Yamuna Expressway, Gurugram, and Ghaziabad. The bench, also comprising Justice N Kotiswar Singh, approved this plan. As the investigation would require deployment of staff and officers for evidence collection and probe, the bench directed the Director Generals of Police (DGPs) of Uttar Pradesh and Haryana to depute officials for forming a Special Investigation Team (SIT) for probing the seven PEs.