Unitech shares crash after SC stay order on govt takeover of realty major

Attorney General admits that the step should not have beentaken

The Supreme Court has stayed the National Company Law Tribunal’s (NCLT’s) order allowing the government to take charge of the management of stressed real estate firm Unitech. The decision, seen as positive to thousands of Unitech homebuyers and depositors, ironically triggered a crash of the company’s share, amid fears that any value left would be drained in the fund mobilisation process for refunds.
 
The stay order came in the wake of Attorney General K K Venugopal’s admission before the Bench that the government petition to the NCLT was a mistake. The Bench, headed by Chief Justice Dipak Misra and comprising A M Khanwilkar and D Y Chandrachud, took the apology and statement on record while passing the stay order on Wednesday. On Tuesday, the SC had expressed its unhappiness over the NCLT order, as it came in the way of the steps initiated to recover dues of aggrieved homebuyers.
 
Reacting to the apex court’s Wednesday ruling, Unitech said: “The SC order will help the company on its path to complete the projects and to increase the pace of delivery and refunds to customers. The order of the NCLT and some other courts and forums were coming in the way to meet the objectives of possession and refunds…. We strongly believe that the current management is better equipped to handle the completion of the 74 projects that are in various stages of construction.”
 
The stay on government takeover has put the focus back on recovery efforts. For promoter family members — who were seen anxiously discussing the implications with lawyers in the court premises — the wait, however, is not over.
 
Promoters Sanjay and Ajay Chandra, currently in judicial custody, have been allowed special facilities to negotiate sale of the group’s unencumbered assets to raise Rs 750 crore by the end of December. Their bail hinges on their ability to deposit the sum. Over 4,700 homebuyers have submitted their refund claims through the portal created by the SC, running up dues of over Rs 1,800 crore. Though the next bail hearing is in January, the petitioners can move court earlier if the required funds are mobilised.

On Friday, the government had moved a company law petition alleging mismanagement on part of Unitech’s board members. Additional Solicitor General Sanjay Jain had argued before the tribunal that there were 19,000 homebuyers who had paid substantial sums but construction had not commenced. He added that there were 51,000 depositors to whom the company owed over Rs 723 crore. Citing these and other irregularities unearthed after an NCLT order in 2016, Jain contended the affairs of the company were not being conducted in accordance with the company law. 

Satisfied that a prima facie case was made out, the principal NCLT Bench passed interim orders to remove the company’s directors and restricted them from selling, or otherwise encumbering their properties and that of the company’s. “All the respondents are restrained from alienating, mortgaging, creating charge or lien or interest in properties owned by them personally or that of the company till the conclusion of investigation as directed by this tribunal vide its order dated 6.10.2016,” the tribunal had said in its order. It had also noted that the investigation ordered by the NCLT had started but hadn’t been completed due to non-cooperation. 

Later that day, senior advocate Ranjit Kumar had brought various interlocutory orders passed by the SC in the matter to the NCLT’s notice. Following this, the NCLT added in its order: “...the order which has been already passed in the forenoon session by this Bench shall be subject to compliances of all directions” of the apex court. It added the new board, if appointed, would also be bound by the court orders. 

In a statement last week, Unitech had said: “Notwithstanding that our managing directors are in judicial custody having extremely limited facilities they are still striving hard to secure financing so that construction can continue to complete various projects. The company has been successful in raising some finance in the past few months, and is confident that it will, over a period of time, complete all its projects.”