Homebuyers' interests prevail over banks and authorities where project funds were diverted and housing projects remained incomplete.

Fraudulent diversion of homebuyers' funds, false disclosures, and non-completion of housing projects justified cancellation of the promoter group's real estate registration and the related lease deeds. Applying the protective scheme of real estate law and the public trust doctrine, the Court treated allottees' interests as paramount and held that authorities' and banks' claims could not be enforced against the project land or flats to the prejudice of buyers. It also required project completion under court-monitored implementation, with completion certificates, conveyance deeds, and possession to follow, while dues were to be recovered from other attached assets and persons holding diverted funds.

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Issues: (i) Whether the promoters' registration under the real estate law and the lease deeds granted by the development authorities were liable to be cancelled for large-scale diversion of homebuyers' funds, non-completion of projects, and fraudulent practices; (ii) whether the homebuyers' interests had to prevail over the claims of the authorities and banks, and whether the project assets could be used to satisfy such claims; (iii) whether the projects were to be completed under court supervision with directions for completion certificate, conveyance, possession, and recovery of dues from other attached properties.

Issue (i): Whether the promoters' registration under the real estate law and the lease deeds granted by the development authorities were liable to be cancelled for large-scale diversion of homebuyers' funds, non-completion of projects, and fraudulent practices.

Analysis: The projects were found to have suffered from pervasive diversion of buyers' money, bogus transactions, false disclosures, non-compliance with statutory obligations, and fraudulent structuring of projects and related entities. The statutory framework under the real estate legislation required timely completion, maintenance of a separate project account, truthful disclosure, and protection of allottees. The conduct found in the forensic material showed default in the promoter's duties, unfair practice, and fraudulent conduct, while the lease conditions under the development statute were also violated through non-payment of dues, impermissible transfers, and misuse of permissions.

Conclusion: The registration of the group under the real estate law was cancelled and the lease deeds granted by the development authorities for the projects in question were cancelled.

Issue (ii): Whether the homebuyers' interests had to prevail over the claims of the authorities and banks, and whether the project assets could be used to satisfy such claims.

Analysis: The Court applied the public trust doctrine and the protective scheme of the real estate legislation to hold that homebuyers could not be made to suffer for the fraud of the promoters and the inaction or collusion of the authorities and banks. The monies collected from allottees were treated as project funds meant for construction and statutory dues, and those funds had already been diverted. Since the bank finance had not been used for the sanctioned projects and no valid mortgage could operate against the allottees' interests in the peculiar facts, the claims of the authorities and banks could not be enforced against the flats or the project land to the prejudice of the buyers.

Conclusion: The homebuyers' interests were held to prevail, and the authorities and banks were denied recourse against the flats and project land to recover their dues.

Issue (iii): Whether the projects were to be completed under court supervision with directions for completion certificate, conveyance, possession, and recovery of dues from other attached properties.

Analysis: The Court treated completion of the housing projects as essential to prevent further prejudice to the allottees. The scheme of the real estate law required completion of the remaining work, issuance of completion and occupancy certificates where warranted, execution of conveyance deeds, and handover of possession. The Court also directed that dues of the authorities and banks be recovered from other attached properties and from persons/entities found to hold diverted funds, while NBCC was brought in to supervise and complete the projects.

Conclusion: NBCC was appointed to complete the projects, the Court Receiver was directed to act for execution of tripartite arrangements and conveyances, and the authorities were directed to issue completion certificates and facilitate possession.

Final Conclusion: The judgment protected the homebuyers, cancelled the promoter regime and project leases, placed completion of the projects under court-monitored implementation, and required recovery of public and banking dues from other attached assets and the persons responsible for the diversion.

Ratio Decidendi: In a case of fraudulent diversion of homebuyers' funds, the promoter's rights, and any dependent claims of authorities or banks, cannot be enforced against the project assets to the prejudice of allottees; the statutory scheme must be applied to secure completion of the project and protect the buyers' possession and title interests.

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