India Top Court Halts Government Effort to Take Over UnitechBy and
Supreme Court stays tribunal order suspending Unitech board
Shares drop; top court sets Jan. 12 as date for next hearing
India’s top court stayed an order allowing the government to appoint new management for erstwhile real-estate giant Unitech Ltd., a setback to efforts by the corporate affairs ministry to safeguard the interests of home buyers.
A three-judge Supreme Court panel stayed the National Company Law Tribunal’s Friday order suspending the existing board of Unitech and allowing the government to appoint 10 nominee directors. Since the top court was already hearing a case against the company, the government should have taken its permission before approaching the tribunal, one of the judges observed Thursday. It will next hear the case Jan. 12.
The government has alleged diversion of funds and Additional Solicitor General Sanjay Jain said last week that authorities wanted to prevent the company moving into insolvency and leaving 19,000 home buyers “high and dry.” Unitech’s managing director Sanjay Chandra was arrested in April this year following complaints from home buyers who were not given possession of their flats.
“I think it is a temporary stay till the Supreme Court gets a better understanding of what is really going on,” said Jayesh H., an advocate and solicitor at Juris Corp, a Mumbai-based legal firm. “If the government ultimately succeeds then it can be a strong signal to other real estate players and further strengthen governance standards.”
Unitech’s lawyer Mukul Rohatgi argued on Tuesday that the tribunal’s order was a “drastic step,” which was against an earlier Supreme Court decision. The top court had in October directed Unitech’s Chandra to deposit 7.5 billion rupees ($116 million) to secure bail and ordered that no coercive steps should be taken against the company in the meanwhile.
Unitech shares fell as much as 17 percent before trading 13.7 percent lower at 6.60 rupees as of 3:04 p.m. in Mumbai on Wednesday. It had climbed 25 percent in the preceding three sessions.