NCLT allows govt to take control of Unitech, appoint 10 directors

In a rare move, the National Company Law Tribunal (NCLT) has allowed the government to appoint new management for real-estate giant Unitech Ltd and take control of the real estate major that has left thousands of home buyers in the lurch.

The bankruptcy court approved the corporate affairs ministry's plea seeking control of the embattled company and asked to replace Unitech's directors with 10 new nominee nominees.

The two-member bench of the NCLT in Delhi also asked the government to submit a list of the proposed nominee directors for it to examine on 20 December.

The NCLT bench also issued notices to Unitech's existing National Company Law Tribunal (NCLT)-appointed directors, who are now restrained from acting as board members.

This marks the second instance of the government taking control of a company in public interest after the government stepped in to take the reins of Satyam Computer Services Ltd and an affiliated firm in 2009, citing mismanagement.

The NCLT decision follows large scale fund diversion by the company that has adversely affected thousands of home buyers who have put their life-time earnings and borrowed money to buy homes.

Thousands of buyers across India have been left in the lurch by indebted developers such as Unitech and Jaypee Infratech Ltd. 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.

Reports said about 19,000 home buyers are currently awaiting possession of their homes, while the company has defaulted on payment of Rs600 crore ($93 million) to more than 15,000 small depositors, according to the petition.

The company has also defaulted on Rs880 crore 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,'' reports quoted additional solicitor general Sanjay Jain as saying.