Supreme Court orders forensic audit of Unitech over fund diversions [18-01-2019]

New Delhi:- After Amrapali NSE 0.00 %, the Supreme Court on Friday directed forensic audit of another real estate giant Unitech NSE 0.00 % and its subsidiary companies to probe alleged financial irregularities and diversion of home-buyers’ funds by its promoters and directors, which led to the company failing to complete housing projects.

Unitech Group is involved in construction of 74 housing projects and around 17,000 home-buyers have invested in its projects. Due to financial crisis, the Group has not been able to complete the projects, leaving buyers in the lurch. Its managing director Sanjay Chandra and his brother Ajay Chandra have been in jail since April last year after being arrested by the Economic Offences Wing (EOW) of the Delhi Police for not handing over possession of flats to buyers despite money being paid to the company. The case was registered against them by the aggrieved home-buyers.

A bench of Justices D.Y. Chandrachud and M.R. Shah said it is necessary to ascertain how the funds collected from home-buyers and financial institutions have been utilised by the Group. It said tracing the money which was received for the purpose of the construction projects, but has prima facie been diverted, is necessary to enable the court to take the matter to its logical conclusion.

It said the company had failed to provide all details regarding use of home-buyers’ money and the court was left with no option but to direct forensic audit to find out the truth. The court assigned the task to Grant Thornton and asked it to examine all the documents and bank account details of all companies, their promoters and directors from 2006 onwards.

Senior advocate A.M. Singhvi, appearing for Chandra brothers, pleaded the court to release them on bail so that they could provide all documents and information to the forensic auditors. But his plea was strongly opposed by home-buyers’ counsel M.L. Lahoty. The audit firm told the court that there are around 300 sister concerns of Unitech and at least 10-11 weeks were needed to complete the task.

The court directed that the two directors of the Group and three competent officials, including chief financial officer, would meet the auditors on a daily basis.


19 Jan 2019