The government on Friday received a nod from the bankruptcy court to appoint a new management for realty giant Unitech. The Corporate Affairs Ministry will soon take control of the struggling company.
The National Company Law Tribunal (NCLT) agreed on Friday in response to government's request and issued notices to Unitech's existing directors conveying that they will no longer be allowed to be a part of the board.
As the NCLT suspended all the eight directors of the realty firm, the government can now appoint 10 nominee directors, whose names will be examined on December 20, reported Bloomberg LP.
The decision was primarily taken by the NCLT over allegations of fund diversion adversely denting public interest and also marks the second time that the ministry has taken control of a company.
It was also important to protect the interest of about 20,000 homebuyers and 51,000 depositors to whom the company owes Rs 723 crore.
Thousands of such homebuyers across the country have been left in the lurch by builders such as Unitech and Jaypee Infratech Ltd after a plunge in demand pushed them to either slow or halt the construction of house projects.
Earlier this year, Unitech's managing director Sanjay Chandra was also arrested after homebuyers filed a complaint against the company as they were not given the possession of their flats.
At present, Unitech's market capitalisation stands at Rs 1,906 crore with the promoters having pledged around 73 percent of their 17.92 percent stake in the company.
"It is a wake-up call for all corporates to not do business at the cost of customers, shareholders and vendors," said JC Sharma, vice-chairman and managing director of Bengaluru-based realty developer Sobha.
"It will send a message to the industry that if you mismanage your company you will lose it," said an executive with a Delhi-based real estate company.
"With court cases and government policies like the Real Estate Regulatory Authority (RERA) there was now a perception that real estate was becoming a buyer's market," added the executive.
