India’s corporate affairs ministry has moved the bankruptcy court to take over management control of real-estate giant Unitech Ltd. citing mismanagement and diversion of funds, people with knowledge of the matter said. The government has sought the suspension of Unitech’s existing board of directors and its chief financial officer in a petition filed with the National Company Law Tribunal under a section of the Companies Act, 2013, given the public interest involved, said the people, asking not to be identified as they are not authorized to speak publicly. The government is seeking to replace the board with 10 of its own nominee directors in the interim, said the people. The tribunal is scheduled to hear the government’s plea on Friday. 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 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 a Times of India report in November.
The company, once India’s second-largest real estate developer, didn’t immediately respond to an email seeking comment sent to Puneet Bansal, who is listed on Unitech’s website as a media contact. Calls to a company helpline listed on their website didn’t connect. The company’s shares were unchanged at 6.10 rupees at 10:09 a.m. in Mumbai.
The government has also appealed to the tribunal to restrain the existing directors and CFO from selling, mortgaging, creating a charge or interest on their personal properties until an investigation into allegations of siphoning and diversion of funds by the company is complete, according to the petition.