NEW DELHI - An Indian court on Friday allowed the government to take over management control of the debt-laden property developer Unitech Ltd, a rare intervention that the government said was to protect the public interest.
A government lawyer said it wanted to prevent Unitech becoming insolvent and protect 19,000 home buyers who have yet to be handed apartments they had bought.
The government sought permission from the National Company Law Tribunal (NCLT) to appoint new directors to the board of Unitech, citing mismanagement and siphoning of funds.
Unitech owed about 7.24 billion rupees ($112.34 million) to 51,000 depositors who had placed funds with the company to earn higher interest rates than typically available in banks, government lawyers said.
Justice M. M. Kumar passed an interim order on Friday allowing the government to take management control of Unitech, replacing the 10 existing directors.
The court banned Unitech's existing directors from selling assets or raising loans on their personal and company assets.
Unitech, which has opposed the government takeover, said it had been hit by tough market conditions but had been working hard to deliver projects as promised and to repay depositors.
"The company and its existing directors are working day and night to monetise assets," the firm said in a statement.
Lawyer Ranjit Kumar, representing the company and its two managing directors, told the court that Unitech would file its reply to Friday's ruling within a week.
The next hearing is on Dec. 20.
Unitech's two managing directors, Sanjay Chandra and Ajay Chandra, who are also the firm's owners, were arrested this year for failing to deliver the apartments and the Supreme Court demanded they deposit funds to secure bail.
A lawyer at a law firm that will represent Unitech and all the directors as the case proceeds told Reuters a response to all charges would be submitted during the Dec. 20 hearing but said he could not comment before that. He asked not to be named.
A government lawyer said home-buyers risked losing millions of rupees if Unitech was declared insolvent.
"We want to avoid insolvency of this company, otherwise the 19,000 home buyers will be left high and dry,” said additional solicitor general Sanjay Jain.
India's companies law allows the federal government to make a case before the companies tribunal to take over a company if the firm is found to be acting against the public interest.