Companies Act 2017: government may be directed to enforce section 456: report

The federal government may be directed to issue notification for the enforcement of section 456 of the Companies Act 2017 immediately to regulate the advances received from public for real estate projects by the companies, recommended a report.
The apex court had constituted a Joint Investigation Team comprising the officers of Federal Investigative Agency (FIA), National Accountability Bureau (NAB), Anti-Corruption Establishment (ACE) and senior officers/collectors of the revenue department of concerned area for carrying out forensic audit of housing schemes.
The JIT submitted it progress report saying Section 456 of the Act stipulates a number of conditions for the companies, which invite advances from the public for real estate projects, including but not limited to the requirements to obtain approval of the Commission, and to deposit any sum obtained from the allottees in a separate escrow account opened in the name of the project.
However, as per sub-section (3) of section (1) of the Act, the provisions of section 456 of the Act shall come into force on such date as the federal government may, by notification in the official Gazette, appoint. This notification has not been issued so far by the federal government.
The report said that the forensic audit of more than 88% registered housing schemes has been completed. Out of 2,814, only 248 have been found law-abiding, while legal action has been recommended against rest of the schemes according to the nature of the illegality/irregularity commuted by the management of these schemes.
The report said that a huge number of housing societies have extended their area, illegally, and are marketing and selling the said area as part of the housing society, defrauding the general public.
In some instances, applications have been submitted for regularisation of such illegal extension, while in many others not even such applications have been put forward. In many cases such extension are several times larger than the size of the actual society.
Booking and sale of plots is not regulated by any agency. As such, overbooking of plots is a common phenomenon, whereby "files" for more plots are sold than the actual number of plots available with the society at low rates. The income generated in this manner is used for development of the society and then plots are allotted to some of the applicants through supposedly random balloting.
Mortgaged plots are marketed and sold before being released from the regulator. Encroachment on park, mosque, graveyard and public sites is very common. Layout plan is modified by the developers at their own without seeking any approval from the regulator.
Transfer deeds of mortgaged plots are not executed in favour the regulator. Revenue record is not updated when sale/purchase of property is made. Mutations in favour of new owners are not made and sale is conducted on sale deed / sale of file alone, said the report.