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Serious allegations of title & licensing violations by IREO

Posted on by Track2Realty
Track2Realty Investigation-I

News Point: Once hailed as foreign funded & professional driven developer, IREO today faces serious allegations of billion-dollar scam and violations of foreign remittance, defective land title and illegal licensing procedure. 

IREO Grand Arch, IREO scam, IREO fraud, IREO billion dollar scam, IREO money laundering, IREO cheated buyers, DTCP Haryana fraud, land title fraud in Haryana, Licensing fraud in Haryana, Gurugram property fraud, India real estate news, Indian realty news, Real estate news India, Indian property market news, Track2Realty, Builders lobby in DTCP HaryanaAmidst the ongoing controversy and allegations of billion-dollar scam against IREO, an aggrieved buyer of IREO Grand Arch has leveled serious allegations of connivance between the builder and the government agency, DTCP (Department 0f Town & Country Planning).

Prima facie, it appears to be a case of IREO allegedly having misrepresented facts and defrauding investors/buyers by falsely representing to have obtained requisite license besides failing to comply with rules regarding registration of a collaboration agreement. The alleged violations not only jeopardised the interests of hundreds of buyers of IREO Grand Arch, but have also caused revenue loss of several hundred crores to the state exchequer.

Irregularities have been pointed out in manner of granting the license to M/s. SU Estates Pvt. Ltd. and others for the Grand Arch project being advertised to having been developed by the IREO Group in Sector 58, Gurgaon. A case in this regard had been filed by Deepak Hans, who has been allotted a residential unit in the project.

The role played by the DGTCP (Director General Town & Country Planning) has also been in question because of its alleged inaction in addressing the concerns of the homebuyers regarding the blatant violations of the provisions of the Haryana Development & Regulation of Urban Areas Act, 1975 and Rules of 1976 made thereunder while failing to stop the illegal sale of units being made by IREO in its name without having been granted any permission/approval for the same by the DTCP under the extant provisions of applicable laws.

A complaint in this regard was first made by Deepak Hans on 30thJuly, 2015. Another complaint dated 24th April 2016, titled HARAYANA ILLEGAL APARTMENT REGISTRATION SCAM was filed before the DTCP with a copy to PMO, Ministry of Urban Development, CM office, CVC, CBI, ACB (Anti Corruption Bureau), Additional Chief Secretary, CAG, ED, Serious Fraud Investigation Office-Ministry of Corporate Affairs, Govt. of India.

The license for developing a group housing society was granted by the DTCP to one M/s SU Estates Private limited, Hi-Energy Private Limited, Bulls Realtors Private Limited, Marigold Merchandise Pvt. Ltd., High Profile Realtors Private Limited, Mikado Realtors Pvt Ltd., and Adson Software Pvt Ltd., in January 2008. It is noteworthy that at that point of time, according to records SU Estates, which was the main company, did not own any land for the housing society, which is contrary to law.

According to rules it is mandatory for an applicant seeking a license for developing a group housing society to own land in its own name. In this case SU Estates, in fact, got land transferred in its name from two of the other licensees, subsequently, in the year 2009. This puts a question mark on the initial license granted for the project which can be contested and cancelled anytime in future for misrepresentation/suppression of facts.

A few questions that indicate foul play are:

Q. When IREO didn’t have land title & licensing related with plot of IREO Grand Arch in its name, how could it market it as its own project?

Q. When IREO didn’t have any permission/approval from the DTCP to develop/market or sell the developed units, how could it continue to sell the same? 

Q. The ROC filing of the license holding company and the IREO doesn’t establish these are subsidiary companies. Have the norms been violated to facilitate foreign funding to IREO?

Q. Why has DTCP been silent on the controversy with this project and has tried to shield the builder?

Q. Why did DTCP ignored the misrepresentation/suppression of facts by the builder before granting the Occupation Certificate to the project?

Q. The buyers are asked to sign indemnity before possession that the builder doesn’t have any liability in future. Who would be responsible if tomorrow there is any legal repercussion with retrospective effect? 

After the license was granted, the high-profile IREO Pvt Ltd. came into the picture and this was the genesis of high-end luxury project IREO Grand Arch. However, the arrangement with IREO is also riddled with loopholes. First of all, according to stipulations regarding policy parameters for allowing change in beneficial interest or change in developer, any such change in shareholding beyond 25 per cent would involve prior approval of DGTCP and a registered collaboration agreement between the proposed developer and the land owning entities. But till date, there is no documentary evidence to suggest such arrangement has been made nor any permission obtained from the DTCP.

Such an agreement mandates the payment of requisite charges. But in the case of Grand Arch while the license was issued to SU Estates and others, the project is being sold as IREO’s. However, the records show no registered agreement of the Group with the original licensees nor any permission has been obtained by IREO from DTCP in this regard.

Meanwhile, according to DTCP’s reply to an RTI application filed by Deepak Hans seeking details of the application, if any, moved by SU Estates and M/s IREO Pvt Ltd., regarding permission/transfer to Marketing, Sale, Administration, Assignment of joint development right from SU Estates to IREO Pvt. Ltd., the DTCP has informed that, “No such application had been received”.

DTCP Haryana has also not issued any permission for transfer of beneficial interest in favour of IREO and neither has any fee has been deposited by the two parties in this regard. (copy of the DTCP reply is with Track2Realty). This raises a fundamental question as to how can the apartments be sold as IREO’s without legal and valid title.

In an email query sent to IREO, the company spokesperson denied these charges but failed to give any evidence that could demolish the allegations. The company statement said, “All relevant Titles are with IREO, this is an erroneous charge. No misrepresentation has been made… No violations whatsoever… This is not correct and seems like inferred interpretation.”

However, the documents with Track2Realty suggest there has been blatant misrepresentation of facts, and it is apparent that the state exchequer has suffered substantial loss of revenue. The DTCP though has issued show cause notice to other license holders on the same grounds vide Memo No. 13697, dated 4thMay, 2018, no such Memo has been issued to IREO Grand Arch.

It is noteworthy that the Punjab and Haryana High Court had earlier issued a contempt of court notice to the DGTCP after it failed to comply with the High Court’s earlier order to take action against the developers that include IREO.

In spite of the irregularities and court order (dated 6thNovember, 2015), the builder was issued Occupation Certificate to start the handing over of the apartments. In December, 2017, IREO sent notices to the buyers claiming to have received Occupation Certificate from the Director General, Town & Country Planning, Haryana asking them to make the final payment and complete other formalities for taking over the possessions of their apartments.

The fine print of some of the clauses in the indemnity bond to be signed and submitted by the buyers at the time of taking possessions also hints at certain pitfalls that can prove to be costly for the buyers at a later date.

According to one such clause, “The Vendee (buyer) hereby also undertakes to abide by all the conditions and restrictions and other stipulations imposed in respect of the Grand Arch by virtue of the license granted to the Vendor for the Grand Arch and shall also abide by the applicable Zoning Plans, Building Plans and all laws, bye-laws, rules, regulations and policies applicable to the said Apartment and/or the Grand Arch or as imposed or may be imposed in future under any applicable law.” 

According to Saqib, lawyer of Deepak Hans, “The license which is being referred to in the clause is itself under a cloud. So, the builder is in effect transferring all its liabilities that may occur in future to the unsuspecting buyers, even fully aware of its violations. And it was for the DTCP to take immediate action so that the buyers’ interests are safeguarded.”

“The DTCP being the nodal department to enable regulated urban development in the State of Haryana should be proactive in ensuring that private builders do not resort to malpractices which can harm homebuyers and any complacency on its part can be detrimental for urban development in the state,” he adds.

By: Ravi Sinha 

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