Amrapali conducted serious fraud; Supreme Court directs NBCC to complete stalled projects


News Point: The Supreme Court (SC) has said that Amrapali conducted serious fraud in connivance with Noida and Greater Noida Authority officials. 

The SC ordered to cancel RERA registration of Amrapali projects.  

NBCC to oversee completion of projects in Noida and Greater Noida.  

Home buyers have been ordered to deposit remaining money in an escrow account. 

JPMorgan has violated Foreign Exchange Management Act (FEMA) regulations.

The Supreme Court of India categorically said on Tuesday, July 23, that serious fraud has been played by real estate firm Amrapali Group in connivance with Noida and Greater Noida authorities by failing to give possession of flats to over 42,000 home buyers.

The bench of judges Arun Misra and UU Lalit had previously reserved their order on the matter.In May 2019, Noida and Greater Noida authorities have told the SC that they don’t have the requisite resources and expertise to construct the stalled projects of Amrapali.

Senior advocate Debal Kumar Banerji, appearing for Noida authority, had accepted that any action could not be taken against the group due to bulk of home buyers and political weight.

“The money paid by home buyers included the duties to be paid to authorities. And since authority did not ensure compliance with conditions of lease, they cannot have any charge over the project,” the bench said.

Amrapali owes around INR 5,000 crore towards the principal amount and interest component besides the penal interest to both the authorities. The SC said that the dues of banks and authorities will be realised by selling of attached property of Amrapali Group other than the projects.

Meanwhile, the authorities have been ordered to execute tripartite agreement and issue completion certificate to the projects.The Apex Court has cancelled registration of all projects of Amrapali Group companies under Real Estate Regulatory Authority (RERA).

Advocate Ashwarya Sinha representing over 2,000 homebuyers, said, “This is a landmark judgement. Builders have taken benefit of innocent homebuyers for long but this judgement will bring in fear of law to such unscrupulous realtors. This also shows that authorities must also be held responsible for the lapses on their part. This order also protects that statutory dues are not burdened on the buyer. We are hopeful that NBCC will complete the remaining projects on time and buyers will finally be able to live in their dream homes.”

Keeping the interests of the home buyers, the Supreme Court has also directed NBCC to oversee completion of company’s projects in Noida and Greater Noida. The apex court fixed the commission of NBCC at 8 per cent. The company had previously proposed the project management cost at 10% of “actual cost of work” which was about INR 774.17 crore.

The bench said that the money will be deposited by all personnel who have benefited from siphoning off the home buyers’ money. Home buyers have been ordered to deposit remaining money in an escrow account.The apex court also observed that there was no need to secure loan against the project since buyers had paid the money in full.

In September 2018, NBCC had submitted its report saying that about INR 8,500 crore were needed to complete 46,575 residential units in Category A, B and C projects of the company. Interestingly, according to an affidavit previously filed by Amrapali, it had informed that about INR 5,220 crore are needed to complete all these projects.

In May 2019, forensic auditors Pawan Agrawal and Ravi Bhatia had informed the SC that Amrapali has diverted INR 3,523 crore of home buyers’ money. The auditors further said that INR 9,590 crore can be recovered from Amrapali and its promoters.

About 5,229 unsold flats of Amrapali in 11 different projects can be sold for INR 1,958.82 crore, the auditors had said.They had also said that INR 3,487 crore is recoverable from home buyers who have booked flats and taken the possession in 14 Amrapali projects.

The concerned ministry and department have also been directed by SC to ensure completion of projects while senior advocate R. Venkatramani has been appointed as the court commissioner.

The apex court also held that JPMorgan has violated Foreign Exchange Management Act (FEMA) regulations. In January 2019, the forensic auditors pointed out that there are some discrepancies in the INR 100 crore investment made by JP Morgan in Amrapali Zodiac which they would like to further investigate. SC had asked the company to clarify how it sold the real estate firm’s shares to two little known companies ‘Neelkant’ and ‘Rudraksh’ for INR 140 crore.

Earlier this month, the Enforcement Directorate’s (ED) zonal office in Lucknow had filed a criminal case under the Prevention of Money Laundering Act (PMLA) against Amrapali and its promoters. The case has been filed after taking cognisance of at least 16 FIRs registered against the group by the Noida Police.The case will next be heard on August 9, 2019.

Leading to historic judgment

In May 2019, Senior advocate Gaurav Bhatia, appearing for Amrapali, said an amount of INR 11,652 crore were collected from the home buyers and that INR 10,630 crore was used for construction of various projects besides paying INR 998 crore to the authorities as lease amount.

During the hearing, forensic auditor Pawan Agrawal had pointed out that funds over INR 400 crore were diverted by Amrapali through three companies Bihariji Highrised, Jotindra Steel & Tubes and Mauria Udyog.

In March 2019, the forensic report ordered by SC had found that funds were transferred to more than 100 shell companies outside Amrapali through dubious transactions.On February 28, the apex court had allowed the Delhi police to arrest Amrapali group CMD Anil Sharma and two directors on a complaint that home-buyers of their various housing projects were cheated and duped of their funds.

In October 2018, forensic auditors informed the SC that a transaction of over INR 100 crore had been diverted by Amrapali to a firm known as GauriSuta Infrastructures.

In September 2018, the statutory auditors have been ordered by SC to handover financial documents from 2008-2015 of Amrapali to forensic auditors appointed by the court in September while the company has been asked to provide details of 2015-2018 to the forensic auditors.

During the same month, SC had ordered selling of 16 unencumbered properties of Amrapali and attached personal properties of company’s directors. In a previous affidavit, Amrapali informed the court that they have 21 unencumbered properties worth INR 2,535.56 crore while Anil Kumar Sharma, chairman and MD of the company, gave details of his immovable assets worth INR 32.73 crore.

In October 2017, over 100 homebuyers had moved SC against the insolvency proceedings order passed BY NCLT on the plea of Bank of Baroda.

In September 2017, NCLT had ordered liquidation of Amrapali on the plea of Bank of Baroda seeking initiation of the same under the Bankruptcy Act.

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