Underlining the “serious kind of fraud played upon the buyers in active connivance with officials of the Noida and Greater Noida Authorities and that of the banks”, the Supreme Court Tuesday cancelled the RERA registration of the Amrapali Group and asked state-run National Buildings Construction Corporation (NBCC) to complete all pending projects and hand them over to home buyers.
Deciding a petition filed by home buyers who had invested in some 42,000 flats of the Group and were duped, the bench of Justices Arun Mishra and U U Lalit ordered a probe by the Enforcement Directorate into diversion of funds and money laundering by the Group.
The bench concluded that Rs 5,619.47 crore of home buyers money had been diverted by the Group, and that a forensic audit had found prima facie violation of Foreign Exchange Management Act, money laundering by “Amrapali Group/Directors” and other fraudulent activities.
It asked the Enforcement Directorate to investigate, fix liability and report the progress to the court. Noida and Greater Noida authorities and banks, it said, cannot sell the flats of the home buyers or the leased land to realise dues. It said they will have to do this by selling other attached properties.
Making clear that it will monitor the investigation, the bench said: “There was total non-monitoring by the bankers. Money laundering was resorted to by Amrapali Group/Directors. The Noida and Greater Noida Authorities were grossly negligent in reviewing and monitoring the progress of the projects and, in collusion with leaseholders, failed to take action concerning non-payment of dues and illegally permitted the Group to sub-lease the land without payment of dues. Bogus allotments of flats were made. There were other irregularities galore.”
“It is apparent from the report of the forensic audit submitted by Forensic Auditors that there is a serious kind of fraud played upon the buyers in active connivance with officials of the Noida and Greater Noida Authorities and that of the banks. The money of the home buyers has been diverted. The Directors diverted the money by the creation of dummy companies, realizing professional fees, creating bogus bills, selling flats at undervalue price, payment of excessive brokerage, etc. They have obtained investment from J P Morgan in violation of FEMA and FDI norms. The shares were overvalued for making payment to J P Morgan. It was adopted as a device for siphoning off the money of the home buyers to foreign countries,” the bench said.
It also had a larger message for governments across the country, directing the Centre and states “to take appropriate steps on time-bound basis to do the needful, all other such cases where the projects have remained incomplete and home buyers have been cheated in an aforesaid manner, it should be ensured that they are provided houses. The home buyers cannot be made to suffer when we are governed by law and have protective machinery.”
On the fraud perpetrated by the Amrapali Group, the bench said “in view of the huge money collected from the buyers and comparable investments made in the projects, there was no necessity to obtain a loan from banks”. But the loans were obtained and “the amount so obtained was not used in the projects”.
“The mortgage deeds in favour of the banks were not permissible due to non-payment of dues of the Noida and Greater Noida authorities. The Noida and Greater Noida authorities issued conditional NOCs (No Objection Certificates) to create mortgages subject to payment of dues which were not paid. They issued such NOCs in collusion with builders,” it said.
On the role of banks, the bench said it was incumbent upon banks to obtain clear unconditional NOCs and to ensure that dues were paid to Noida and Greater Noida authorities. But these were not obtained. “They permitted diversion of money immediately after sanctioning of the loan and also in day-to-day transactions of Amrapali Group of Companies,” it said.
On how the fraud unfolded, it said Group Directors “along with other employees, statutory auditors, CFO, etc. have formed a cartel to defraud the home buyers for siphoning off their money. Dummy companies were created in the names of peons, boys of office, the relation of statutory auditor, CFO, etc. and several companies were created only for the purpose of few transactions… The money obtained from banks was diverted to unapproved uses such as for the creation of personal assets of Directors, creation of assets in closely held companies by the Directors along with their partners and relatives, for personal expenses of Directors, to give advances without carrying interest for several years”.
The bench said the entire episode “goes to indicate how at large-scale middle-class home buyers have been defrauded of their hard-earned money, taken away by the affluent and the officials in connivance with each other. Law has to book all of them”.
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