Amrapali CMD Gets SC Dressing-Down Over Account Balance
The Supreme Court (SC) on February 14 grilled Amrapali Group Chairman and Managing Director Anil Kumar Sharma for keeping Rs 94 crore of homebuyers' money in his bank account, and directed him to return the money latest by February 28. The top court also warned him that he would be sent to jail for his reluctance in disclosing the identity of the person, who had bought company's shares worth Rs 140 crore from the multi-national firm JP Morgan.
Earlier, the SC on January 16 indicated it might allow registration of units in Amrapali projects that are yet to receive completion certificates in Noida and Greater Noida. The top court said it might invoke powers of extraordinary jurisdiction under Article 142 of the Constitution to direct for registration of the flats.
In the meantime, more shocking revelations were made by the court-appointed forensic auditors going through the books of the embattled realtor. They informed the SC on January 16 that 23 shell companies were floated by Amrapali in the name of office boys, peons and drivers and worked as fronts to divert homebuyers' money. Benami transactions were widely carried out by selling premium flats for Re 1, Rs 5 and Rs 11 per square foot in the name of over 500 people, the audits pointed out.
After the auditors told the SC a share purchase and sale by JP Morgan Real Estate fund was in violation of laws, the court also brought the multi-national company under its scanner. JP Morgan Real Estate fund had invested Rs 85 crore in Amrapali Zodiac project in 2010 by purchasing its share. It later sold those shares to Amrapali’s sister concerns.
In December, the forensic auditors were ordered to trail the Rs 3,000 crore of homebuyers' money realtor Amrapali has admitted to diverting. The order came after Chief Managing Director Anil Sharma told the court the company diverted Rs 3,000 crore of homebuyers’ money to expand itself.
In the previous hearing, the SC told the Delhi branch of the Debt Recovery Tribunal to seize and auction as many as 28 properties of embattled Amrapali Group to refund homebuyers. In November also, the Supreme Court (SC) had ordered attachment of the company's 100-bed multi-specialty hospital in Greater Noida, three residential towers in Noida and a villa in Goa citing "willful disobedience".
The SC also said properties of those homebuyers who bought units in bulk from the developers using unaccounted money be sold to arrange funds to complete Amrapali’s pending projects.
The long and the short of it
After months of reprimanding and rebuking, the SC on October 9 ordered that three directors of Amrapali be sent to police custody for stalling the forensic audit of the insolvency-hit realtor — they would remain in police custody in a Noida hotel with no mobile phones. The three directors, Anil Kumar Sharma, Shiv Priya and Ajay Kumar, who failed to provide the necessary documents to the forensic auditors, must have seen it coming.
Following the apex court direction, nine properties of the company — some in national capital region’s in Noida and Greater Noida and others in Bihar’s Rajgir and Buxar — were also sealed on October 10 to dig out the documents, which, the directors said, were stored in these buildings.
When the top court decided to tear into the once-the-poster-boy-of-affordable-realty-in-the-national-capital-region on August 1 for “defrauding” homebuyers, it went for the choicest words to haul the company over the coals. Not only did it virulently criticised the company, which has kept 42,000 buyers waiting for their dreams for years, for playing “dirty games” and “hide-and-seek”, it also blasted Amrapali for committing “fraud” “misdirecting” the court and criminally breaching “buyers’ trust”.
However, when the company on August 8 submitted a proposal to deposit only Rs 400 crore of the Rs 4,000 crore that is needed for finishing its stalled projects, the top court took a threatening tone. It told the company bosses would be rendered homeless and be forced to look for homes for themselves, if they acted smart in front of the court.
“You are actually acting smart. When you are before the court, you have to be sincere and upright … we will sell each and every property of yours and render you homeless. You (directors) will have to look for your houses like you are making others wait for their homes,” the SC said.
On that stern note, it directed the company to give details of all movable and immovable assets owned by its directors. On August 21, the top court said it would start with the sale of Amrapali directors' personal assets since company assets would not be without encumbrances. The company was during that hearing asked to give details of all the directors, who have served in the company since 2008 even for a few months, and their properties by September 4.
On September 4, however, more worrying facts emerged in the courtroom concerning the realtor. Bank of Baroda (BoB), the financial institution that moved the insolvency tribunal against the realtor, informed the top court forensic audit of Amrapali showed diversion of Rs 2,765 crore — the top court on September 6 also allowed Corporation Bank, which has lent Rs 270 crore to Amrapali to move the NCLT against the builder.
BoB also said statutory auditors were “hand in glove with the company” and their findings should not be relied on. Following which, the SC on September 12, appointed two auditors, Ravi Bhatia of Bhatia and Company and Pawan Kumar Aggarwal of Sharp and Company, to conduct the forensic audits of group companies. It also directed the Delhi Debts Recovery Tribunal to sell the unencumbered commercial properties of Amrapali Group.
While observing that a "big scandal is taking place in the name of real estate business", the top court assured state-run National Buildings Construction Corporation India Ltd (NBCC), which has been assigned the task of completing Amrapali projects, to arrange all the necessary funds to complete 46,575 flats.
According to media reports, NBCC would mortgage vacant land parcels owned by the distressed realtor to raise Rs 2,000 crore of the total Rs 8,500 crore it needs to complete Amrapali’s 16 stuck projects. The remaining amount, Rs 6,500 crore, would be raised through selling of unsold flats and payments from existing homebuyers.
On October 3, NBCC was given the SC go-ahead to float tenders for selecting a developer to complete Amrapali's stalled projects. The top court also asked the state-run builder to prepare a detailed project report for pending projects within 60 days. In the meantime, residential as well as commercial properties of the realtor, including 5,000 flats, have been seized by the Noida Authority and the Greater Noida Industrial Development Authority. Money raised after selling the properties will be given to NBCC to carry out the gargantuan task it is entrusted with.
Earlier on August 2, while declaring that the company has been misusing the “leniency” shown by the judicial system, the SC had said it could not afford to give any “longer rope to the company”, and ordered all immovable properties and other assets of group company, along with 40 sister concerns and their promoters, be attached.
Also sending a strong message to the entire developer community, the court had sworn it would put an end to the “non-sense” that took place in the form of diversion of funds collected by builders to build projects from buyers “once and for all”.
"This (diversion of funds) is the malady, which is affecting all the builders. We want to stop this nonsense once and for all," the SC had said while entrusting NBCC with the responsibility to finish the company’s pending projects.
The changing versions
In the past six months, the company has been frequently changing its versions on how to plans complete its pending projects.
Giving an order on several petitions, the SC had on January 31 asked Amrapali to submit a comprehensive plan on how it planned to complete its projects. Initially, the three directors of the group, Anil Kumar Sharma, Ajay Kumar and Shiv Priya, had assured buyers that they "intend to complete all our ongoing projects", and were "not running away from the country”, and the company "is making efforts to deliver all flats by 2020".
On February 20, the realtor told the SC it was unable to deliver homes to about 42,000 buyers in a time-bound manner in light of the financial crisis. To deal with that, it proposed to use outside help — the company told the SC that 13 developers were willing to join it to finish its stuck projects. The SC told the company to "immediately start" the work to deliver 10,647 units in 3-15 months, as promised by it.
Before we go any further it must be noted here that the crisis-hit real estate giant has as many as 43 real estate projects in various stages of construction. The company had launched 11,000 units in Noida. Of these, 8,500 have been delivered and 2,500 are pending. In Noida Extension, the company had launched 28,000 units. All of these are yet to be delivered. The company cites "land acquisition issues in Greater Noida during 2011-15" and "demand slowdown in the property market in the last several years" as the reason for delay in project delivery. Buyers have been waiting for their homes for years —some even for over a decade.
At a hearing on April 11, the company told the apex court that it would require funds to the tune of Rs 2,000 crore to complete nine projects in Noida and Greater Noida. It also said it was found three co-developers to finish projects. On May 17, the apex court allowed three builders to assist Amrapali complete 12 stalled projects. However, in July, Amrapali told the court that if NBCC was permitted to take over its project, the need to take help from co-developers would not arise.
The company also invited the top court's ire on September 6 when Chairman and Managing Director Anil Sharma said he had a net-worth of only Rs 67 crore. In his election affidavit filed during the 2014 Lok Sabha polls, Sharma had declared he held assets worth Rs 847 crore.
How things come to such a pass?
When the National Company Law Tribunal (NCLT) on September 4 last year initiated insolvency proceedings and appointed an interim resolution professional to manage the affairs of embattled Amrapali Group, thousands of flat owners, primarily in Noida, found themselves extremely jittery. Their jitters are not wrong-headed. Under the earlier Insolvency and Bankruptcy Code (IBC), consumers are placed right at the end of the queue when it comes to distribution of assets if a company were to be liquidated. (This has changed now.)
Since insolvency proceedings would have impacted buyers’ interest, several pleas were filed in the SC, including one by the Amrapali Silicon City Flat Owners Welfare Society, against the NCLT order.
BoB might have initiated the proceedings against the builder, but it is not the only lender to which the group owes. The group has a standing liability of Rs 1,000 crore to 10 banks. Additionally, the group owes about Rs 3,000 crore to Noida and Greater Noida authorities, the two areas where the group has the highest number of residential projects.