SC Verdict: Relief to Homebuyers in Amrapali Scam Case

Many home buyers who had bought property from real estate titan Amrapali Group were expecting that their wait for much-awaited homes would end as a verdict was scheduled to be delivered by the Supreme Court. Many middle-class families were locking horns with country's one of mightiest company after it failed to deliver almost 42,000 homes even after the projects had started in late 2010. In a crammed room, Justice Uday Udit Lalit and Justice Arun Prakash started pronouncing their judgement and each coming sentence was proving to be a death knell for the lawyers defending the company.

The judgement went beyond the routine and unearthed the murkier world of scams by the directors of the company which was once promoted by none other than former Indian cricket team captain Mahendra Singh Dhoni. The judgement was important from two perspectives: it threw light on how India's one of biggest real estate companies exploited thousands of home buyers and diverted money to the tune of Rs 5,000 crores and the use of money for amassing wealth and property with connivance with the banks.

The Judges observed, “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 the officials of the Noida and Greater Noida Authorities and that of the banks." Interestingly, the court observed that the money pooled by the company for the construction of residential projects from the home buyers was enough and there was no necessity to ask for loans from banks. Currently, the company owes Rs 5,000 crore to civic authorities and Rs 1,000 crore to 10 banks.

The court observed, "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. 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. The amount so obtained was not used in the projects."

So, where did all the money collected from the homebuyers go? The answer to this question lies in the findings of the forensic auditors who audited the accounts of the company on the orders of the apex court. The auditors found that the money was swindled away to pay the directors’ fee. Interestingly, the directors were also withdrawing salaries. Under Indian Income Tax rules, a person cannot draw salary and consultancy from the same company at the same time. Consider this.

Credit: Forensic Auditors' Committee

Anil Sharma, the promoter of company withdrew Rs 29,13,23,580 as professional fee whereas another Shiv Priya Withdrew Rs 26,43,64, 571 for his services. But what is more astonishing is the fact that the money was also diverted for buying luxury cars, gold bars and even expensive marble for bathrooms. For example, the company diverted over Rs 38 lakh for bathroom products, Rs 19 Lakh for watches and Rs 74 lakh for furniture.

Credit: Forensic Auditors' Committee

Baffled by the enormity of the financial irregularities, the court ordered a probe by enforcement directorate and cancellation of the license under Real Estate Regulatory Authority Act. But fall of the company showed that there are more astonishing stories to be unearthed.

Also read: Supreme Court Implicates Firms Linked to MS Dhoni in Amrapali Group Scam