Indiabulls Accused of Financial Irregularities with Reliance ADAG, DLF, Others

A writ petition filed in the public interest in the Delhi High Court on Friday, September 6, has alleged that the Indiabulls Housing Finance Group, headed by Sameer Gehlaut, misappropriated thousands of crores of rupees and round-tripped the funds through complex transactions involving, among others, entities in the Reliance Anil Dhirubhai Ambani Group led by Anil Ambani and the DLF Group, promoted by K P Singh.

The petition, filed by a non-government organisation, the Citizens Whistle Blower Forum (CWBF), has urged the court to initiate an independent investigation by a Special Investigation Team to inquire into the allegations of financial irregularities by the Indiabulls conglomerate.

The CWBF, which is a platform where whistleblowers can make disclosures, was launched by Supreme Court lawyer and political activist Prashant Bhushan in February 2017. Prominent members of the forum include Aruna Roy, founder of the National Campaign for People’s Right to Information, Wajahat Habibullah, the first Chief Information Commissioner of the Central Information Commission and Justice A P Shah, the former Chief Justice in the High Courts of Delhi and Chennai.

The petition has accused Indiabulls Housing Finance Limited (IHFL) and its promoters of extending huge loans to various large companies which, in turn, routed large chunks of the funds back to the promoters of IHFL and associates. The petition claims: “The intent of all these methods is to create private wealth out of public money.”

IHFL is one of the country’s biggest housing finance companies and the flagship of the Indiabulls Group, whose founder and chairman is 45-year-old Sameer Gehlaut.

Five major corporate groups have been accused in the petition of being involved in alleged round-tripping of money and these are (1) Americorp Group, (2) Reliance ADAG, (3) Chordia Group, (3) Vatika Group and (4) DLF Group.

IHFL has been accused of round-tripping funds by extending loans worth Rs 151.90 crore to five companies in the Americorp Group, promoted by Harish Fabiani, a non-resident Indian based in Madrid, Spain. Fabiani allegedly invested Rs 254.87 crore back into Indiabulls Group firms through his companies, Jasol Investment and Trading Company Private Limited and Joindre Finance Private Limited.

Similar allegations have been levelled about IHFL’s dealings with Reliance ADAG. It has been claimed that five companies in the conglomerate headed by Anil Ambani received loans worth Rs 1,580 crore from IHFL and that Rs 570 crore out of this amount was brought back into nine companies either owned or promoted by Gehlaut directly or indirectly or through group subsidiaries.

In the case of the Pune-based real estate development group, the Chordia Group, the petition alleges that IHFL extended loans worth Rs 1,209.50 crore to three companies which came into existence between 2016 and 2017 and each had a paid-up capital of only Rs 50,000. An amount of Rs 450 crore that was taken by one of the three companies was repaid from the Rs 740 crore that IHFL had loaned to another Chordia Group company.

The petition claims that 51 companies of the Vatika Group received loans worth Rs 4,600 crore from IHBL. Many of these entities were allegedly “pass-through companies” which had a paid-up capital of barely Rs 1,00,000 each. It has been alleged that one of the Vatika Group companies gave back Rs 400 crore to Karkinos Constructions, a company controlled by Indiabulls promoter Gehlaut.

It has also been alleged that 48 companies in the DLF Group have been provided with funds of Rs 1,705 crore. Many of the companies have a negative net worth. Three DLF Group companies have also been accused of investing Rs 66 crore back into Indiabulls subsidiary EMU Realcon.

The petition also levels other allegations of financial irregularities against companies promoted either by Gehlaut or the Indiabulls group.

Similar Petition Was Filed Three Months Ago; What Happened?

On June 10, Abhay Yadav, a shareholder in Indiabulls Private Housing Limited, had filed a plea in the Supreme Court accusing the chairman and directors of the IHFL of misappropriating Rs 98,000 crore of public money. The plea had made similar allegations of round tripping as the ones made in the writ petition filed in the Delhi High Court.

In the petition, it was mentioned that Gehlaut, along with Fabiani, had created many shell companies that were allegedly used for round tripping money back into companies owned either directly by Sameer Gehlaut or his family members

In an official statement, IHFL denied any wrongdoing and said: “The writ petition is filed only today and is not heard by the court....The total loans on the books of Indiabulls Housing is approx Rs 90,000 crore. The allegations of siphoning off of Rs 98,000 crore is bizarre.”

Two days after the filing of the writ petition, IHFL went to the Supreme Court to seek an urgent hearing on the petition. It argued that the petition was a tactic to blackmail by the petitioner. IHFL was represented by Abhishek Manu Singhvi, senior lawyer and Congress politician. 

Then, IHFL announced on June 13: “Abhay Yadav, the petitioner, today has withdrawn the writ petition in the Supreme Court.”

Yadav said in his affidavit: “I am not aware of the contents and allegations mentioned in the complaints or the petition. I now realise that such papers, affidavits, applications etc were signed by me have been misused to file false complaints and petitions against Indiabulls with malafide intentions.”

Yadav’s lawyer for this petition was Kislay Pandey. On June 18 and June 20, respectively, non-bailable warrants were issued by a magistrate in Gurugram against advocates Kislay Pandey and his father Ram Mani Pandey. 

On June 25, IHFL announced in a press release: “Investigations by the Gurgaon police into a complaint filed by Indiabulls (the bail petition of Vishal Shekhar has been denied by the courts) has blown the lid of an organized racket run by the duo of Kislay Pandey and his father Ram Mani Pandey, who are advocates by profession.”

 In the statement, they accuse the father-son duo of blackmailing and putting pressure on the company over the past 10 days to extort money through different individuals. Ram Mani Pandey was arrested on June 30 by the Gurugram police.

Interestingly, Bharatiya Janata Party MP Subramanian Swamy had alleged on July 29, that he had sufficient evidence to link IHFL of embezzling over Rs 1 lakh crore. He publicly released a letter he had written to Prime Minister Narendra Modi on June 28, in which he claimed: 

“As per credible information that I have, and after perusal of many available documents, I wish to inform you that Indiabulls Housing Finance Limited and its associates which many Congress leaders e.g., P Chidambaram and B S Hooda have patronised, is heading now for a financial collapse and bankruptcy, resulting large corruption issues in real estate sector, banking, stock markets and loss of more than Rs one lakh crores of funds of public and of National Housing Bank.”

After the allegations were made public by Swamy, the shares of IBHFL tumbled by around 10%. The company again refuted the allegations. It said: “The loans outstanding as on date from NHB to Indiabulls Housing is zero. Indiabulls Housing, in its history, has never taken any loan or refinancing facility from NHB. The total loan book of Indiabulls Housing is about Rs 87,000 crore.”

The Indiabulls Group had first come under the radar of controversy when Canadian firm, Veritas Investment Research, had filed a report written by Neeraj Monga and Nitin Mangal titled “Bilking India” on August 1, 2012. It was alleged in the report that to enrich a small group of shareholders, the management of Indiabulls indulged in corporate malpractices. The report stated:

“We believe that disclosures at Indiabulls Real Estate Ltd (IBREL) and Indiabulls Power Ltd are unreliable and that the sole purpose of IBREL is to bilk institutional and retail investors for the benefit of select insiders The controlling shareholders are running the organisation as a piggybank, while proclaiming propriety and espousing credibility.”

Indiabulls denied the allegations and accused Monga, one of the authors of the report, of demanding money in exchange for holding back the report. A first information report was filed against Veritas, Monga and Mangal on August 8, 2012.

Mangal was arrested by the Gurugram police on November 24, 2014. Monga is stationed in Canada. The sessions court in Gurugram granted Mangal bail on December 11, 2014. The proceedings against him have been legally challenged.

In an article published in the Wall Street Journal on September 16, 2015, Mangal had told journalist Geeta Anand: “I feared for my life. I did not know what they would do to me.” 

He alleged that police took him on a long road trip with Indiabulls lawyer who he named as Ajay Grewal. Mangal alleged that he was asked to drop charges against the Indiabulls Group. He claimed he was offered a job if he was willing to blame Veritas in an affidavit.

A second FIR was filed against Mangal in Mumbai. The police has filed a closure report in this FIR but the trial court is yet to take cognisance of the closure report, NewsClick has been reliably informed.

Sameer Gehlaut is among hundreds of Indians whose name appeared in the Panama Papers This has been mentioned in the petition. According to an article in the Indian Express published in April 2016, three top London properties were acquired by Gehlaut through family entities in the United Kingdom, Jersey, Bahamas, Delhi and in Karnal. 

On September 6, before the PIL was filed in the Delhi High Court, Amit Jain, Company Secretary, IHFL, issued a statement saying the petition had been leaked on the social media before it was filed in court with “ulterior motives” and “malicious intent” to “create turbulence” in the stock prices of the company.

On August 28, it was announced that the National Stock Exchange had decided to replace IHFL by Nestle India in the NIFTY 50 – a benchmark stock market index.

The credit rating agency ICRA has also downgraded IHFL’s long-term debt instruments. The company’s rating is under watch in view of its proposal to merge with Laxmi Vilas Bank, ICRA said.

The September 6, IHFL’s statement claimed that Abhay Yadav’s allegations had been repeated in the purported PIL and that Yadav was part of a blackmailing racket and is currently in jail. Further, it claims that the “petitioners have deliberately chosen the route of PIL to attract attention and play into the hands of blackmailers and corporate rivals” at a time the merger process with Laxmi Vilas Bank is being scrutinised by different regulatory authorities.

The IHFL statement concluded by stating that the “company is determined to fight out the petitioners in the court.”

IHFL share prices tanked by 9% when the market opened on Friday.

Meanwhile, Gautam Bhalla, Managing Director, Vatika Ltd, denied his group’s association with Gehlaut and the companies associated with him. He described the “news doing the rounds” as false, malicious and aimed at damaging the reputation of his group.