BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS.

A Amrapali Bhatia 6120 B Available 2766 Smartcity Properties sq. ft. Developers Pvt Ltd Amrapali Bhatia 22200 B 6th May 2777 B Leisure Valley Properties sq. ft. 2015 Developers Pvt Ltd Hi-Tech CitySarbjit Leasing 1245.23 B 23rd July 2756-2758 Developers Pvt and Finance sq. 2016 Ltd Company yards Amrapali Vaishnavi 10261 B 13th 2758-2764 Hospitality Vahini Mount sq. ft. November C Services Pvt Ltd Life Hospitality 2017 Pvt Ltd Sangam Anjali 3.13 B 24th April 2753 Colonizers Pvt Consultants Hectare 2017 Ltd Amrapali Dr. J P Sharma 2.1 B June 2017 2764 Hospitality Bigha D Services Pvt Ltd Amrapali Homes Ajit Kumar & 11245 B 9th October 2780-2781 Project Pvt Ltd Kriti Agarwal sq. ft. 2017 Amrapali Deepak Kumar 1560 B 20th August 2784 Leisure Valley sq. ft. 2016 Pvt Ltd Amrapali Dream Bihariji 16000 B 10th July 2770-2771 E Valley Pvt Ltd Developers Pvt sq. ft. 2017 Ltd Amrapali Dream SBL 6500 B 5th July 2771-2772 Valley Pvt Ltd Construction sq. ft. 2017 Pvt Ltd Amrapali Silicon SBL 20640 B 2nd May 2778 City Pvt Ltd Construction sq. ft. 2017 Pvt Ltd F Amrapali Silicon Nirala India 16436 B 15th 2778-2779 City Pvt Ltd Developers Pvt sq. ft. October Ltd 2015 Amrapali Dream Mr. Vinay Garg 11000 B 15th 2769 Valley Pvt Ltd sq. ft. February 2018 Ultra Home V. 82.937 B 18th 2795-2796 G Construction Thiruvenkitam Cents January Pvt Ltd & Thushara 2012 Reddy Amrapali One 16360 B 25th 2786-2787 Centurian Park Flameboyant sq. mtr. September Pvt Ltd Realty Pvt Ltd 2013

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 499 [ARUN MISHRA, J.]

CATEGORY-C A Sangam Radheshyam 3.28 C 19th Feb 2754-2755 Colonizers Pvt Yadav, Keshav Hectare 2015 Ltd Yadav, Surender Yadav, Narayan Yadav & Lakhan Yadav B Amrapali PSK Finance 14853 C 15th July 2782 Leisure Valley Solution Pvt sq. ft. 2014 Pvt Ltd Ltd Amrapali Star Land Craft 23395 C 31st July 2784-2785 Leisure Valley Pvt Ltd sq. mtr. 2013 Pvt Ltd Amrapali Dream Shri Balaji Hi 12479 C 31st July 2772-2773 C Valley Pvt Ltd Tech sq. mtr. 2013 Construction Pvt Ltd Amrapali Dream K V Developers 19986 C 7th June 2773 Valley Pvt Ltd Pvt Ltd sq. mtr. 2013 Amrapali Dream J M Housing 33537 C 5th June 2773-2774 Valley Pvt Ltd Ltd sq. mtr. 2013 D Amrapali Dream Samridhi 27989 C 17th June 2774 Valley Pvt Ltd Realty Home sq. mtr. 2013 Pvt Ltd Amrapali Hawelia 14920 C 5th June 2787-2788 Centurian Park Builders Pvt sq. mtr. 2013 Pvt Ltd Ltd Amrapali DSD Homes Pvt 14760 C 20th June 2788 Centurian Park Ltd sq. mtr. 2013 E Pvt Ltd Amrapali Elegant 14590 C 1st June 2788-2790 Centurian Park Infracon Pvt Ltd sq. mtr. 2013 Pvt Ltd Amrapali PSK Finance 12500 C 15th April 2766 Smartcity Solution Pvt sq. ft. 2016 Developers Pvt Ltd F Ltd

29. Further Assets To be Attached Inventory of plots at Jaipur – of company names Sangam Colonisers Pvt Ltd G Amrapali Power & Cement Pvt Ltd – Land from Charu Rai yet to be identified, Land from UPSIDC yet to be identified. Vinayaka Projects at Greater Noida

p. 500 Copy page pinpoint

A 30. Statement of cash flow Receipt and Payment Statement (Amount in crores) S.No Name of the Company Amount Cost of Remarks/Assumptions received as Construction per Chart- taken from B of latest affidavit of audited B promoters financial submitted statements on 3rd available Dec'18 1 Received from Customers Amrapali Centurian Park Pvt Ltd 1050.83 573 C Amrapali Dream Valley Pvt Ltd 1270.5 549 Amrapali Leisure Valley Pvt The group received Rs 11573 Ltd 1563.17 594 Crore from th homebuyers Amrapali Sapphire and spent Only Rs. 7,389 Developers Pvt Ltd 1186.66 828 Crore on construction Amrapali Silicon City Pvt Ltd 1468.79 1126 including land payment to Amrapali Smartcity authorities. It is pertinent to D Developers Pvt Ltd 1230.87 780 note it includes borrowing Amrapali Zodiac Developers cost also. Any amount of Pvt Ltd 835.69 566 expenditure which was Hi Tech City Developers Pvt outstanding is not considered Ltd 113.18 104.16 in the given tabe and it is Amrapali Eden Park prepared on the bsia of Developers Pvt Ltd 171 175.14 audited financial statements latest available upto March Sangam Colonizer Pvt Ltd 9.58 7.61 2015 except one company for E Amrapali Grand 217 104.98 which it is March 2016. It was Amrapali Princely Estate Pvt found at any given point of Ltd 724.55 578 time the amount received Amrapali Leisure Valley from homebuyers was never Developers Pvt Ltd 505.19 355 in short Amrapali Homes Project Pvt Ltd* 103 103 Ultra Home Construction Pvt F Ltd* 1123.12 945 Sub Total (A) 11573.13 7388.89

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 501 [ARUN MISHRA, J.]

1 The above does not include the cash received from customers. 2 * Assumed the figure as given in the affidavit.

31. Mrs. Manju Rajpal and Mr. Ramesh Rajpal E Mrs. Manju Rajpal and Mr. Ramesh Rajpal HUF each invested Rs 7.5 crore in May 2011 on interest in Amrapali Leisure Valley Private Limited. The rate of interest is 18%. However he claimed in his submission that it was an investment in residential property for his staff because he was having a plan to shift his business operations in Noida. He submitted that he acquired this property F for residence of his staff. On reviewing the return of income of Mrs. Manju Rajpal (Refer annexure S-1 of supplementary report page no. 2823) and Mr. Ramesh Rajpal we found that amount invested in various units as given below:

1. Mr. Ramesh Rajpal – Unit No A-388 admeasuring 20,200 G sq. feet in Amrapali Leisure Valley Private Limited for RS 7.5 Cr. However, due to company’s inability to handover the said villa, 8 units were allotted instead. Refer Annexure S-2 of supplementary report page no. 2824 H

p. 502 Copy page pinpoint

A We found Unit No A-388 in Amrapali Leisure Valley Private Limited is booked in the name of Mr. Joginder Sharma on 13th February, 2016 admeasuring area 2525 sq. feet for a value of Rs 1.29 crore. It depicts very clearly that there was no unit admeasuring an area of 20,200 sq feet and the amount was invested for a purpose to avail Capital Gain benefits and B earn interest on investment at the rate 18% p.a. It is recommended that the units allotted as per Annexure S-2 of supplementary report page no. 2824 should be treated as vacant and be available for sale.

2. Mrs. Manju Rajpal – Unit No A-396 admeasuring 17,675 C sq. feet in Amrapali Leisure Valley Private Limited for RS 7.5 Cr claimed as Long term Capital gain. It is claimed, due to company’s inability to handover the said villa, 53 units were allotted instead. Refer Annexure S-3 of supplementary report page no. 2825-2826. D We found Unit No A-396 in Amrapali Leisure Valley Private Limited is booked in the name of Mr. Satya Vir Srivastava on 14th July, 2014 admeasuring area 2525 sq. feet for a value of Rs 65.5 Lakh. It depicts very clearly that there was no unit admeasuring an area of 17,675 sq feet and the amount was E invested for a purpose to avail Capital Gain benefits and earn interest on investment at the rate 18% p.a. It is recommended that the units allotted as per Annexure S-3 of supplementary report page no. 2825-2826 should be treated as vacant and be available for sale.

F The amount invested in residential property is claimed as Capital gain. Subsequently in the year 2017, the villas were shifted from Amrapali Leisure Valley Private Limited to Royalgolf Link, Amrapali Princely Estate Private Limited, Amrapali Zodiac Developers Private Limited, Amrapali Silicon City Private Limited, Amrapali Dream Valley Private Limited and Amrapali Smart City G Developers Private Limited and the villas numbers are attached. (Refer Annexure 2.2 and Annexure 2.3) For the amount invested of Rs 15 crore, Rs 12.25 crore has been paid to him in the form of interest at the rate of 18%.

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 503 [ARUN MISHRA, J.]

32. M/s Surbhaee Advertising Private Limited (Immovable Property-A3A, Maharani Bagh, New Delhi) (i) Mr. Paramjit Gandhi, Mr. Gagandeep Gandhi & Ms. Jasmine Gandhi are the directors of the company M/s Surbhaee Advertising C Private Limited. The shares of M/s Surbhaee Advertising Private Limited were purchased by Mr. Paramjeet Gandhi & M/s Special Tools Private Limited (a company owned by him & his family) for Rs 1.59 crore for which no agreement was provided by them. D (ii) It was informed that principal business of the company is Advertising of Projects. However no income has been earned from its principal business activity or any other source. (iii) The company is holding an immovable property at A3A Maharani Bagh, New Delhi admeasuring approximately 800 sq E yards. It is also stated that the family of Mr. Anil Kumar Sharma is residing in the same house against which no rent deed is agreed between Mr. Anil Kumar Sharma & Mr. Paramjit Gandhi (Surbhaee Advertising Private Limited) F (iv) When asked to Mr. Paramjit Gandhi who resides in Ghaziabad that why he purchased the property in New Delhi 4-5 years back, he replied that he wanted to shift to this property. However the fact is that he has never shifted to Delhi & all the G renovation & maintenance work was overlooked by Mr. Anil Kumar Sharma. (v) The company has also taken loan of Rs. 25 crores from Aditya Birla Finance Limited in the FY 2016-17 against the hypothecation H

p. 504 Copy page pinpoint

A of the property which was purchased for Rs 1.59 crore. This indicates the property value was much higher on the date of transfer. (vi) The company has advanced Rs. 25.88 crores as short term loans & advances to the following parties-

B 1. Chandan Homes Private Limited- Rs. 6.89 crores.

2. Inderjeet Arora- Rs. 1.25 crores.

3. Ishwar Steels- Rs. 2.18 crores

4. Jai Kishan Estate Developers Private Limited- Rs. 1.33 crores. C

5. Shekri Finance & Investment Private Limited- Rs. 3.10 crores.

6. Shubha Green Private Limited- Rs. 4.77 crores.

7. Special Tools Private Limited- Rs. 3.37 crores.

D 8. PJ Buildtech Private Limited- Rs. 0.55 crores.

9. Paradise System Private Limited- Rs. 0.52 crores.

10. Jiwan Kumar Arora- Rs. 0.50 crores.

11. Shubhkamna Buildtech Private Limited- Rs. 0.25 crores. (vii) The company has also received Rs. 2.35 crores & Rs. 3.55 E crores from Mr. Ritik Kumar Sinha & Miss Swapnil Shikha respectively, also directors in M/s Surbhaee Advertising Private Limited in the FY 2016-17 out of funds received from Amrapali group of companies enrouted via the account of Mr. Anil Kumar Sharma. F (viii) It implies that the property which was bought for Rs 1.59 crore, the amount has been funded out of Amrapali Group funds routed by Mr. Anil Kumar Sharma who is family member and from them to Surbhaee Advertising Private Limited. Two of his family members were made director to have a control on the property of a value of Rs 50 Cr. It further proves that the difference G between the value of property and the price at which it was transferred to Mr. Paramjit Gandhi was paid in cash out of cash amount received in Amrapali Group by booking of bogus expenditure and selling the flats undervalued.

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 505 [ARUN MISHRA, J.]

Opinion A Based on the facts stated above, in our opinion the property at A3A Maharani Bagh, New Delhi is a “Property” belongs to Mr. Anil Kumar Sharma/Amrapali group held in the name of the company M/s Surbhaee Advertising Private Limited.

33. Facility Sold B It is found that the facilities sold under various projects as shown in Chart M of Affidavit submitted on 3Rd December, 2018 are mere adjustment entries (Refer Annexure S-10 of supplementary report page no. 2958-2959). We found that the buyer is not aware of that he has purchased C any land for the mentioned facility. We further found that there is no account in the name of the said buyers in many cases to whom the facilities were sold. It is recommended that the facilities sold so far should be attached.

34. Mr.Prem Mishra D We are of the opinion and also given to understand from various sources that the group diverted funds in the range of 500-600 crore in Madhya Pradesh projects in particular Indore. Mr.Prem Mishra has appeared in response to the court notice and he was non-cooperative. We have also received a communication supporting our views, reproduced below- “Good Evening Sir, Hope you are doing well, this is regards Amrapali Scam of CMD Anil Sharma, as per my information CMD has transferred 1 thousand crore to the different Amrapali Townships project of M.P. through Mr. Prem Mishra. The details of the same on paper is available with me. If you can arrange some time and allow me to have a detail discussion of the same, that would be great.Kindly inform me two days prior to the meeting date, as I am from XXXXXX. need to do some arrangements for the same, its a request. G Waiting for your response.” We could not complete the examination of Mr.Prem Mishra in Indore project due to paucity of time and request it to be included in the second audit. H

p. 506 Copy page pinpoint

A 35. Heartbeat City Developers Private Limited The project is in the name of 3 companies namely Pebbles Prolease Private Limited, Three Platinum Softech Private Limited and Baseline Infradevelopers Private Limited. The project is an Amrapali group’s project which was carved out from Amrapali B Group of companies while case was pending before Honorable Supreme Court. Funds were invested in the project from Amrapali Group through Mr. Amit Wadhwa, Mr. Amit Wadhwa was a partner of 25% each in Pebbles Prolease Private Limited and Three Platinum Softech Private Limited. Amrapali Group launched and advertised the project as Amrapali Group project and the project was named as Amrapali Heartbeat City Developers Private Limited in the agreements. Corporate office was having the same address as Amrapali Corporate Tower in Sector 62, Noida. The purpose of carving out the project from Amrapali is not known. It is informed that Mr. Vaibhav Jain and Mr. Sankalp Shukla are the key managerial persons. In the absence of accounting records we could not proceed further on the issue.

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 507 [ARUN MISHRA, J.]

1. Sale of Flats at lower prices A Total amount involved in under-valued transactions in respect of Companies audited by us is Rs.321.31 Crores as per summary given below:

B S.no. Name of the company Number of Amount (In Refer Page Number Units Crores) 1 Amrapali Sapphire 315 76.02 Volume – I Page No. 205 - Point No. 1 Developers Private Limited 2 Amrapali Leisure Valley Volume – I Page No. Developers Private Limited 70 5.88 222 - Point No. 1 C 3 Amrapali Smart City 261 18.97 Volume – I Page No. 232 - Point No. 1 Developers Private Limited 4 Amrapali Silicon City Private 468 73.05 Volume – I Page No. Limited 257 – Point No. 1 5 Amrapali Dream Valley Private 1,752 24.11 Volume – I Page No. Limited D 248 - Point No. 1 6 Amrapali Leisure Valley Private 122 8.53 2811 Limited (Supplementary Audit Report)

10 Amrapali Zodiac Developers 107 6.75 2811 Private (Supplementary

Limited Audit Report)

11 Amrapali Patel Platinum 179 27.31 2811 G (Supplementary Audit Report) Total 5,856 321.31

p. 508 Copy page pinpoint

A 2. Amount Recoverable from Home Buyers A sum of Rs.3624.65 crores is recoverable from home buyers. Detailed summary is as under:

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 509 [ARUN MISHRA, J.]

3 Amrapali Smart City Developers Private 19.58 Volume – I Page Limited No.232- Point No. 3 4 Amrapali Silicon City Private Limited 2.48 Volume – I Page No.257- Point No. 3 C 5 Amrapali Dream Valley Private Limited 6.12 Volume – I Page No.248- Point No. 3 Volume – II Section 6 Ultra Home Construction Private Limited 38.03 XXII (Page No. 563 – 568) Volume – II Section 7 7Amrapali Princely Estate Private Limited 5.50 XXII (Page No. 563 – 568) D Volume – II Section 8 Amrapali Zodiac Developers Private 2.08 XXII (Page No. 563 – Limited 568) Volume – II Section 9 Amrapali Leisure Valley Private Limited 3.58 XXII (Page No. 563 – 568) Volume – II Section 10 Amrapali Eden Park Private Limited 3.64 XXII (Page No. 563 – E 568) Total 89.83

4. Unsold Inventory There is unsold inventory of flats and Commercial areas amounting to Rs.2337.47Crores F approximately as per details given below: a) Unsold Inventory of Flats S.no. Name of the company Number Approximat Page No. of Units e Realizable in Value Reference G Residential (In Crores)

1 Amrapali Sapphire Developers Private 14 14.45 Volume – I Page No.39- Limited Point No. 4a H

p. 510 Copy page pinpoint

*Estimated Realizable value Noida @ Rs 4,500 approximately psf and Greater Noida @ Rs3,000 approximately psf (Amount in Crores).

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 511 [ARUN MISHRA, J.]

b) Unsold Inventory of Commercial Area/Shops A

S.no. Name of the Company Unsold Approxima Page te No. Commercial Realizable refere Value (In nce Inventory Crores)

B 1 Amrapali Sapphire Developers 1 Shop 0.71 Volume – Private Limited I Page No.39- Point No. 4b 2 Amrapali Leisure Valley Nursery Volume – Developers Private Limited I Page Schools, 7.00 No.39- C NursingHomes Point No. and MilkBooth 4b 3 Amrapali Smart City 1 Shop 0.49 Volume – I Page No.39- Point No. Developers Private 1 Nursery School 4.00 4b D Limited

4 A m r ap a li S ilic on C i ty P r iv ate Vo lum e – N u rs e r y S c h oo l Li m i ted 11 . 0 0 I P age & M i lk B o ot h N o. 39 - P o in t N o. 4b 5 Am ra p a li D r e am V a ll ey Pr i va te 1 8 S h o p s, Vo lum e – Li m i ted N u rs e r y S c h oo l s , I P age N o. 39 - E N u rs in g H o m e s P o in t N o. a n d S e n io r 4b S e c o n d ar y 44 . 4 7 S c h oo l s 6 Am ra p a li E d e n Pa r k D ev e lop e r s 1 .4 0 Vo lum e P vt . L td . 1 – II S e c tio n X X II (P ag e N o. F 5 63 – 5 68 ) 7 Am ra p a li C e n tu r ia n P a r k P v t. L td . 17 5.7 1 Vo lum e – II S e c tio n X X II (P ag e N o. 5 63 – 5 68 ) G 8 U ltr a H o m e C o n s t r u c tio n P v t. 31 8 + 487 2 71 . 0 0 Vo lum e Lt d . – II S e c tio n X X II (P ag e N o. 5 63 – 5 68 ) T o tal 3 4 5 .7 8 H

p. 512 Copy page pinpoint

A 5. Amount recoverable from Key Managerial Persons and their Relatives a) Professional fees paid to directors Rs.100.53 crore Name of Director Professional Fees (As per Affidavit) (Under Disclosure in B Rs. in Cr. Affidavit)Rs. in Cr.

Anil Kumar Sharma 29.13 8.75 Shiv Priya 26.43 24.65 Ajay Kumar 5.76 - Suvash Chandra Kumar 5.11 - C Amresh Kumar 0.68 - Total 67.13 33.40

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 513 [ARUN MISHRA, J.]

Recoverable from other KMPs is as under : E

ChanderWadhwa and Family 2.55 Mohit Gupta and Family 0.16 SuvashChander Kumar 0.67 Amresh Kumar 0.17 F NishantMukul 0.12 Adhikari Devi Prasad and Family 0.02 Anil Mittal and Company (Statutory Auditor) 0.19

Total 3.88

Cash in Hand G

Cash in hand of various Companies is not physically available nor deposited in the banks and siphoned by the Directors amounting to Rs.69.36 crores should be recovered from the Directors as per details given below: H

p. 514 Copy page pinpoint

A S. no. Name of the Company A mount (In Crores) 1 Stunning Construction Private L imi ted 0. 17

2 A mrap ali Sapphire Developers Priva te L imited 0. 11

3 A mrapali Leisure Va lley De ve lopers Private 0. 23 L imited 4 A mrapali Smart City Developers Private L imited 10.79 B 5 A mrapali Silic on City Private Limited 3. 58

6 A mrapali D ream Val ley Private Limited 8. 02

7 H i-tec h City Developers Private Limited 0. 46

8 A mrapali Infrastructure Priva te Limited 3. 16

9 Sangam Colonizers Priva te L imited 0. 15 C 10 Nav odaya Properties Private Limited 0. 24

14 G aurisutaInfrasolution Private L imi ted 0. 01

17 A mrapali H ospi ta lity Services Private Limited 0. 01 D 18 K apilaBuildhome Private L imited 0. 03

19 M annatBuildcraft Private Limite d 0. 20

20 Ultra Home Construction Pri vate Limited 0.22

21 AmrapaliCenturian Park Private Limi ted 7.45

E 22 Amrapali E den Park D evelopers Pri vate Limited 2.00

23 Amrapali G ra nd 0.50

24 Amrapali H omes 0.19

25 Amrapali H omes Projects Private L imite d 0.23

26 Amrapali L eisure V alley Private Limited 9.79

F 27 Amrapali Media Vision Private L imited 9.67

28 Amrapali Prince ly Es tate Private Li mi ted 5.02

29 Amrapali Smart City Private Limited 0.50

30 Amrapali Zodiac Devel opers Private L imited 3.84

33 Noida Texfab Private Limited 0.13

34 La Residentia D evelopers Private Limi ted 0.30

35 Amrapali Biotech Indi a Private L imited 1.50

Total 69 .36 H

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 515 [ARUN MISHRA, J.]

p. 516 Copy page pinpoint

F Advance Construction co Pvt ltd is/was a partner holding 9% in Amrapali Patel Platinum and 66% in AHS Joint Venture Project with Ultra Home Construction Pvt Ltd. They overdrew 7.10 crore and 14.81 crore from the respective joint venture totaling to 21.91 crore G While scrutinizing the documents sent by Advance Construction Company Private Limited, detail of capital contribution of the Advance Construction Company Private Limited as on 1st April, 2008 and thereafter is as under (as per tally data and confirmed by Advance Construction Company Private Limited): H

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 517 [ARUN MISHRA, J.]

Particulars As on 31st As on 31st As on 31st As on 31st A March, 2007 March, 2008 March, 2009 March, 2010

Capital Account 3,00,00,000 50,00,000 (6,10,00,000) (7,10,00,000)

Note: The negative figures represent debit/ recoverable balance. B The aforesaid amount of Rs.7.10 crores should be recovered from the said party along with interest of Rs.7.24 Crores (computed at 12% p.a. simple interest) in view of the undermentioned observations: The clause 12 of MOU dated 11th November, 2006 clearly C states that the profit would be divided amongst the partners in the profit-sharing ratio. The Audited Financial Statements of the firm for the financial year 2013-14 reflect the firms Reserve and Surplus as Rs.35,433 only. D No other clause in the MOU states regarding payment of Interest on Capital. It is not understood that how the said Company has withdrawn Rs.10.10 Crores on an investment of Rs.3 Crores invested for only a period of 1.5 years from this partnership firm. No E satisfactory explanation has been given to us by the Management. Even the ledger account sent by the said Company confirms that they owe Rs.7.10 Crores to this firm as on 31st March, 2018 after which an entry has been passed in the books of accounts. As per supplementary partnership cum deed of retirement dated F 31st Day of March, 2014, 2 partners namely M/s Patel Engineering Limited and M/s Advance Construction Company Private Limited have retired from the partnership and M/s Amrapali Infrastructure Private Limited has joined as a partner with M/s Ultra Home Construction Private Limited. However, the amount of Rs.7.10 G Crores was not adjusted and was shown as payable to Amrapali Patel Platinum by Advance Construction Company Private Limited since 2014 till 2018. Further, The Audited Financial Statements of Amrapali Infrastructure Private Limited for the financial year 2013- 14 and thereafter don’t reflect any investment in Amrapali Patel Platinum. H

p. 518 Copy page pinpoint

A Particulars As on As on As on As on As on As on As on As on 31st 31st 31st 31st 31st 31st 31st 31st March, March, March, March, March, March, March, March, 2008 2009 2010 2011 2012 2013 2014 2015 Capital 4.22 4.25 4.26 4.32 4.35 4.35 4.30 4.30 Account Current (12.56) (14.82) (14.82) (14.82) (14.82) (14.82) (14.82) (14.82) B Account

Note: The negative figures represent debit/ recoverable balance. The aforesaid amount of Rs.10.52 crores should be recovered from the said party along with interest of Rs.17.78 croresupto 31st March 2018 (computed at 12% p.a. simple C interest) in view of the undermentioned observations: a. It is not understood that how the said Company has withdrawn Rs.14.82 crores on an investment of Rs.4.30 crores. No satisfactory explanation has been given to us by the Management. D b. As informed to us by Advance Construction vide their mail dated 6th March, 2019, the Company had effectively retired from the said partnership and all the project related responsibilities were handed over to Mr. Sharma, (of Ultra Home) and the same was evidenced by an MOU dated 17th January, 2006. E This explanation given by Advance Construction is not satisfactory since the Company is continuing as a partner and the subsequent Audited Financial Statements have also been signed by Advance Construction as a Partner sharing profit/ loss. This shows that MOU as referred by Advance Construction is bogus/ legally not enforceable. F c. Further, Partnership firm has been legally dissolved as per dissolution deed dated 2nd Day of April, 2018. This shows that Advance Construction is continuing as a partner in this firm till this date. It has also been mentioned in the dissolution deed that the accounts of the firm have been made upto 31st March, 2014 G to the mutual satisfaction of all the parties here to. Even this dissolution deed is dated 2nd April, 2018 doesn’t seem to be genuine in view of the following observations: i. It refers to the Audited Financial Statements for the financial year 2013-14, whereas the Audited Financial Statements are H available upto financial year 2014-15.

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 519 [ARUN MISHRA, J.]

ii. The deed of dissolution has not been notarized. A iii. The Witnesses to this Dissolution Deed are incomplete in so far, name and address of witness number 1 is not there and signature of witness number 2 is not there. iv. There is no copy of the resolution available authorizing Mr. Shiv Priya to sign the deed of dissolution. B The Company has made cash payments to various parties exceeding INR 20,000 in contravention to The Income Tax Act 1961, to the tune of INR 45,768,482 in just one company namely Amrapali Sapphire Developers Pvt Ltd. This is just tip of the iceberg and actual amount may be much much higher. Most of these payments are not supported by evidence. It was further C observed that neither the Statutory auditor has mentioned these cash payments exceedingRs.20,000 in his report and nor any addition has been made by the Income Tax department in framing the Assessments for the Assessment year 2014-15 vide order dated 31.03.2016. D

Financial Year Name of Party Expense Debited Amount 2012-13 Staff Incentive 2,252,720 Labour charges of E 2014-15 Unity Contractor Contractor 1,600,000 ShailenderaDhwaj (T Z- 2014-15 803) - 1,399,500 2013-14 MV Ayer (TL-506) - 1,000,000 Other Petty Amounts F between 20,000 to 10 Lakhs 39,516,262 Total 45,768,482

6. Diversion of home buyer’s funds G Further as per financial statements and the books of accounts scrutinized by us up to 31st March 2015, a sum of Rs.1,588.59 Crores has been diverted to other projects, other group companies, directors and their relatives and senior employees. As per summary given below: H

p. 520 Copy page pinpoint

A S.no. Name of the company Amount Refer Page No. (In Crores) 1 Amrapali Sapphire Developers Private Limited 113.98 Volume – I Page B No.210- Point No. 7 2 Amrapali Leisure Valley Developers Private 134.25 Volume – I Page No.224- Point No. 7 Limited 3 Amrapali Smart City Developers Private 532.76 Volume – I Page No.233- Point No. 7 Limited C 4 Amrapali Silicon City Private Limited 347.36 Volume – I Page No.259- Point No. 7 &8 5 Amrapali DreamValley Private Limited 457.82 Volume – I Page No.251- Point No. 7 6 Hi Tech Developers Private Limited 2.42 Volume – II Page No.281- Point No. 2 D Total 1,588.59

7. Non genuine purchases from suppliers The total amount of non-genuine/ bogus purchases amounting to E Rs.842.42 crores approximately. Details are as follows: Non genuine purchases from Suppliers (Refer Page No. 2800 Supplementary Report& Annexure No. S-4) F Rs. 837.12 crore Add: Land development charges booked without supporting documents Rs. 7.30 crore

G Total Rs. 842.42 crore

8. Recovery from Others A sum of Rs.32.69 croresis recoverable from others as per details given below:

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 521 [ARUN MISHRA, J.]

9. Unexplained cash deposits/jewellery E Details are as under : Name of person Amount/ Refer Page No. value (in crore) Anil Kumar Sharma (Cash) 5.73 Volume II - page no F 419, Point no 7 1.50 Volume II - page no 420, Point no 12 Raj Dulari (mother of Anil 0.13 Volume II - page no Kumar Sharma) (Cash) 420, Point no 9 Shiv Priya (cash) 6.00 Volume II - page no G 422, Point no 6 1.00 Volume II - page no 422, Point no 11 Shiv Priya (Jewellery) 0.58 Volume II - page no 422, Point no 11 Total 14.94 H

p. 522 Copy page pinpoint

A 10. Balance due to Noida Authority and Greater Noida Authority as per affidavits submitted by them before Hon’ble Supreme Court of India The Group paid only 1st installment to Noida and Greater Noida authorities and did not pay in almost all the cases the installment due, lease rent and interest under one pretext or another. The B Group has not made any provision for additional interest due to delay in payments of installments. We had issued a letter dated 30th January, 2019 to Noida Authority to send us the complete information/ documents regarding the amounts due from Amrapali Group of Companies. But we have not received any such details from the Noida Authority. In these circumstances balance due to C Noida Authority Couldn’t be verified by us. It was further informed to us by the management of Amrapali that Noida and Greater Noida authorities have submitted three claims before the Honourable Supreme court. We were produced one of the annexure of the affidavit and the same is reproduced below. We found that Noida/Greater Noida authority administration was non active for reasons best known to them. Amrapali group never paid the 2nd installment but Noida and Greater Noida authorities continued to allot large size land to them without fail. They never bothered to issue even a notice to be pasted at site for the information of home buyers that the land dues had not been paid so that home buyers could be cautious and on alert. In spite of non receipt of any installment, lease rent, interest they were very trumped in giving no objection certificate for the borrowings to Amrapali group from different sources like JP Morgan, ICICI and Aditya Birla Pvt equity funds and/or various banks. F a) Noida Authority S . no. Name of the Company A mou nt (In C ro res) 1 Amrapa li Sa pphire Developers Pri va te 348.8

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 523 [ARUN MISHRA, J.]

b) Greater Noida Authority A

11. Balance payable against Term Loans Date of Total (In Name of the Company Name of the bank Confirmation Crores) D Indian Overseas Bank 31-12-2018 16.15 Ultra Home Constructions Private Limited Corporation Bank 5/2/2019 91.49 Amrapali Smart City Developers Private Limited Corporation Bank 5/2/2019 143.74 Amrapali Leisure Valley Andhra Bank 5/2/2019 98.04 Developers Private Limited E Bank of Maharashtra 5/2/2019 179.02 A/c Andhra Bank 5/2/2019 13.56

Bank of Maharashtra 5/2/2019 22.24 Amrapali Silicon City Private Limited Bank of Maharashtra 5/2/2019 95.34 F Total 659.58

Note: Information in respect of bank loans has been given to the extent of availability of documents.” 61(a). The aforesaid is the summary of report of the Forensic Audit which states that the Group collaborated with external parties like G J.P. Morgan in contravention of FEMA and distributed returns along with the principal amount, even though it did not book gains within the business of the company. (b). The report also reveals various disturbing features that no accounts were prepared from 2015 to 2018 and money was withdrawn H

p. 524 Copy page pinpoint

A out of it and diverted from one company to another. The entire transactions were not being entered into Tally. The opening balances were not entered properly. In April 2015, the Amrapali Group introduced Far Vision an ERP, which was also not implemented properly. (c). There was no information about purchases from the supplier. B During a search in 2013, it was held by Income Tax Authorities that purchases are being made from bogus suppliers without receiving the goods physically. Bogus expenses and cash has been surrendered by Amrapali Group in the income tax search. (d). The amount shown as developmental charges is not supported by evidence or vouchers. The total bogus expense has been ascertained to Rs.842.42 crores. An amount of Rs.0.25 crore was paid to Mr. Alok Ranjan towards brokerage. (e). The company has also made unusual cash payments in the financial year 2016-2017 by transferring cash to the Site, but the same is not supported/authenticated by the Site Cash In-charge. Certain payments have not been found to be genuine. (f). The Group Companies purchased gold bar worth Rs.5.88 crore, which is a personal expense and it should be recovered from the management of the company. E (g). The amount disbursed by Banks was not utilised for constructions of projects and the funds of homebuyers as well as the amount disbursed from the Banks were diverted to unapproved uses, namely, creation of personal assets of Directors; creation of assets in closely held companies by Directors along with their partners and F relatives; funds were used for personal expenses of Directors; funds were advanced to unrelated entities for several years without levying interest on unrealized amount, the recoverable amount from third parties has amounted to Rs.326 crores; creation of discreet projects for personal income; and construction of assets for other projects. (h). There were negligence and non-monitoring by Bankers. There G was a transfer of funds from one company to another company to a third company and so on and so forth on the same dates would not have been possible without the active support of the Bankers. They turned blind eye to all the transfers and did not inquire, which were being routed every day. If they had been alive to the situation, the Management H

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 525 [ARUN MISHRA, J.]

would not have dared to launder the money from one company to another according to their whims and fancies and the Bankers are solely responsible for the negligence on their part. The Bankers did not do any monitoring. The Bank of Maharashtra and Andhra Bank also failed to do the monitoring. Even the basic checks were foregone. The Banks acted as a mute spectator to unapproved diversion which was happening evidently in all banking transactions. Even, Noida and Greater Noida Authorities were grossly negligent in reviewing and monitoring the progress of projects and did not take any action for non-payment of land dues and continued to allot land to Amrapali Group for the reasons best known to them. (i). The Directors along with trust partners discreetly divided the projects into two parts: (i) Projects in which home buyers funds were received and funds were diverted from these projects; (ii) Projects to which home funds were diverted. These D projects were subsequently separated/demerged from Amrapali Group, e.g., Heartbeat City, La Residentia, Vinayaka Square. (j). Several dummy companies were formed in the names of office boys and peons. Technically, the allotments at the initial stage were void E ab-initio. The amount received by the Companies from home-buyers was more than the amount spent on construction and for payment of the land. The sole objective of taking a loan was to divert the funds to other ventures to create assets in the name of family members and to make movies. Villas were bought at tourist destination for fun at the expenses of the middle class and low-income group people. F (k). Several companies were created solely for the purpose of routing funds. These companies did not have any material transaction as per the main object for which they were incorporated and did not have a business since their incorporation. G

62Copy pinpoint62. As is apparent from the report, several companies were created only to route the funds and transactions consisting of office boys, persons with no income and dummy companies in which family members and relatives were inducted as members only for few transactions, which are as under: H

p. 526 Copy page pinpoint

A (1) Jhamb Finance & Leasing Private Limited. It was under the control of Mr. Chander Wadhwa, CFO. It has advanced loans amounting to Rs.875 crores to related and unrelated entities, which are recoverable. (2) Gaurisuta Infrastructure Private Limited B It was also created for diverted funds. (3) Neelkanth Buildcraft Private Limited Similarly it was formed for the purpose of buying shares from J.P. Morgan at exorbitant rates, consisiting of office boys and relatives of C Mr. Anil Mittal, Statutory Auditor. (4) Stunning Construction Private Limited As per findings of the Forensic Auditors, they should either surrender 19.75 percent of land or 632 flats. D (5) Kapila Buildhome Private Limited It financed a sum of Rs.392.68 crores. It accepted non-interest bearing inter-corporate deposits from non-group companies, which was used for money laundering. (6) Rudraksha Infracity Private Limited E It was consisting of office boys and relative of Anil Mittal, Statutory Auditor, which was created to receive money from Mannat Buildcraft Private Limited and to transfer it to J.P. Morgan Investments by purchasing it at exorbitant rates and for no other transaction.

F (7) Mannat Buidcraft Private Limited It was created for money laundering of Rs.120 crores, only for few transactions. (8) Amrapali Magadh Developers Private Limited It did not carry out any principal business activity. The purpose of its creation is not clear. The shareholders paid the share application money in cash. (9) Amrapali Mahi Developers Private Limited It received share capital in cash and all the expenses were paid in cash.

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 527 [ARUN MISHRA, J.]

(10) Amrapali Spring Valley Private Limited A It was created for the purpose of routing and diversion of funds amounting to Rs.186 crores has been found. (11) Amrapali Media Vision Private Limited It was created making movies. There was no necessity of creation B of this company for advertising. It was created to divert funds to make movies. Rhiti Management Private Limited was paid Rs.24 crores for professional charges and advertisement expenses etc. (12) Hawthrone Intellect Management Solutions Private Limited It had paid up capital of Rs.1 lakh and incurred losses of Rs.2.33 C crores. The expenses are inflated to wipe off the various loans and advances received from sister concerns. The entries have found to be dubious and the amount of loss of Rs.2.33 crores to be recovered from the Directors as it was wiping off the amount of the homebuyers. (13) Amrapali Smart City Private Limited D It is stated in the report that plot allotted to Amrapali Smart City Private Limited was cancelled, therefore, money receivable from Greater Noida is Rs.18.35 crores. (14) Amrapali Biotech India Private Limited E It was created for routing funds. The ICD’s are either from the group companies or received from outside the group companies through adjustment entries. (15) Amrapali Healthcare Private Limited It formed the property by funds of Ultra Home Construction F Private Limited created from home buyers’ funds. It deserves to be sold. (16) Amrapali Centurian Park Private Limited The Forensic Auditors have found bogus booking of expenditure G and certain adjustments against bogus billings of River Sand for an amount of Rs.3.60 crores. (17) Amrapali Leisure Valley Private Limited Mr. Akhil Kumar Surekha became the Director and thereafter most diversions of funds took place through the current account. The H

p. 528 Copy page pinpoint

A funds of the company were transferred to and fro with companies in which Surekha family had control. FSI was sold without taking approval from Great Noida Authority. The money received from Bihari High Rise Private Limited was diverted to Jotindra Steel & Tubes Limited and Ozone GSP Infratech by routing it through Ultra Home Construction Private Limited. Bihariji High Rise Private Limited, Jotindra Steel & B Tubes Limited and Mauria Udyog Limited are owned by Surekha family. There was bogus booking of expenditure since March 2018 also of Rs.2.86 crores and other bogus entries of huge amounts. (18) Amrapali Homes C It has been found that Mauria Udyog Limited has to pay Rs.20 crores and the same be recovered. (19) La Residentia Developers Private Limited The consortium of five members was created, which was controlled by Amrapali Group. The shareholders and directors were just acting faces for outsiders. There was diversion of funds since beginning of the project itself. The company purchased raw material from Amrapali Infrastructure Private Limited amounting to Rs.67.45 lakhs, but not even a single penny was paid since then. The loan amount of Rs. 49 crores were taken. On the other hand, there was withdrawal by Directors and advances given to the related parties and entities. Amrapali Group transferred some of their buyers to La Residentia Developers Private Limited and the payment for the same was received by Amrapali Group. They were reflected as customers in the customer data of Amrapali Group. The company is using the brand name/trademark of Amrapali Group on its letterheads. F (20) Amrapali Homes Projects Limited Mr. Prem Mishra was given Rs.12.40 crores for purchase of land since 1st April 2008, out of which Rs.10 crores are still receivable from him. Rs.55.87 crores are recoverable amounts and out of which Rs.20.75 crores pertain to advances against land which has not been charged to G cost of construction. (21) Ultra Home Construction Private Limited The flats were allotted on false promises, forged documents and certain allotted flats did not exist in the approved building plan. H Shareholders used the money of home buyers for allotment of shares in

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 529 [ARUN MISHRA, J.]

the company. The records of certain lands purchased by the company A disappeared, the details of which have been given. The company has advances recoverable amounting to Rs.111 crores. (22) Amrapali Grand Bihariji Ispat Udyog Limited always had negative capital. Loans and advances amounting to Rs.25.73 crores have been diverted. The B other diversions have also been noticed in the report. (23) Amrapali Eden Park Developers Private Limited There is no substance in the nature of transactions of the company. It was for routing funds form one entity to another to hidden objective. C Banks loans were diverted as advances to third parties. The funds were diverted for purposes other than development.

63Copy pinpoint63. Several companies were created for building assets. There was no compliance of the statutory obligations by the companies. The annual returns and audited financial statements have not been filed after D 31.3.2015. The Registrar of Companies has disqualified the Directors, namely, Mr. Anil Kumar Sharma, Mr. Amresh Kumar, Mr. Shiv Priya, Mr. Ajay Kumar and Mr. Suvash Chandra Kumar for a period of 5 years under Section 164(2) of the Companies Act, 2013. The Company has not been regular in payment of TDS and service tax and has also not filed relevant returns after 31.3.2015. Mr. Anil Mittal, CA (Statutory E Auditor) and Mr. Chander Wadhwa, CFO were in connivance with each other. Mr. Anil Mittal, CA blindly signed the accounts and along with Mr. Chander Wadhwa, CFO is grossly involved in making manipulation in the accounts. He has received payment on account of professional charges in the name of companies in which his relatives were Directors F and this fact has not been disclosed in the audited financial statement. A sum of Rs.52.07 crore was adjusted on account of professional fees due and to be paid on account of audit fees. Further, a sum of Rs.16.36 crore was adjusted against a flat in Amrapali Princely Estate on account of audit fees. They incorporated 27 additional companies identified. They were shell companies, whose share capital was mostly subscribed G in cash and the transfer of shares was also in cash leaving no audit trail. The home-buyers funds to the extent of Rs.5,619.47 crores have been diverted. There was diversion of funds to various suppliers, fake purchases and advances without any adjustment. Siphoning off funds had also taken place by way of booking under-valued transactions in H

p. 530 Copy page pinpoint

A respect of the sale of flats. The Forensic Auditors have also traces of receiving cash from home-buyers, which is not accounted for in the books of accounts. The home-buyers funds were diverted to the tune of Rs.5,619.47 crores to the other companies through (i) payment of professional fee to Directors for Rs.100.53 crores; (ii) bogus billing for Rs.842.42 crores; (iii) under-valuing of flats to the tune of Rs.321.21 B crores; (iv) brokerage was paid against flats which were not sold by the company; and (v) inter-corporate deposits were given to related entities.

64Copy pinpoint64. In J.P. Morgan, had also been found to routing money and in violation of FEMA by the Forensic Auditors. As pointed out, the equity shares were purchased at an exorbitant price to suit the requirements of C J.P. Morgan. Sudit K. Parikh & Co., Chartered Accountants and the Auditors made the valuation on the basis of information provided by J.P. Morgan Investments. Amrapali Zodiac Developers Pvt. Ltd. has diverted home buyers fund and there was no need for any investment from J.P. Morgan. It was in the knowledge of Mr. Suraj Chhabria and also in the knowledge of J.P. Morgan that money had been diverted.

65Copy pinpoint65. Rule 4 of FEMA Rules has been referred by the Forensic Auditors pointing out that External Commerical Borrowings (ECB) can be accessed under two routes namely Automatic Route and Approval Route. Under Automatic Route, the ECB is not permitted to be utilized for real estate sector, whereas under Approval Route the ECB are not permitted to be utilized for real estate. Rs.60 crores were remitted to Amrapali Leisure Vally Developers Pvt. Ltd. by J.P. Morgan without obtaining approval from the competent authority so as to make investment in the form of ECB. It is necessary to comply with the following :

F (a) obtaining Loan Registration Number from R.B.I.; (b) file ECB-2 returns every month to the R.B.I.; (c) withhold tax on interest payment to J.P. Morgan under Section 195 of the Income Tax Act. As per Article 11 of the Avoidance of Double Taxation Agreement between G India and Mauritius, the tax shall be charged @ 7.5 percent of the gross amount of interest; (d) J.P. Morgan would have to file its income tax return under Section 139 of the Income Tax Act in India due to withholding tax on its interest income borrower. H

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 531 [ARUN MISHRA, J.]

66Copy pinpoint66. The Forensic Auditors have also reported duplicate allotment A of flats. They have provided the details of flats. Flats were alloted (residential and commercial) to the brokers and suppliers of which list has been given. Utilities like Milk Booth, nursery schools, senior secondary schools, nursing homes alloted to various parties should be cancelled.

67Copy pinpoint67. With respect to Sureka Group, it is pointed out in the Forensic B Audit Report that they have been a partner in various projects and were authorised cheque signatories in various companies. It is observed that Rs.13.44 crores were paid to Surekha Public Charitable Trust, which is a group institution of Jotindra Steel and Tubes Limited, which amount should be recovered from Jotindra Steel & Tubes Limited. An amount of Rs.9,506,120 should also be recovered from Surekha Group. Funds C were routed through Synergy Freightways Pvt. Ltd. Mr. Atul Kumar was alloted a flat which was not by way of adjustment. The amount should be recovered or his flat may be attached.

68Copy pinpoint68. With respect to R.N. Traders, an amount of Rs.2,714.02 lakhs have been withdrawn by the management for the purpose of their own D use and should be recovered from the management. There is a billing of Rs.5.28 crores for the financial year 2015-16 in the name of Mauria Udyog Limited. Forfeiture of the investments has also been suggested in the group companies named by the Forensic Auditors. CONSIDERATION OF SUBMISSIONS E

69Copy pinpoint69. In the instant matter, the question of larger public importance is involved. It is a shocking and surprising state of affairs that such large-scale cheating has taken place and middle and poor class home buyers have been duped and deprived of their hard-earned money and lifetime savings and some of them had taken a loan from the bank and F they are not getting houses. Bank has made payment to the builder, owners have the liability of making payment of amount with interest, home buyers are still waiting for their dream houses to be completed. This is not only with respect to the Amrapali builders that projects have not been completed as reflected in the affidavits of Noida and Greater G Noida Authorities. More than 70% of the projects have not been completed which were initiated way-back in the year 2008-09 and were supposed to be completed within 3 years. By the Amrapali Group, the buyers’ money which has been obtained has not been invested in the construction activities, rather it has been diverted to a great extent. Money H

p. 532 Copy page pinpoint

A obtained from the banks has also not been invested in the projects and has been diverted elsewhere to acquire other assets.

70Copy pinpoint70. There are huge liabilities of Noida and Greater Noida Authorities and though builders were asked way back on 17.11.2017 to deposit 10% of the amount with the Noida and Greater Noida authorities, that order was repeated again on 18.1.2018 but still that has not been complied with. Thereafter on the basis of joint note, this Court directed Amrapali group of companies to complete the projects but the order was not complied with. Various wrong representations were made in this Court. Developers backed out and an application was filed to waive the condition of deposit of Rs.250 crores to start work by the Amrapali group that shows that its action was mala fide and it never intended to complete various projects as rightly found by the forensic auditors and that their intention was to divert the funds and this they had done at a large scale as is borne out from their report.

71Copy pinpoint71. The question involved in the case is whether the builders and promoters can be permitted to usurp and divert the money of home buyers and home buyers can be left in the lurch as a silent spectator. As per the Noida and Greater Noida authorities, in case the lease-deed is snapped, the entire constructed buildings shall have to be demolished within 3 months. As per the bankers, they have a charge on the property as the land has been mortgaged to them and until and unless their amount is paid, the builder will have no right on the property which has been constructed by their money, and the buyers have also to wait for the satisfaction of the dues.

72Copy pinpoint72. In our opinion, if the real estate business has to survive in F India, it has to be answerable to the public and has necessarily to uphold the trust reposed in builders/promoters. They have been paid huge amounts not only by the home buyers but also, they have to pay a huge amount for the public land given to them on lease by Noida and Greater Noida Authorities for construction of houses. The land has been given to them by the authorities on a concessional basis by making payment of G 10% amount at the time of allotment. The builders have to be accountable to public/home buyers as well as the authorities and bankers. It is a matter relating to housing needs dealing with shelter place, such an activity is of the public importance as the real estate sector plays a pivotal role in the fulfilment of needs of housing infrastructure. H

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 533 [ARUN MISHRA, J.]

IN RE: PUBLIC TRUST DOCTRINE A

73Copy pinpoint73. The public trust doctrine imposes on the State and its functionaries a mandate to take affirmative action for effective management, and the citizens are empowered to question its ineffectiveness. The land of the farmers had been acquired for the purpose of housing and infrastructure needs by the State Government B and handed over to the concerned authorities for construction. They are bound to ensure that builders act in accordance with the objective behind the acquisition of land and the conditions on which allotment had been made. It was a duty of concerned officials; they are not only enjoined to ensure that the rights of the home buyers are protected but also the interests of the authorities; and bankers. The public authorities are duty- C bound to observe that the leased property is not frittered away along with the money of the home buyers. Affirmative action was clearly enjoined upon them not only under the statutory provisions of various enactments but also under the public trust doctrine that has evolved over the years by this Court. In Noida Entrepreneurs Association v. Noida D & Ors. (2011) 6 SCC 508, this Court has observed: “38. The State or the public authority which holds the property for the public or which has been assigned the duty of grant of largesse, etc. acts as a trustee and, therefore, has to act fairly and reasonably. Every holder of a public office by virtue of which he E acts on behalf of the State or public body is ultimately accountable to the people in whom the sovereignty vests. As such, all powers so vested in him are meant to be exercised for public good and promoting the public interest. Every holder of a public office is a trustee. F *** *** ***

40. The Public Trust Doctrine is a part of the law of the land. The doctrine has grown from Article 21 of the Constitution. In essence, the action/order of the State or State instrumentality would stand vitiated if it lacks bona fides, as it would only be a case of colorable G exercise of power. The Rule of Law is the foundation of a democratic society. (Vide Erusian Equipment & Chemicals Ltd. v. State of W.B., AIR 1975 SC 266, Ramana Dayaram Shetty v. International Airport Authority of India, AIR 1979 SC 1628, Haji T.M. Hassan Rawther v. Kerala Financial Corpn., AIR H

p. 534 Copy page pinpoint

A 1988 SC 157, Shrilekha Vidyarthi v. State of U.P., AIR 1991 SC 537; and M.I. Builders (P) Ltd. v. Radhey Shyam Sahu, AIR 1999 SC 2468). *** *** ***

41. Power vested by the State in a Public Authority should be viewed as a trust coupled with duty to be exercised in larger public and social interest. Power is to be exercised strictly adhering to the statutory provisions and fact-situation of a case. “Public Authorities cannot play fast and loose with the powers vested in them”. A decision taken in an arbitrary manner contradicts the principle of legitimate expectation. An Authority is under a legal obligation to exercise the power reasonably and in good faith to effectuate the purpose for which power stood conferred. In this context, “in good faith” means “for legitimate reasons”. It must be exercised bona fide for the purpose and for none other. (Vide Commr. of Police v. Gordhandas Bhanji, AIR 1952 SC 16, Sirsi D Municipality v. Ceceila Kom Francis Tellis, AIR 1973 SC 855, State of Punjab v. Gurdial Singh, AIR 1980 SC 319, Collector (District Magistrate) v. Raja Ram Jaiswal, AIR 1985 SC 1622, Delhi Admn. v. Manohar Lal, (2002) 7 SCC 222 and N.D. Jayal v. Union of India, AIR 2004 SC 867).”

74Copy pinpoint74. In Natural Resources Allocation, In re, Special Reference No.1 of 2012, (2012) 10 SCC 1, the Court observed: “172. The judgment in LDA v. M.K. Gupta, (1994) 1 SCC 243, brings out the foundational principle of executive governance. The said foundational principle is based on the realization that sovereignty vests in the people. The judgment, therefore, records that every limb of the constitutional machinery is obliged to be people oriented. The fundamental principle brought out by the judgment is, that a public authority exercising public power discharges a public duty, and therefore, has to sub-serve general welfare and common good. All power should be exercised for the sake of society. The issue which was the subject matter of consideration, and has been noticed along with the citation, was decided by concluding that compensation shall be payable by the State (or its instrumentality) where inappropriate deprivation on account of improper exercise of discretion has resulted in a loss, H

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 535 [ARUN MISHRA, J.]

compensation is payable by the State (or its instrumentality). But A where the public functionary exercises his discretion capriciously, or for considerations which are malafide, the public functionary himself must shoulder the burden of compensation held as payable. The reason for shifting the onus to the public functionary deserves notice. This Court felt, that when a court directs payment of B damages or compensation against the State, the ultimate sufferer is the common man because it is tax-payers money out of which damages and costs are paid.”

75Copy pinpoint75. In Association of Unified Tele Services Providers & Ors. v. Union of India & Ors. (2014) 6 SCC 110, the Court observed: C “4. We have indicated, the worth of spectrum to impress upon the fact that the State actions and actions of its agencies/ instrumentalities/ licensees must be for the public good to achieve the object for which it exists, the object being to serve public good by resorting to fair and reasonable methods. State is also bound to protect the resources for the enjoyment of general public rather than permit their use for purely commercial purposes. Public trust doctrine, it is well established, puts an implicit embargo on the right of the State to transfer public properties to private party if such transfer affects public interest. Further, it mandates affirmative State action for effective management of natural resources and empowers the citizens to question ineffective management.”

76Copy pinpoint76. In the instant case, it is apparent that there are colossal dues of Noida and Greater Noida Authorities. The dues of Noida Authorities as on 30.4.2019 are Rs.2191.38 crores and dues of Greater Noida F authority are stated to be Rs.3234.71 crores as on 15.1.2019. Thus, the total dues of Noida and Greater Noida authorities are more than Rs.5426.09 crores; by now more than Rs.5500 crores. Payments were made to Noida authorities in 2010 and some amount in 2013; in-between or thereafter, except one or two payments no other amount has been paid. There were several defaults in making the payment of the premium G amount, lease money, even the money payable to the farmers as compensation for land acquisition has not been paid by the builders, as is apparent from the account statement filed on behalf of the Noida authority. Though the builder has realised from home buyers the amount payable H

p. 536 Copy page pinpoint

A to authorities of Noida and Greater Noida as a component of the price payable by them.

77Copy pinpoint77. Once the Noida and Greater Noida Authorities knew very well that there were defaults, they could not have allotted further land to the Amrapali group without insisting for payment of its dues. Secondly, it was not open to the authorities to permit the sub-leases of plot of land executed by builders, thereby allowing the leaseholder to earn a huge amount without making payment of the amount due to them. The officials of the authorities have acted in clear breach of public trust. They have permitted the defaulting leaseholders to earn the amount by sub-leasing its land of which dues had not been cleared. Thus, apparently, the officials of the authorities acted clearly in collusion with the builders and overlooked the interest of the Authorities and home buyers while permitting the sub- leases of plot of land to be granted. It passes comprehension how the officials of the authorities could have permitted such sub-leases in the factual scenario of the case when even the basic obligation to raise the construction was not being fulfilled by the builders and they were not paying the dues of premium, lease money etc. The action of the officials of the authorities has the effect of causing unjust enrichment of builder from the land held by the concerned authorities. It was wholly an illegal exercise permitted.

78Copy pinpoint78. We are of the considered opinion that the officials of the Noida and Greater Noida authorities have acted clearly in a breach of public trust and apart from that, they have failed to act as per the statutory mandate, the regulations and the terms of the lease deed. The transfer of the plot by the lessee was only on fulfilment of certain conditions. The dues of lessor towards the cost of land were to be cleared in accordance F with the schedule of payment. Following provision is contained in lease deed dated 3.8.2010 entered into between Greater Noida Industrial Development Authority and M/s. Amrapali Leisure Valley Developers Pvt. Ltd. The relevant provision with respect to the transfer of the plot is extracted hereunder: G “TRANSFER OF PLOT . Without obtaining the completion certificate the Lessee shall have the right to sub-divide the allotted plot into suitable smaller plots as per planning norms and to transfer the same to the interested parties up to 30.0.2010, or as decided by the Lessor, H

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 537 [ARUN MISHRA, J.]

with the prior approval of LESSOR on payment of transfer charges A @ 2% of allotment rate. However, the area of each of such sub- divided plots should not be less than 20,000 sq. mtrs. However, the individual flat/plot will be transferable with prior approval of the LESSOR as per the following conditions:- (i) The dues of LESSOR towards the cost of the land shall be B paid in accordance with the payment schedule specified in the Lease Deed before executing of sub-lease deed of the flat. (ii) The lease deed has been executed. (iii) Transfer of flat will be allowed only after obtaining completion certificate for the respective phase by the Lessee. C

(iv) The sub-Lessee undertakes to put to use the premises for the residential use only. (v) The Lessee has obtained building occupancy certificate from the Building Cell/Planning Department, GREATER NOIDA. D (vi) First sale/transfer of a flat/plot to an allottee shall be through a Sub-lease/Lease Deed to be executed on the request of the Lessee to the LESSOR in writing. (vii) No transfer charges will be payable in case of the first sale, including the built-up premises on the sub-divided plot(s) as E described above. However, on a subsequent sale, transfer charges shall be applicable on the prevailing rates as fixed by the LESSOR. (viii) Rs. 1000/- shall be paid as processing fee in each case of transfer of flat in addition to transfer charges.” (emphasis supplied) F

79Copy pinpoint79. In the lease deed, the schedule of payment was fixed. Two years was the period of the moratorium and thereafter payment was to be made on expiry of 23.10.2012, onwards up to 23.4.2020. In case of default in depositing the amount, the interest @ 15% compounded half yearly shall be leviable. With respect to the extension of time, it is provided G that in exceptional circumstances, time to deposit for payment of balance due amount may be extended by the CEO for 15% interest compounded half yearly. The extension of time, in any case, cannot be allowed for more than 60 days for each instalment to be deposited, subject to a H

p. 538 Copy page pinpoint

A maximum of 3 such extensions during the entire payment schedule. The provision relating to the extension of time is extracted hereunder: “A. EXTENSION OF TIME

1. In exceptional circumstances, the time of deposit for the payment of balance due amount may be extended by the Chief B Executive Officer of the Lessor.

2. However, in such cases of time extension, interest @ 15% per annum compounded half yearly shall be charged on the outstanding amount for such extended period.

C 3. Extension of time, in any case, shall not be allowed for more than 60 days for each instalment to be deposited, subject to maximum of three (3) such extensions during the entire payment schedule.

4. For the purpose of arriving at the due date, the date of issuance of allotment letter will be reckoned as the date of allotment.”

80Copy pinpoint80. The lease was granted for a term of 90 years. It is specifically provided in lease deed condition No.(ii)(c) that the lessee shall use the allotted plot for construction of group housing/flats/plots. Condition No.(ii)(c)(iii) deals with the part transfer of the plot. It lays down normally the permission for part-transfer of the plot shall not be granted under any circumstances. The lessee shall not be entitled to complete the transaction for sale, transfer, assign or otherwise part with possession of the whole or any part of the building constructed thereon before making payment according to the schedule specified in the lease deed of the plot to the lessor. Relevant condition No.2(c)(iii) is extracted hereunder: F “(c) The Lessee shall use the allotted plot for construction of Group Housing/flats/plots. However, the Lessee shall be entitled to allot the dwelling units on a sub-lease basis to its allottee and also provide space for facilities like Roads, Parks, etc. as per their requirements, convenience with the allotted plot, fulfilling G requirements or building bye-laws and prevailing and under mentioned terms and conditions to the Lessor. Further transfer/ sublease shall be governed by the transfer policy of the Lessor. i) Such allottee/sub Lessee should be a citizen of India and competent to contract. H

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 539 [ARUN MISHRA, J.]

ii) Husband/wife and their dependent children will not be separately eligible for the purpose of allotment and shall be treated as single entity. iii) Normally, the permission for the part transfer of plot shall not be granted under any circumstances. The Lessee shall not be entitled to complete transaction for sale, transfer, assign or otherwise part with possession of the whole or any part of the building constructed thereon before making payment according to the schedule specified in the lease deed of the plot to the Lessor. However, after making payment of premium of the plot to the Lessor as per schedule specified in the lease deed, permission for transfer of built-up flats or to part with possession of the whole or any part of the building constructed on the Group Housing Plot, shall be granted and subject to payment of transfer charges as per policy prevailing at the time of granting such permission of transfer. However, the Lessor reserves the right to reject any transfer application without assigning any reason. The Lessee will also be required to pay transfer charges as per the policy prevailing at the time of such permission of transfer. The permission to transfer the part of the built-up space will be granted subject to execution of tripartite sub-lease deed which shall be executed in a form and format as prescribed by the lessor. On the fulfilment of the following conditions: - a) The lease deed of the plot has been executed and the Lessee has made the payment according to the schedule specified in the lease deed of the plot, interest and one-time lease rent. F Permission of sub-lease deed shall be granted phase wise on payment of full premium (with interest up to the date of deposit) of the plot of that phase. b) Every sale done by the Lessee shall have to be registered before the physical possession of the property is handed over. G c) The Lessee has obtained building occupancy certificate from the Planning Department, Greater Noida. d) The Lessee shall submit list of individual allottees of flats within 6 months from the date of obtaining occupancy certificate. H

p. 540 Copy page pinpoint

A e) The Lessee shall have to execute sublease in favour of the individual allottees for the developed flats/plots in the form and format as prescribed by the LESSOR. f) The Sub-Lessee undertakes to put to use the premises for the residential use only.” B (emphasis supplied)

81Copy pinpoint81. In view of the aforesaid clause, by way of sub-lease of the plot, the transfer of plots could not have been made by the lessee. The lessee was required to start construction within 12 months from the date of possession. The date of execution of lease deed shall be treated as the date of possession. The lessee shall be required to complete the construction of minimum 15% of the total FAR of the allotted plot as per the approved layout plan and get occupancy/completion certificate within 3 years from the date of execution of the lease deed. Cancellation of lease deed is also provided in the case of violation of directions, or rules, regulations or in case of the default on the part of the lessee for breach or violation of terms and conditions of the registration/allotment/lease and/or non-deposit of allotment amount. In the case of cancellation, if the plot is occupied by the lessee, an amount equivalent to 25% of the total premium of the plot shall be forfeited and possession of the plot will be resumed by the lessor with structure thereon, if any, and the lessee will have no right to claim compensation thereof. The provision relating in lease deed as to its cancellation is extracted hereunder: “CANCELLATION OF LEASE DEED In addition to the other specific clauses relating to cancellation, the Lessor, as the case may be, will be free to exercise its right of cancellation of the lease in the case of:-

1. Allotment being obtained through misrepresentation/suppression of material facts, misstatement and/or fraud.

2. Any violation of directions issued or rules and regulation framed by Lessor or by any other statutory body.

3. Default on the part of the Lessee for breach/violation of terms and conditions of registration/allotment/lease and/or non-deposit of allotment amount.

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 541 [ARUN MISHRA, J.]

4. If at the same time of cancellation, the plot is occupied by the A Lessee thereon, the amount equivalent to 25% of the total premium of the plot shall be forfeited and possession of the plot will be resumed by the Lessor with structure thereon, if any, and the Lessee will have no right to claim compensation thereof. The balance, if any, shall be refunded without any interest. The forfeited B amount shall not exceed the deposited amount with the Lessor and no separate notice shall be given in this regard.

5. If the allotment is cancelled on the ground mention in sub- clause 1 above, then the entire amount deposited by the lessee till the date of cancellation shall be forfeited by the Lessor and no claim whatsoever shall be entertained in this regard.” C

82Copy pinpoint82. As provided by clause 6, the lease deed/allotment shall be governed by the provisions of the U.P. Industrial Area Development Act, 1976 and by the rules and/or regulations made or directions issued under the Act. Clause 7 requires the lessor to monitor the implementation of the project. The applicants who do not have a firm commitment to D implement the project within the time limits prescribed are advised not to avail the allotment. In larger public interest the lessor under clause 13 is also given a right to take back possession of the land/building by making payment at the prevailing rate. Condition Nos.6, 7 and 13 are extracted hereunder: E “6. The Lease Deed/allotment will be governed by the provisions of the U.P. Industrial Area Development Act, 1976 (U.P. Act No.6 of 1976) and by the rules and/or regulations made or directions issues, under this Act.

7. The Lessor will monitor the implementation of the project. F Applicants who do not have a firm commitment to implement the project within the time limits prescribed are advised not to avail the allotment.

13. The Lessor in larger public interest may take back the possession of the land/building by making payment at the prevailing G rate.” (emphasis supplied) Thus, it is apparent that the officials of the concerned authorities have not discharged their duty in accordance with the trust enjoined H

p. 542 Copy page pinpoint

A upon them under aforesaid terms and conditions of lease deed, thus, by their inaction, enabled cheating of the home buyers at a large scale. They were well aware of what was happening on the spot. IN RE: MORTGAGE

83Copy pinpoint83. With respect to the creation of mortgage deed in favour of bankers etc., Noida Authority has submitted that every mortgage permission is granted by the Noida Authority to the individual company of Amrapali group wherein a provision is made that Noida Authority has first charge/priority over all other charges including those created in favour of banks and financial institutions. The conditions on which permission to mortgage had been granted are as under: “This is to inform you that Noida shall have no objection for the purpose of financing his investment in the project on Group Housing Plot No.001, Sector 119, Noida in favour of Nationalised Banks/ Financial Institutions/HUDCO, New Delhi or to issue NOC to mortgage the said land to facilitate the housing loans of the final loans of the final purchasers subject to such terms and conditions as may be decided by the Authority at the time of granting the permission. This permission is being granted subject to the condition that in the mortgage deed, following clauses will be included:-

E (i) That the financial institution in whose favour mortgage permission is required should be recognised by the Reserve Bank of India/National Housing Bank/HUDCO New Delhi. Noida shall have the first charge towards the pending payment in respect of plot/flat allotted/lease rent/taxes or any other charges as informed or levied by the Authority on the plot and the banks/financial institutions/HUDCO New Delhi, shall have the second charge on the dwelling units thus being financed. (ii) The mortgage permission shall be effective on making full payment of premium and up to date annual lease rent of group housing plot and after execution of sub-lease deed in favour of allottee of the dwelling unit and the allottee/sub-lessee shall be governed by the terms and conditions of allotment/lease deed of the plot to be executed and sub-lease deed to be executed in favour of the allottee sub-lessee. In the event of sale/transfer of flat, transfer charges at the rate prevailing at the time of transfer shall be payable to Noida. H

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 543 [ARUN MISHRA, J.]

(iii) Each allottee/sub-lessee of the dwelling units shall have to intimate Noida of the creation of the mortgage in favour of bank/ financial institutions/employer and the bank/financial institution/ employee of the allottee shall also keep Noida informed about the dwelling units thus financed. (iv) It is further to inform you that in the case of cancellation of lease, Noida Authority will give 30 days’ notice to nationalised Banks/financial institutions/HUDCO, New Delhi prior to exercising its right of re-entry on the premises.” (emphasis supplied)

84Copy pinpoint84. The permissions to mortgage containing aforesaid clauses have been placed on record along with affidavit dated 22.11.2018. It is apparent from the second condition, subject to which permission to mortgage shall be effective on making full payment of the premium and up to date annual lease rent of group housing plot and after execution of the sub- lease deed in favour of the allottee of the dwelling unit, the allottee/sub- D lessee shall be governed by the terms and conditions of allotment/lease deed of the plot to be executed and sub-lease deed to be executed in favour of the allottee/sub-lessee. Since at no point of time, payment of premium due had been made and up to date annual lease rent had not been paid, no mortgage could have been created in favour of the bank in view of specific condition No.2 extracted above. Thus, when the conditional permission granted by the authority was furnished to the bank for obtaining the loan by promoters/builders, it was incumbent upon Bank officials to ascertain from the concerned authorities that the premium due under the leases has been paid and lease rent due up to date has also been paid. In order to create a mortgage, it was necessary to obtain clear NOC in order to create effective mortgage deed. As that has not been done so far, no mortgage in the eye of law has been created in favour of the bank. It was not open to the bankers to mortgage the land in view of the conditional permission to create mortgage, the mortgage created in violation of condition cannot be said to be effective in accordance with law as the land was owned by the concerned authorities and the lessees had right to mortgage only subject to fulfilment of conditions imposed by the lessor/authorities.

85Copy pinpoint85. On behalf of Noida and Greater Noida authorities, it was pointed out that they had taken steps reminding the lessees to pay dues by issuing H

p. 544 Copy page pinpoint

A notices w.e.f. 2007 to 2017. In our opinion, in spite of no payment made by lessees, failure to take action, makes their position further worse. As no effective action had been taken and officials have permitted wilfully contumacious violations of conditions of the lease. Right under their nose and to their knowledge serious kind of fraud had been taking place and officials have clearly connived with builders. In spite of construction activity lying stand still for years together dues not being paid. As a matter of fact, issuance of conditional NOC was with ulterior motive, there was no reason to issue such a conditional permission, subject to which mortgage could have been made. They could not have issued any conditional permission for creation of a mortgage also without payment of amount due, permission has been issued obviously for being misused, in collusion with the officials of the bank and Authorities. It was incumbent upon the concerned authorities not to issue such an NOC for a mortgage and it was incumbent upon the bank officials in order to create a valid mortgage to ascertain from the Noida and Greater Noida Authorities that the condition imposed by them as condition precedent to create a D mortgage had been fulfilled and to obtain clear NOC. But that is how in illegal manner the public money is obtained from banks for the purpose of construction activity and then it was not used for that purpose, as found in the forensic audit report in which it is rightly pointed out that there was a diversion of money. The amount of loan advanced by banks was not used for the purpose it had been obtained for a particular project and it was diverted to other companies. It was happening not only under the nose of Noida and Greater Noida authorities, but was directly in the knowledge and connivance of the bankers as day-to-day transactions in the bank accounts were pointing out that the money was being siphoned and diverted for other purposes routinely, not being utilised for the purpose it was given. Thus, all of them have helped in perpetuating the fraud on the home buyers by Amrapali group of companies, its various Directors, officials and others who have been specified in minute details in the forensic audit reports. The case also indicates that not only the banks have failed to ensure that mortgage was effected in accordance with the law, but also they have failed to check whether money was in fact, required for the projects and was used for purpose it was lent. By the collusion, the money paid by home buyers to builders which included money payable to the Authorities could be diverted, had the deposit made by home buyers been unutilised, money due under lease would have been paid to authorities before the creation of the mortgage. Money H

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 545 [ARUN MISHRA, J.]

borrowed from bank, in fact, was not required for completion of these A projects as the money paid by the buyers was enough for that purpose, but that was also diverted and the money obtained from the banks was also not utilised for the purpose it was taken and it was well within the knowledge of the bankers and Authorities that the funds were being diverted, but they remained mute spectators. B DIVERSION OF FUNDS

86Copy pinpoint86. It has been observed in extensive detail in the forensic audit report that the Bank of Baroda, Syndicate Bank, Bank of India, Corporation Bank did not monitor utilisation of funds and acted as a mute spectator to diversion which was almost happening evidently in all banking transactions. In the case of Amrapali Zodiac Developers, Bank of Baroda has advanced an amount which was diverted immediately on receipt. The details have been given in the forensic auditors’ report extracted above. There was no amount due as on the date of the transfer. In the case of Amrapali Princely Estate Pvt. Ltd., the details have been given with respect to the Syndicate Bank and Bank of India as to how immediately on receipt, the funds were diverted to several parties. In the case of Amrapali Eden Park Developers Pvt. Ltd., there was a receipt from the Corporation Bank, and similar is the position. Immediately the funds were diverted to the third parties as detailed in the forensic report. Details of diversion of loan funds have been given in a tabular form in Section XII from pages 426 to 457 of the report. The submissions which have been raised on behalf of Bank of Baroda that due observance of norms was observed before sanctioning the loan, before disbursal and an independent Lenders’ Engineer had been appointed in order to monitor the contract. Monitoring was done during and post disbursal of loan by Bank of Baroda. As a matter of fact, the bank has not been able to show what steps it has taken to stop the diversion of funds to third parties on the same date of disbursal of the amount. The aforesaid stand of the Bank is falsified by the Forensic Auditors’ report.

87Copy pinpoint87. The transactions of Amrapali Zodiac Developers Pvt. Ltd. with J.P. Morgan were clearly in order to avoid the provisions of the G Companies Act. It is apparent that Mr. Anil Mittal, Statutory Auditor, did not report his interest and disclosed about his relatives and junior employee as Director and shareholders. Mr. Chandan Kumar was a junior employee and Mr. Atul Mittal was his relative. Thus, it is apparent that Rudraksha Infracity Pvt. Ltd. was created for money laundering as aforesaid two H

p. 546 Copy page pinpoint

A Directors and shareholders had no income, Rudraksha Infracity Pvt. Ltd. was incorporated to receive funds from Mannat Buildcraft which was also created by Mr. Chander Wadhwa, CFO through his close associates. After receiving money from Mannat Buildcraft Pvt. Ltd., the same was transferred to J.P. Morgan Investments for purchasing equity shares of Amrapali Zodiac Pvt. Ltd. at an exorbitant price. There B was no transaction before or after these transfers of monies in the aforesaid dummy companies. To suit the requirement of J.P. Morgan Investments, in entirety incorrect valuation report was prepared by M/s. Sudit K. Parikh & Co., Chartered Accountants. The methodology and procedures defined of computation of fair market value were not followed C at the time of exit. J.P. Morgan was having full control on Amrapali Zodiac Developers and no action could have taken as per clause 10.4.3 without investors’ approval. The profit cannot be recognised until the project is completed. Thus, there cannot be any distributable amount as profit for distribution to J.P. Morgan. It has also been found by the Forensic Auditors that J.P. Morgan was in the knowledge of the fact that Amrapali D Zodiac Developers had paid the money received to other companies of Amrapali group. Advances exceeded the limits specified in the shareholders’ agreement, but J.P. Morgan did not ensure bringing back the money. It was accepted by Mr. Suraj Chhabria that it was in his knowledge and that of J.P. Morgan that the money has been diverted E from shareholder’s agreement and share subscription agreement. The valuation of the shares did not follow the correct methodology of discounted cash flow as detailed out by the forensic auditors. The valuation exercise was done backwardly in order to inflate the value of share to siphon out the money of home buyers through J.P. Morgan.

88Copy pinpoint88. The FEMA rules prohibited the kind of transactions which were entered into with J.P. Morgan. Rule 4 of FEMA has been clearly violated. Master Circular No.8/2010-2011 of July 1, 2010, dealing with external commercial borrowings and trade credits clearly provides that external commercial borrowings are not permitted to be utilised for real estate business under the automatic route. The term real estate excludes the development of the integrated township. It was not a case of development of the integrated township. Even if it is taken to be a case of integrated township as submitted on behalf of J.P. Morgan, then also for approval route, hedging is required as pointed out by the Forensic Auditors in their report and borrowers had to submit their report about the signing of loan agreement with the lender for obtaining Loan

BIKRAM CHATTERJI & ORS. v. UNION OF INDIA & ORS. 547 [ARUN MISHRA, J.]

Registration Number. In case J.P. Morgan had invested in the form of A ECB, following would have been the requirements: (i) obtaining Loan Registration Number from the RBI; (ii) file ECB-2 returns every month to the RBI, (iii) to pay tax on interest payment to J.P. Morgan; and (iv) to file income tax return. We are in agreement with the findings of the forensic auditors in this regard. It is clear that it was a methodology B adopted by the group to siphon out the funds of the home buyers in violation of the FEMA rules and the notifications and by the creation of dubious companies for which appropriate action is warranted by the concerned authorities.

89Copy pinpoint89. The report of Forensic Audit also indicates that the Company has received a sum of Rs.140 crores during the financial year 2012-13 C from IPFFI Singapore PTE Limited under Foreign Direct Investment Scheme. As per FEMA Rules, this amount was to be invested in real estate construction projects only.

90Copy pinpoint90. The IPFFI Singapore PTE Limited which was incorporated on 20.5.2011, entered into a Share Subscription Agreement with ASCPL D on 23.8.2012 and paid a sum of Rs.140 crores to ASCPL in the following manner on 7.8.2012: (a) INR 85 crores received in Axis Bank, Indirapuram Branch on 7.8.2012. E (b) INR 55 crores received in BOB Escrow Account on 7.8.2012. Thus, a total sum of Rs.140 crores was received in Axis Bank. The amount was received in Axis Bank of INR 85 crores was transferred to Amrapali Centurian Park Pvt. Ltd. in three proportion. On 7.8.2012, F Rs.5 crores were transferred. On 8.8.2012, an amount of Rs.50 crores was transferred and on 18.8.2012, Rs.30 crores were transferred. The ACPPL on receiving Rs.85 crores allotted equity shares worth INR 85 lakhs to ASCPL and balance INR 84.15 crores were treated as share premium account. There is no valuation report available as to how the share premium of INR 84.15 crores had been calculated. This transfer G of fund by ASCPL to ACPPL is termed as absolutely violative of FDI Rules and agreement. With respect to Rs.55 crores routed from IPFFI Singapore in the Escrow Account of Bank of Baroda, Escrow Account was transferred from 8.8.2012 to 28.9.2012 in the account of Bank of Baroda and used for payment of term loan instalments of OBC and H