TNIE: Karnataka Bank reports Rs 285 crore fraud in four loan accounts

6 June 2020: Private sector lender Karnataka Bank has reported to the RBI that it has been defrauded of over Rs 285 crore consequent to loans gone bad to four entities including DHFL. A total of Rs 285.52 crore has been reported as fraud wherein the bank was one of the consortium lenders during 2009 to 2014 to Dewan Housing Finance Corporation Ltd (DHFL), Religare Finvest, Fedders Electric and Engineering Ltd and Leel Electricals Ltd, Karnataka Bank said in a regulatory filing on Friday.

The maximum is owed by DHFL at Rs 180.13 crore, followed by Religare Finvest Rs 43.44 crore, Fedders Electric Rs 41.30 crore and Leel Electricals Rs 20.65 crore.

“DHFL (defaulted entity) dealing with us since 2014 had availed various credit facilities under consortium arrangement wherein, we were one of the member banks. In view of Early Warning Signals (EWS) in the conduct of the account and other developments, the account was red flagged on November 11, 2019.

“The borrowing account was classified as Non-Performing Asset on October 30, 2019 and now, for misappropriation & criminal breach of trust & diversion of funds in the credit facilities extended earlier to the company, a fraud amounting Rs 180.13 crore has been reported to RBI,” Karnataka Bank said.

Likewise, Religare Finvest Ltd (RFL) was dealing with the bank since 2014, availing various credit facilities.

Following classification of this account as non-performing in October 2019 by a consortium member, Karnataka Bank reported to RBI a fraud amounting to Rs 43.44 crore in the credit facilities extended earlier, on account of diversion of funds.

Leel Electricals was classified as NPA account in March 2019 and it reported to RBI a fraud amounting to Rs 20.65 crore in the credit facilities to the company on account of diversion of funds.

“In all the referred three non-performing accounts, necessary provisions have been made in full to be spread across four quarters,” it said.

Fedders Electric and Engineering Limited was reported as NPA in July 2018 by a member bank in consortium, subsequent to which Karnataka Bank reported fraud of Rs 41.30 crore on account of fund diversion.The account has already been fully provided for, it added.

Source: The New Indian Express reported

TOI: PMC Bank case: Chargesheet against five directors, two valuers

6 June 2020: The city economic offences wing (EOW) on Friday filed a 2,000- page chargesheet in the Esplanade court against five directors and two valuers of Punjab and Maharashtra Cooperative (PMC) Bank. The two valuers are accused of giving backdated reports with inflated valuation of properties mortgaged with the bank. This is the third chargesheet in the case.

Those chargesheeted on Friday include five directors, Jasbir Banwait, Balbir Singh Kochar, Surjit Singh Narang, Omprakash Uppal, Brijbhushan Handa and two valuers, Vishwanath Prabhu and Shripad Jere. Four of the accused are bedridden and, hence, could not appear in court. Earlier, a police team led by inspector Kishore Parab had arrested 12 accused and registered offences against them.

On February 5, police had filed the second chargesheet that ran into 12,000 pages in the Rs 4,700-crore bank loan fraud case against BJP MLA Sardar Tara Singh’s son, Rajneet Singh, and six others. In December last year, the police had filed their first 32,000-page chargesheet against five accused in this case.

HDIL group’s managing directors, Rakesh Wadhawan and his son, Sarang, are accused of fraudulently availing loans of more than Rs 6,700 crore and defaulting on them. They were assisted by the bank’s ex-chairman, Waryam Singh, suspended managing director Joy Thomas and bank director, Surjit Singh Arora. All the accused are currently in jail.

HDIL group’s managing directors, Rakesh Wadhawan and his son, Sarang, are accused of fraudulently availing loans of more than Rs 6,700 crore and defaulting on them. They were assisted by the bank’s ex-chairman, Waryam Singh, suspended managing director Joy Thomas and bank director, Surjit Singh Arora. All the accused are currently in jail.

Source: The Times of India

ET: Bankruptcy process at Indu Techzone set aside by NCLAT

29 May 2020: The National Company Law Appellate Tribunal (NCLAT) has set aside the insolvency proceedings at Indu Techzone, providing relief to promoters led by I Syam Prasad Reddy, who is a co-accused in the disproportionate assets case against Andhra Pradesh CM YS Jagan Mohan Reddy.

The tribunal has ordered in favour of the company on the ground that lender IFCI had filed the insolvency petition after missing the deadline as per the Insolvency and Bankruptcy Code.

It allowed Indu Techzone to “function independently through its board of directors with immediate effect”. The May 22 order also provides relief to the Enforcement Directorate, which had attached certain assets of Indu Techzone in the disproportionate assets case and sought to exempt those from the insolvency proceedings.

The firm had approached the NCLAT after the National Company Law Tribunal’s (NCLT’s) Hyderabad bench ordered insolvency proceedings against it in November last year. It argued that the resolution application was barred by limitation — the period within which legal action could be initiated or a right enforced.

The ED had earlier submitted before the NCLT that it had registered a case in August 2011 against Jagan Mohan Reddy and others under the Prevention of Money Laundering Act, wherein Indu Techzone was one of the suspects.

Source: The Economic Times

HT: CBI books rice mill, 3 directors in ₹100-cr cheating cases

28 May 2020: The CBI has booked Karnal-based Shakti Basmati Rice Pvt Ltd and its three directors for allegedly cheating the State Bank of India (SBI) to the tune of over Rs 100 crore, officials said on Wednesday.

Directors Shyam Lal, Parveen Kumar and Suresh Kumar allegedly obtained credit facilities from the SBI’s commercial branch in Haryana’s Karnal by misrepresentation of facts, a Central Bureau of Investigation (CBI) spokesperson said.

The company, which manufactured grain mill products (rice), allegedly diverted the loan amount for introduction of share capital, inflated the sale and purchase figures, and devalued stocks to show losses to justify diversion of funds by selling stock out of books, the officials said.

The company allegedly failed to repay the loan amount resulting in the loss of Rs 100.46 crore to the bank. The agency has also booked unnamed public servants in the case, the officials said.

Source: Hindustan Times

TNIE: Money laundering case: DHFL promoters Wadhawans sent to jail

27 May 2020: A special court here on Wednesday remanded DHFL promoters Kapil and Dheeraj Wadhawan, arrested by the ED in connection with money laundering probe against Yes Bank co-founder Rana Kapoor and others, to 14-day judicial custody.

They were arrested earlier this monthunder the provisions of the Prevention of Money Laundering Act (PMLA).

The Wadhawans brotherswere produced before the special court at the end of their Enforcement Directorate (ED) remand. The court sent them to jail after no further remand was sought by the central investigating agency.

The duo, also being probed by the ED in another money laundering probe linked to late gangster Iqbal Mirchi, were summoned by the agency multiple times in the Yes Bank case but they had cited the ongoing COVID-19 travel restrictions to skip appearance.

In April, the Wadhawan brothers and their family members had travelled to Mahabaleshwar, a hill station in Satara district of Maharashtra, in violation of the coronavirus-induced lockdown. Five vehicles used by the family were seized by the ED.

As many as 44 companies belonging to 10 large business entities, including Anil Ambani Group, Essel Group, IL&FS, Dewan Housing Finance Corporation Ltd, Cox & Kings and Bharat Infra, among others, reportedly accounted for bad loans worth Rs 34,000 crore of Yes Bank.

The ED has accused Kapoor, his family members and others of laundering “proceeds of crime” worth Rs 4,300 crore by receiving alleged kickbacks in lieu of extending big loans through the bank that later allegedly turned non-performing assets (NPAs).

Kapoor is currently in the ED’s custody. The Wadhawans are also being probed by the Central Bureau of Investigation (CBI) in connection withthe same case.

Source: The New Indian Express

BS: Govt orders probe against Jaiprakash Associates, Jaypee Infratech

27 May 2020: The Serious Fraud Investigation Office (SFIO) will probe Jaypee group’s flagship firm Jaiprakash Associates and bankruptcy-bound Jaypee Infratech for alleged financial irregularities, according to a source.

The probe agency comes under the corporate affairs ministry. The source said the ministry has ordered an SFIO probe against Jaiprakash Associates and Jaypee Infratech.

Jaypee group, which is into construction, cement, power, real estate, hotel and hospital businesses, has been facing crisis in the last few years due to defaults in debt repayments and huge delays in completion of housing projects in Noida and Greater Noida.

The group has already sold many cement and power plants to reduce its debt.

Jaypee Infratech, which is a subsidiary of Jaiprakash Associates, went into an insolvency process in August 2017. In December last year, the Committee of Creditors (CoC) comprising 13 banks and around 21,000 homebuyers approved the resolution plan of NBCC.

On November 6, 2019, the Supreme Court directed completion of Jaypee Infratech’s insolvency process within 90 days. In December, the CoC approved NBCC’s resolution plan.

Source: Business Standard

ET: Sterling Biotech case: Far-reaching NCLAT order sets new bankrupcty precedent

4 September 2019: The National Company Law Appellate Tribunal (NCLAT) has set aside a lower court order to liquidate debt-ridden Sterling Biotech, allowing its promoters to take back control of the company once they make full payment to the lenders.

The ruling may well set a precedent that will have ramifications for companies willing to clear dues after they are admitted for insolvency resolution.

In an oral order last week, a threemember NCLAT bench presided over by justices SJ Mukhopadhyay and AIS Cheema along with member (technical) Kanti Narahari, set aside the May 8 order of the National Company Law Tribunal’s Mumbai bench and allowed withdrawal of a petition filed under Section 7 of the Insolvency and Bankruptcy Code (IBC).

“The entire payment under OTS (one-time settlement) shall be made by the promoters and not through the corporate debtor or its properties,” the NCLAT said in its order. “The liquidator to continue till the entire payment is made to the lenders.”

In June, the NCLAT had stayed the corporate insolvency resolution process of Gujarat-based Sterling Biotech after its workmen and lenders challenged the NCLT order before the appellate tribunal.

The dedicated bankruptcy court in Mumbai had rejected the plea of the lenders, led by Andhra Bank, to withdraw from the CIRP process.

Over 90% of the lenders had approved the settlement offer of around Rs 3,945 crore and withdrawal of the insolvency case under Section 12 (A) of the IBC. The lenders received 5% of the default amount on the day of default. Total dues to the lenders stand above Rs 8,100 crore.

The Sterling group collectively owes its financial and operational creditors Rs 15,000 crore.

Nishit Dhruva, managing partner of law firm MDP & Partners and an advisor to the Andhra Bank, confirmed the development but refused to comment since the matter is still sub-judice.

Sundaresh Bhat, partner and leader of resolution process advisory at consultancy BDO, who is the RP for the company, also confirmed the development but refused to give details.

“In so far asset of the corporate debtor (Sterling Biotech) is concerned, if it is based on the proceeds of the crime, it is always open to the Enforcement Directorate to seize the assets of corporate debtor and act in accordance with the Prevention of Money Laundering Act, 2002 (PMLA),” said the NCLAT in its 28-page order. “However, it will not come in the way of the individual such as promoter, shareholder or director, if he pays, not from the proceeds of crime but in his individual capacity, the amount from his account and not from the assets of the corporate debtor and satisfies all the stakeholders including financial creditors and operational creditors.”

Sterling promoters Chetan Sandesara and Nitin Sandesara are absconding and believed to be in Africa. The Central Bureau of Investigation (CBI), the Enforcement Directorate (ED) and the income tax department are looking into the dealings of the promoters.

Three companies of the group — Sterling Biotech, Sterling SEZ and trading arm Sterling International — are facing insolvency cases. In a separate development, the tribunal has also stayed the withdrawal petition of lenders to Sterling SEZ. These bankers too accepted a settlement offer from the promoters. Sterling SEZ owes around Rs 4,500 crore to its lenders.

The Economic Times reported

DNA: Lenders fail to attach Sterling Biotech’s overseas assets

22 August 2019: Banks have failed to take adequate safeguards to protect the loans extended to Sterling Biotech by attaching the oil assets of the promoters in Nigeria.

Instead of carrying out a prior examination on how this could be done by discussing with the Nigerian oil regulator, senior bank officials made a visit to the country years after issuing two standby letters of credit (SBLC) worth $230 million (Rs 1,500 crore) to the promoters Nitin Jayantilal Sandesara and Chetan Kumar Jayantilal Sandesara, who are now absconding, to raise money overseas.

Despite the officials travelling to Nigeria from September 17 to 23, 2017 to attach the oil assets of the Sandesaras, no action could be enforced. Initially, the agreement was that the overseas oil company, Sterling Oil Exploration & Energy Production Company Ltd (SEEPCO), would take responsibility for the unpaid loans of Sterling Biotech’s Indian companies, but the promoters failed to repay the loans and were classified as wilful defaulters.

The Sandesaras are defaulters of Rs 15,600 crore taken on behalf of their two Indian companies, Sterling Biotech and Sterling SEZ & Infra. While Sterling Biotech owes Rs 7,500 crore, its sister concern Sterling SEZ & Infra owes Rs 8,100 crore. Despite these loans being unpaid to the consortium of lenders led by the State Bank of India (SBI), two guarantees were offered to the group’s foreign outfit, SEEPCO, so that it could borrow from overseas.

“The banker group that went to Nigeria reported back that recovery of loans from the oil field assets could be done only if the Nigerian oil regulator agreed to substitute SEEPCO with new owners,” said one of the bankers. However, the banks failed to reassign SEEPCO’s participating interest right to any other investor. No effort was made to find another investor or use the good offices of the government of India for taking charge of interests in the oil fields. No visit to Nigeria was made before sanctioning the two SBLCs, the source said.

The first SBLC worth $130 million was issued on March 2014 while the second one of $100 million was approved in September 2015. SBI had fronted the guarantees on behalf of the other banks despite two of its loans to Sterling turning into non-performing asset (NPA) and the promoters being classified as wilful defaulters.

A detailed questionnaire sent to SBI and Reserve Bank of India (RBI) failed to elicit any response.

Andhra Bank, which is now leading the lender consortium, had initially referred Sterling Biotech to the National Company Law Tribunal (NCLT) on June 11, 2018. But later lenders of Sterling Biotech voted with a 90.32% majority to pull the case out of the NCLT. In March this year, the creditors told the court that they would withdraw the case and have a one-time settlement (OTS) with the promoters. However, they refused to give the details of the OTS to the resolution professional (RP) saying that they would inform the court at the appropriate time.

A source told DNA that the absconding promoters made an offer of Rs 5,500 crore, which is 40% of the total claims of Rs 15,000 crore of the banks.

Andhra Bank has petitioned through its lawyers AZB Partners and Nishit Dhruva from MDP and Partners to withdraw the case from the NCLT so that banks could settle part of the debt with a representative, Farad Darruwala, of the promoters. However, the NCLT court noted that in the OTS there is no mention whether Daruwala is authorised by the promoters, the Sandesaras.

The DNA reported

LM: Lights out for CG Power as serious lapses are revealed

20 August 2019: The board of Gautam Thapar-promoted CG Power and Industrial Solutions Ltd said the company will restate accounts after discovering “significant accounting irregularities” and governance lapses, sending its shares plunging by the maximum daily limit of 20% on Tuesday.

The board said it has found “suspect” transactions that have led to significant understatement of the company’s liabilities and advances to related and unrelated parties.

CG Power’s disclosure of accounting lapses is the latest in a series of governance and accounting scandals that have hit India Inc. over the past year, increasing scrutiny over not just the promoters of the companies but also independent directors, auditors and regulators.

The inability of Thapar’s Avantha Group to meet debt obligations has meant that group companies had to cede control of CG Power to lenders, although they are still listed as the promoter group.

As on 30 June, Avantha had a negligible stake in the company, with lenders invoking the entire pledged promoter shareholding earlier this year. Private sector lender Yes Bank holds a 12.79% stake in CG Power as of 30 June, while other major shareholders include HDFC Mutual Fund, Aditya Birla Sun Life, Franklin Templeton and Life Insurance Corporation of India.

Yes Bank’s shares crashed 7.11% to ₹71.25 on BSE following the disclosure by CG Power.

“The total liabilities of the company and the group may have been potentially understated by approximately ₹1,053.54 crore and ₹1,608.17 crore, respectively as on 31 March 2018,” CG Power said in its exchange filing.

The company said that advances to related and unrelated parties and the Avantha Group may have been potentially understated by ₹1,990.36 crore and ₹2,806.63 crore, respectively as on 31 March last year.

The board said that certain assets of the company were purportedly provided as collateral without due authority and that the company was made a co-borrower and/or guarantor for enabling ostensibly unrelated third parties to obtain loans without due authorization.

These transactions were purportedly executed by company personnel (current and past) including certain non-executive directors, certain key managerial personnel and other employees, the company said.

CG Power’s revenue rose to ₹5,355 crore in the year ended 31 March from ₹5,106 crore in the previous fiscal. It reported a loss of ₹1,403 crore in the year ended 31 March compared to a profit of ₹19.24 crore in the previous year.

Avantha Group’s troubles can be traced to its ambitious expansion plans fuelled by debt in the pre-Lehman Brothers period, when it made the largest overseas acquisition by an Indian paper maker in 2006, buying Malaysia’s largest pulp and paper company Sabah Forest Industries in a $261 million deal. That, and other acquisitions, eventually stretched the group’s balance sheet too thin.

According to Bloomberg data, CG Power reported a consolidated debt of ₹2,664 crore as on 31 March, up from around ₹1,996 crore in the previous fiscal, while Ballarpur Industries Ltd, another group company, reported a debt of ₹5,496 crore as on 31 March.

Ballarpur too has seen massive erosion in share value, with its stock price falling over 86% since the start of the year to close at ₹0.73 on Tuesday.

The promoter group holds 25% in Ballarpur, however almost all of it is pledged with lenders as of 30 June, stock exchange data shows.

In 2017, lenders to Ballarpur Industries took management control of the company as part of strategic debt restructuring, a Reserve Bank of India mechanism to address bad loans.

The group’s foray into the power business too didn’t yield a successful outcome, saddling it with additional debt.

Its 600 megawatt (MW) thermal power plant in Chhattisgarh under Korba West Power Co. has been sold to Adani Group by lenders. Banks are also trying to find a buyer for its other power plant in Madhya Pradesh—Jhabua Power—which has 600MW of operational thermal capacity, with an additional 660MW under implementation.

The LiveMint reported

LM: The Jaypee jigsaw: Filling the final pieces

31 July 2019: It will be over someday soon, but, hopefully, not before it has taught a lesson to everyone involved—the government, the judiciary, homebuyers, and the promoters of Jaypee Infratech Ltd (JIL), an arm of the Manoj Gaur-run Jaiprakash Associates Ltd (JAL). It is a classic case of greed versus fear—an ambitious promoter unable to manage risks, and a government content with making rules without attempting to enforce them.

The playground was Jaypee’s 6,175 acres of land spread over five locations in Uttar Pradesh, namely Noida, Mirzapur, Jaganpur, Agra and Tappal, with most of it lying in Noida. The land came to JAL in 2007 as part of an Uttar Pradesh government contract to build a 165 kilometres long expressway between Noida and Agra. Things turned sour in 2012 when the real estate market imploded spectacularly, particularly in the boomtowns that ring fence the National Capital Region. Housing projects ground to a halt. Customer advances got stuck in companies on the verge of insolvency, such as Jaypee. Caught in the vortex are now some 20,000 buyers waiting for their dream home in one of the 12 projects that the Jaypee group planned to construct at its so-called “Wish Town” township.

For some, the wait is now well over five years, even as at least 50 cases do the rounds in the Supreme Court, the National Company Law Appellate Tribunal (NCLAT), the National Company Law Tribunal (NCLT), and various consumer courts. The latest Supreme Court judgment in the Amrapali matter— another case of homebuyers versus an errant builder—has rekindled hope among Jaypee customers of an early resolution.

The apex court last week cancelled the licence of Amrapali Group and asked NBCC (India) Ltd to take over all its ongoing, unfinished housing projects. “The Supreme Court has unequivocally put the homebuyers’ interest at the top of the ladder and we hope other stakeholders and quasi-judiciary bodies take a message from this ruling,” says Aaditya Gutgutia, a 38-year-old homebuyer who put money into a “Wish Town” apartment. “Homebuyers are looking at NBCC and banks with a lot of hope… that our agony will end soon.”

On Monday, the Supreme Court ordered NBCC to take over as a consultant and find a way to complete a slew of unfinished housing projects that belong to Unitech Group, whose promoters are currently in jail for defrauding homebuyers. For the thousands of homebuyers who sunk their hopes on barren patches of land in Noida, the wheels of the system finally seem to be creaking forward.

The Jaypee saga, in particular, will leave ripples across the real estate industry for years to come. It was perhaps the first insolvency case against a real estate developer in India. The slew of court battles that ensued have already resulted in two marquee changes: a homebuyer is on par with a bank or lender in an insolvency court, and there is now the new threat of a public sector entity, like NBCC, taking over incomplete housing projects.

“We are clearly past the wild west bonanza where builders operated on the basis of flimsy business models,” says Arun Maira, a member (urban affairs) at the erstwhile Planning Commission. The era of zero finance from the builder, where customers paid money upfront, is over, Maira says, and adds that significant changes in law and regulations are inevitable going forward since the Supreme Court has clearly set a precedent by siding with the weaker party, the consumer.

But even as those fairer terms of engagement, between homeowner and developer, await to be written, for those trapped in the middle, the immediate concern is: who will build the houses and when will it be built? One critical difference between the Amrapali case and Jaypee case is that there are still assets (like the Yamuna Expressway) lying with Jaypee, all of which can be monetized. That has resulted in homeowners and banks fighting pitched battles in the halls of bankruptcy tribunals. Banks would, after all, like to liquidate the assets and recover as much money as possible, while homebuyers would want someone to build them a home. In August, the Jaypee liquidation drama would cross 350 days since it began last year. And all eyes, unsurprisingly, are on the Supreme Court. “As the matter is already before the Supreme Court, it can take a very radical approach,” says Manoj Kumar, partner at legal and corporate advisory firm Corporate Professionals.

While it is one particular case involving a single developer, the outcome may have wide-ranging fallout in a country where an estimated 500,000 houses remain unfinished for well over six years in the top seven cities alone.

Boom and bust

J.S. Bedi, 43, who works a medical representative for a pharmaceutical company, had booked a ₹74-lakh four-bedroom house in 2011 at Kensington Boulevard, one of those 12 housing projects at Wish Town. It’s a daily struggle for Bedi, who lives in a rented house at Ashram Chowk in Delhi with his wife and two children. “I have already paid ₹67 lakh. My wife can’t go out to work as she has to look after her father. I earn little and pay most of it as EMIs,” he says.

It was the heydays of the first decade of this century, with all asset classes booming—equities, gold, commodities, and, of course, real estate. Gaur then, coming into his own after his father and founder of the Jaypee group had ceded day-to-day operations, was a businessman on overdrive. The group went into major expansion in power and cement capacities between 2005 and 2012. At one point, JAL was the third largest cement manufacturer in the country with an annual capacity of 33 million tonnes.

Rumoured to have close ties to the then Uttar Pradesh chief minister and Bahujan Samaj Party chief Mayawati, every tender that Gaur touched turned into gold. That fetched him the expressway order that would eventually prove to be his nemesis. JIL was JAL’s special purpose vehicle (SPV) that would develop, operate and maintain the expressway that arguably is one of the best pieces of infrastructure created in the country. A Formula 1 track on the expressway, besides a hospital, a school and a college came up alongside.

Over the next four to five years, the group would go on to announce as many as 27 real estate projects—split between JAL and JIL—comprising flats and villas of various sizes to cater to classes ranging from the middle-income groups to the super rich. The group would run full-page advertisements in leading newspapers, offering dream homes at five locations in Uttar Pradesh. Many non-residents, either returning to India or those remitting money, bought into the promise.

“We met a lot of people… friends, bankers who had and who did not have exposure to the group. And all advised us to book a house. We were looking for a spacious living in a greener, more secure area,” says 62-year-old Ajoy Shah.

And then came the collapse of the real estate sector, somewhere around 2012-13. The Noida region was the worst-hit. Banks curtailed lending and consumers withdrew. The industry went into a tailspin as the Narendra Modi government went after black money. To make matters worse, an adverse ruling in 2015 by the National Green Tribunal, banning all construction within a kilometre of the Okhla Bird Sanctuary, an area not far from Noida, further affected sentiment. The November 2016 demonetization sucked the remaining life out of the informal sector, a key component of the real estate boom.

As the banking sector stared at mounting bad debts, the government enacted the Insolvency and Bankruptcy Code, 2016 to help lenders explore all options to recover their money within a time frame. The law set a 270-day deadline to find a resolution. JIL found its name in a list of 12 companies the Reserve Bank of India (RBI) had prepared and sent to the banks in June 2017 to invoke bankruptcy proceedings. Gaur was caught napping while he had been trying to work out a deal with IDBI Bank, one of the lenders. But now, the only recourse was the NCLT, Allahabad, where the case would proceed.

It dealt a body blow to the likes of Ajoy Shah. Having booked his house in 2010, he paid his last equated monthly instalment (EMI) this year but awaits his dream house—a three-room flat in Kensington Boulevard. “There is no communication from the firm. We last got a letter from them in 2013 that the delivery would happen three years later. We are still waiting for the handover as we go around doing the rounds of the Supreme Court, the NCLT and the consumer courts,” he says.

Bankruptcy battle

Jaypee’s bankruptcy case was unique as it affected not just the banks, but also around 26,000 homebuyers, as per figures then. All other cases in the RBI’s early list were mostly industries or infrastructure companies. Hence, Jaypee quickly became a matter of public interest.

“It’s very painful,” says Ajai Kaul, a 55-year-old director of technology at a multinational corporation. “We were thrown out of our own home state, Kashmir, in the 1990s. Thirty years ago, I slept on the floor at various migrant shelters in Delhi. I made it on my own through sheer hard work. I paid ₹40 lakh upfront for my house and another ₹10 lakh for a shop there. I have two brothers who also booked houses there and each paid as much. None of us has got any flat. Banks seem to be in collusion with the builder.”

A forensic audit report by T.R. Chadha & Co. Llp for the period between 1 April 2014 to 31 March 2017 found banks ever-greening the group’s loans and imposing inexplicably high penalties for pre-payment, a strange occurrence given that JIL was in trouble and thousands still awaited the handover of homes.

“JAL and JIL were both ripped-off by banks. Banks have already recovered their principal amount. The litigation has been on for two years now and I believe the case should be settled outside the court,” says Krishan Mitroo, a 75-year-old homebuyer and a former air force pilot.

With nearly a decade of their life gone, even the homebuyers are now divided. Earlier, nine resident groups had been set up just to fight the court battles, but now, some are in favour of a settlement—as long as they get the promised apartment. With almost a 60% strength in the ongoing arbitration process, homebuyers have been pushing for a government entity to take over and end the uncertainty. The Noida Development Authority has also given early indication of setting up a “stress fund” to disburse seed money to kick-start stalled projects. While NBCC taking over Jaypee sites as well and using the stress fund to get things started is one option, there are already growing concerns about what these thousands of unfinished homes may do to the balance sheet of the publicly listed company.

Irrespective of how exactly the Jaypee saga drags towards a resolution, the case has changed the real estate industry’s outlook forever. “If we consider trends in residential real estate over the last two years, demand for ready-to-move-in properties spiked significantly across cities, primarily led by the end users,” says Anuj Puri, chairman of Anarock Property Consultants.

The Real Estate Regulatory Authority (Rera) is also helping the cause, bringing some trust back into the system. “Rera has created a sense of discipline and accountability in developers,” Puri says.

Way forward

But Rera, an entity formed after Jaypee was admitted as a bankruptcy case, offers no hope to the its stranded buyers. They continue to fight their battle at the NCLAT and the Supreme Court.

Awaiting the Supreme Court order, Jaypee cannot be liquidated, which is otherwise a certain outcome in all insolvency cases where no resolution is found. While a mail sent to the company remained unanswered, a top official at the company cited, like Mitroo, Gaur’s handing over of the flats in the interim as proof of his commitment. He was not willing to come on record as the matter is sub judice.

The third round of bidding is underway as this story is published, the first two having failed as the banks were unwilling to accept the low quotes offered by the bidders. Mitroo remains sceptical. “I wonder how a new buyer will come and complete the projects when Jaypee is best positioned to do it. After all, the new buyer will also want a return,” he says. Between Mitroo and the Shahs and the Kauls is the story of the Indian real estate buyer. Everything rests on hope but nobody knows who the enemy is. As Kaul says, “I don’t care who builds it. I want my house. I feel I am back to where I started 30 years ago.”

The LiveMint reported