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TMI Blog2024 (2) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... rovide them anonymity and to in still in them the necessary confidence to make disclosures without fear, arrange for their objective and impartial investigation and help to take such cases to their logical conclusions in a time bound manner. 2. The petitioner has filed the instant writ petition under Article 226 of the Constitution of India seeking direction for an in-depth, thorough and time bound investigation by a SIT into various serious illegalities, violations and siphoning of funds committed by the promoters of Indiabulls Housing Finance Limited (IBHFL), its subsidiaries and their promoters. The petitioner has further sought directions to the Ministry of Corporate Affairs, Registrar of Companies (ROC), Serious Fraud Investigation Office (SFIO), National Housing Bank (NHB), Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) to take action against IBHFL and its promoters/owners, who through its promoters, subsidiary companies and various group of companies, has been advancing dubious loans to companies owned by large corporate groups which in turn have been routing the money back to the accounts of companies owned by the promoters of Indiabulls, so as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The manner in which Indiabull group of companies is manipulating the funds, has been narrated by the petitioner, which is as under: a. By investing in Preference Shares of IB group subsidiaries. b. By investing Compulsory Convertible Debentures. These debentures have been issued to the investing companies at a rate of interest of 0.01%. c. By receipt of Mobilization Advance paid to a contractor for mobilization of resources for a project. 9. The petitioner alleged that even though few of the companies belonging to IBHFL did not have any fixed assets or not even involved in any business activity still they have extended small paid-up capital loans. Even the Directors and their office addresses are also common. 10. Petitioner has averred that the Companies Act, 2013 defines 'charge' as an interest or lien, created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage. It is the duty of every company to register with the Registrar of Companies the specific 'charge' created by the company on its assets in public domain details of those who contemplate to give credit to a company to know how the property of the company i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner as may be prescribed to the company and, as the case may be, to the person in whose favour the charge is created. (3) Notwithstanding anything contained in any other law for the time being in force, no charge created by a company shall be taken into account by the liquidator [appointed under this Act or the Insolvency and Bankruptcy Code, 2016 (31 of 2016), as the case may be,] or any other creditor unless it is duly registered under sub-section (1) and a certificate of registration of such charge is given by the Registrar under sub-section (2). (4) Nothing in sub-section (3) shall prejudice any contract or obligation for the repayment of the money secured by a charge." 12. The petitioner has alleged that IBHFL has extended huge sums of loans to various group of companies owned by Indiabulls, promoted by Mr. Sameer Gehlaut, which include Americorp Group, Reliance ADAG, Chordia Group, Vatika Group and DLF Group, apart from Indiabulls' promoter group companies. I. Americorp Group: The details of loans advanced by IBHFL to Americorp Group is as under:- Sr.No. Name of the Company Amount loaned (Rs. In crore) 1. Transpacific Business Services Pvt. Ltd. A copy of Bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Amount (Rs. in crore) 1. Reliance Inceptum Pvt. Ltd. A Copy of Financial Statement of Reliance Inceptum Pvt. Ltd. for the FY 2017-18 is annexed as Annexure P17. 106 2. Zapak Digital Entertainment Limited A Copy of Financial Statement of Zapak Digital Entertainment Limited for the FY 2017-18 is annexed as Annexure P18 156 3. Reliance Big Entertainment Pvt. Ltd A Copy of Financial Statement of Reliance Big Entertainment Pvt. Ltd for the FY 2016-17 is annexed as Annexure P19 210 4. Reliance Communications Enterprises Pvt. Ltd. 200 5. Reliance Interactive Advisors Pvt. Ltd. A copy of details of charges registered with ROC of Reliance Interactive Advisors Pvt. Ltd. for the FY 2017-18 is annexed as Annexure P20 908 Total 1580 According to petitioner, how amount of Rs.570 crores out of the afore-noted funds has been invested back to the Indiabulls of companies, is as under:- Sr.No. Name of the Borrower Name of the Lender Loaned Amount (Rs. In crore) 1. Iphito Properties Pvt. Ltd. (a subsidiary of Indiabulls Pvt. Ltd) A copy of Index of Charge of Iphito Properties Pvt. Ltd. is annexed as Annexure P21. Reliance Capital Limited 10 2. Iphito Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BHFL has granted huge loan of Rs.4,600/- crores to these companies in a dubious manner. Petitioner has alleged that out of 51 such companies, 40 companies have paid-up capital of Rs.1 lakhs who have been granted loans ranging from 16 crores in case of Garin Developers Pvt. Ltd. to Rs.184.50/- crores in the case of Timor Developers. The details of IBHFL loan to Vatika Group Companies are as under:- Sr. No. Name of the Company Paid-up Capital (Rs. in crore) Loaned Amount (Rs. in crore) 1. Garin Developers Pvt. Ltd. 0.01 16 2. Felisa Developers Pvt. Ltd. 0.01 22 3. Valda Developers Pvt. Ltd. 0.01 23 4. Valonia Developers Pvt. Ltd. 0.01 27 5. Fonzell Developers Pvt. Ltd. 0.01 28 6. Uland Developers Pvt. Ltd. 0.01 25 7. Misaki Developers Pvt. Ltd. 0.01 41.50 8. Zina Developers Pvt. Ltd. 0.01 43.30 9. Myrica Developers Pvt. Ltd. 0.01 46 10. Carney Developers Pvt. Ltd. 0.01 48 11. Agnes Developers Pvt. Ltd. 0.01 31 12. Cebu Developers Pvt. Ltd. 0.01 41 13. Acklin Developers Pvt. Ltd. 0.01 21.50 14. Capparis Developers Pvt. Ltd. 0.01 19 15. Jurgen Developers Pvt. Ltd. 0.01 39 16. Islay Developers Pvt. Ltd. 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Karkinos Constructions which is 100 percent owned by Sameer Gehlaut. Petitioner has alleged that Karnikos Constructions received Rs. 200/- crores from Agnes Developers owned by Vatika Group Companies in the form of debentures and has also received a substantial amount in the form of loan from IBHFL but this company has filed no 'Charge' with the MCA. Petitioner also pointed out that Karnikos Constructions has no significant asset and as per balance-sheets pertaining to the year 2017-18, has recorded Rs.724 crores in security deposit under the head 'Long Term Loan' which is a clear deviation from the standard accounting procedure. Petitioner averred that security deposit is purely an accommodation entry to avoid disclosure of terms of loan and identical interest. V. DLF Group Companies: Petitioner alleged that IBHFL has given loan of more than Rs. 1705.54 crores in 48 companies owned by DLF Group Companies which is promoted by K.P.Singh. Petitioner also alleged that most of these companies have negative worth and have not filed any charge with the MCA. Petitioner further alleged that IBHFL, despite a negative worth, gave a loan of Rs. 173.40 crores to Atherol Builders & Develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se land and advance loan to related party. (Charges filed on June 11, 2019, after PIL was filed in the SC.) 8. Rosalind Builds & Constructions Pvt. Ltd. 42 26.73 * 100% subsidiary of Atherol Builders & Developers. * Loaned money used to purchase land and advance loan to related party. 9. Tane Estates Pvt. Ltd. 29 12.43 * 100% Subsidiary of Atherol Builders & Developers. * Loaned money used to purchase land and advance loan to related party. 10. Unicorn Real Estate Developers Pvt. Ltd. 69 40.52 * 100% subsidiary of Atherol Builders & Developers. * Loaned money used to purchase land and advance loan to related party. (Charges filed on June 11, 2019, after PIL was filed with the SC. 11. Garv Promoters Pvt. Ltd. 24 16 * 100% subsidiary of Atherol Builders & Developers. * Loaned money used to purchase land and advance loan to related party. (Charges filed on June 11, 2019, after the PIL was filed in the SC.) 12. Aaralyn Builders & Developers Pvt. Ltd. 47 29.91 * 100% subsidiary of Atherol Builders & Developers. * Loaned money used to purchase land and advance loan to related party. (Charges filed on June 6, 2019.) 13. Garv Developers Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary of Ananti Builders & Construction. * Loan money received from group companies used to purchase land and advance loan to related party. * Compensation received from LAC, Haryana. (Charges filed on June 11, 2019 after the PIL was filed in the SC; charges satisfied on June 24.) 21. Talvi Builders & Developers Pvt. Ltd. 100 59.23 * 100% subsidiary of Ananti Builders & Construction. * Loan money received from group companies used to purchase land and advance loan to related party. * Compensation received from LAC, Haryana. (Charges filed on June 11, 2019 after the PIL was filed in the SC; charges satisfied on June 24.) 22. Abheek Real Estate Pvt. Ltd. 83 22.91 * 100% subsidiary of Ananti Builders & Construction. * Loan money received from group companies used to purchase land and advance loan to related party. * Compensation received from LAC, Haryana. (Charges filed on June 11, 2019 after the PIL was filed in the SC; charges satisfied on June 24.) 23. Musetta Builders & Developers Pvt. Ltd. 27 18 * 100% subsidiary of Felicite Builders & Construction. * Loan money received from group companies used to purchase land and advance loan to related party. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC; charges satisfied on June 24) 31. Afaaf Builders & Developers Pvt. Ltd. 30 12.86 * 100% subsidiary of Felicite Builders & Construction. * Loan money received from group companies used to purchase land and advance loan to related party. (Charges filed on June 8, 2019, after the PIL was filed in the SC; charges satisfied on June 24.) 32. Ati Sunder Estates Developers Pvt. Ltd. 32 13.71 * 100% subsidiary of Felicite Builders & Construction. * Loan money received from group companies used to purchase land and advance loan to related party. 33. Alfonso Builders & Developers Pvt. Ltd. 40 17.14 * 100% subsidiary of Felicite Builders & Construction. * Loan money received from group companies used to purchase land and advance loan to related party. (Charges filed on June 11, 2019 after the PIL was filed in the SC; charges satisfied on June 24.) 34. First India Estates & Services Pvt. Ltd. 37 15.86 * 100% subsidiary of Felicite Builders & Construction. * Loan money received from group companies used to purchase land and advance loan to related party. 35. Sagardutt Builders & Developers Pvt. Ltd. 35 15.00 * 100% subsidiary of Felicite Builders & Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed on June 13, 2019 after the PIL was filed in the SC; charges satisfied on June 24.) 44. Atherol Builders & Developers Pvt. Ltd. 173.40 * Owned by Felicite Builder & Constructions Pvt. Ltd. * Holding company for 30 companies which have taken loans from IBHL. The loan taken by the subsidiary company is infused in the company in the form of unsecured, loan/current liability. * The money is used to purchase land. A part of the land is acquired again by the government back at a much higher value. 45. DLF Home Developers Ltd. 500 338.45 * Owned by DLF Ltd. * Rs. 1000 crore Exposure to Franklin Mutual Fund in NCDs. * Loan money used for onward investment. 13. Petitioner also gave details of DLF Group of Companies who had transferred a substantial part of loaned amount money from IBHFL to EMU Realcon, which is owned by Sameer Gehlaut being 100 percent owner of Mughwort Real Estate. Besides, EMU Realcon has also three other companies. Petitioner gave the details of receipt of infusion of Rs. 66 crore in the form of preference shares by the EMU Realcon which are as under:- Sr.No. Name of the Company Amount Received (Rs. in crore) 1. Cotys Buildcon Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an accommodation on entry to avoid incidence of interest. 3. EMU Construction Pvt. Ltd. 0.01% Debentures 56.39 Total 1017.77 The petitioner has alleged that a huge sum of Rs. 1,142/- crore was used out of capital resources raised by shares of IBHFL and Indiabulls Real Estate and make investments in other subsidiary companies through Myrina Real Estate, even though this company has no work history of the past and the transactions were sham and were made with the mala fide intent to fight levy of interest or to fight disclosure of name in the financial statement. Besides, the petitioner has also alleged that Myrina Real Estate is owned subsidiary of EMU Construction, which is owned by Sameer Gehlaut through Mugwort Real Estate Limited. To demonstrate the chain of group of companies owned by Indiabulls, the petitioner has shown it through the following flow chart:- Myrina Builders:- The company is a fully owned subsidiary of EMU Construction, which in turn is owned by Sameer Gehlaut through Mugwort Real EstateLimited. Attention of this Court was drawn to the chart Annexure P64. To show that investment of about Rs.614/- crores in India Best Buy flowing of mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner has prayed that since these authorities have failed to take requisite action against Indiabulls, its subsidiary companies as well as group of companies, to ensure a corruption free society, a time-bund investigation by SIT, comprising expert members, be directed. 22. A prayer is also made to direct the Ministry of Corporate Affairs to conduct a fair investigation through the SFIO into the irregularities committed by Indiabulls and companies. A direction is also sought to Reserve Bank of India, National Housing Bank to investigate the financial affairs of IBHFL and direct a special audit. 23. To rebut the allegations of the petitioner, the Ministry of Corporate of Affairs its interim affidavit dated 22.10.2019 by it has been stated that an inspection under Section 206 (5) of the Companies Act, 2013 has already been directed in respect of three companies Indiabulls Ventures Limited, Indiabulls Housing Finance Limited and Indiabulls Real Estate Limited. In its second Affidavit filed on 28.11.2019, it is stated that inspection was in progress. Vide its third additional Affidavit filed on 05.09.2023, Ministry of Corporate of Affairs has stated that it had ordered inspec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, which fall under Regulatory purview of National Housing Board and Reserve Bank of India, therefore, the allegations of diversion and misappropriation of funds by issuance of dubious loans by IBHFL or its promoters or its group of companies or its subsidiaries and so, a letter dated 20.08.2019 was sent to National Housing Board stating that SEBI is neither a proper party nor a necessary party to the present proceedings. 26. Respondent-NHB in its Affidavit has stated that it has no regulatory power over any of the companies mentioned in the writ petition as power of NHB stands transferred to RBI w.e.f. 09.08.2019 and, therefore, this respondent has forwarded the complaint in the present petition for necessary action to SEBI, ROC, SFIO and RBI who have the regulatory power. However, it is stated that Ms. Indiabulls Housing Finance Ltd. (IHFL) was granted certificate of registration by NHB to carry on the business of housing finance institution and is amenable to the provisions of NHB Act and in exercise of its powers conferred under Section 33 of NHB Act, a special audit of IHFL was conducted. It is further stated that since NHB had the supervisory power to purview the functioni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Rs. In Crore) Name of the Company Mode 31.03.2016 31.03.2017 31.03.2018 31.03.2019 Indiabulls Real Estate Limited Equity Shares 70.38 55.13 - - Iphito Real Estate Private Limited OCD 11.00 44.00 44.00 - Indiabulls Housing Finance Limited Equity Shares 3.26 32.07 - - Indiabulls Venture Limited Equity Shares 19.85 - - Cleta Infracon Private Limited OCD - - - 44.00 Total 84.64 151.05 44.00 44.00 28. Reliance ADAG Group Companies - With regard to allegations of the writ petitioner that IHFL had given loans to five Reliance ADAG Companies (ADAG), Reliance Big Entertainment Pvt. Ltd., Reliance Communications Enterprises Pvt. Ltd., Reliance Interactive Advisors Private Limited, Reliance Inceptum Pvt. Ltd & Zapak Digital Entertainment Ltd. and that two ADAG companies, namely, Reliance Capital Ltd. & Reliance Corporate Advisory Pvt. Ltd. had infused funds in SG Group Companies. The Auditor's observation is that the ADAG Companies had repaid the loans during the review period. Sr.No. Borrower's Name As on 31st March, 2019 O/s 1 Reliance Big Entertainment Pvt. Ltd. Nil ** The Ledger accounts of the same could not be extracted as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat as on 31.03.2018, payments were made to Kumar Urban Pvt Ltd. and Delioitte, however, no payment was traced to Indiabulls Real Estate Limited. 33. D. Vatika Group Companies: With regard to allegations against the Vatika Group Companies, the Auditor has observed that out of the fifty three companies, one company, namely, Aspire Promoters Private Limited was not provided loan during the period under the review. 34. During inspection, the auditor was informed by IHFL that Vatika group was jointly managed by the brothers, namely, Mr. Gaurav Bhalla and Mr. Gautam Bhalla, till 2012, however, in 2012-13 both brothers have entered into a family settlement and businesses have been separated in two groups i.e. Vatika Group, headed by Mr. Gautam Bhalla and Dream Cart Group, headed by Mr. Gaurav Bhalla and therefore companies are not related or belong to same group. However, while verifying the end use of funds from AFS the auditor observed that borrowed fund has been transferred from Dream Cart group companies to Vatika Ltd for purchase of land. 35. One hundred ninety eight loans were advanced by IHFL to fifty two Vatika Group entities as alleged in the petition and out of it, three loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er III B of the RBI Act. Therefore, the Reserve Bank in exercise of its powers under Section 45 NC of the Reserve Bank of India Act, by notification dated 15.11.1997 had exempted housing finance institutions from the provisions of Chapter III B of the Reserve Bank of India Act. The Finance Act (2) of 2019 (Act 23 of 2019) has since amended the National Housing Bank Act, 1987 specifically conferring certain powers on the Reserve Bank of India in respect of housing finance institutions and these provisions of the Finance Act amending the NHB Act has come into force with effect from 09.08.2019. Further, the Reserve Bank has since issued Notification dated 09.08.2019 in exercise of its powers under section 45 NC of the RBI Act rescinding its earlier notification exempting housing finance institutions from the provisions of Chapter IIIB of the RBI Act except section 45-IA of that Act. Therefore, consequent to the amendment of the NHB Act and the notification dated issued by the Reserve Bank of India, the Reserve Bank has the powers to regulate and supervise housing finance companies as provided in the NHB Act as well as in Chapter IIIB (except section 45 -lA) of the RBI Act. 39. The re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been noted herein above, however reiterated for the sake of convenience:- a. By investing in Preference Shares of IB group subsidiaries. b. By investing Compulsory Convertible Debentures. These debentures have been issued to the investing companies at a rate of interest of 0.01%. c. By receipt of Mobilization Advance paid to a contractor for mobilization of resources for a project. 43. In the preceding paragraphs of this judgment, this Court has noted the claims of petitioner in respect of amounts allegedly siphoned away by the Indiabulls of companies, which have been advanced as loan by IBHFL to its own group of companies. The nutshell whereof is that:- "i. Four Americorp Group companies received about Rs. 151 crores from IBHFL, which is invested back in four Indiabulls Group companies, including IBHFL. ii. Out of a total loan of Rs. 1580 crore that five Reliance ADAG companies received from IBHFL in loans, Rs. 570 crores was invested back in nine Indiabulls subsidiaries through debentures iii. Three Chordia Group companies received Rs. 1209.50 crores from IBHFL in loans. This loan was squared up through money diverted from Mahalunge Land Developers (group Company of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly withdraw the said notice dated October 09, 2019. Yours sincerely, For Business Standard Private Limited" 46. The above-referred shows that pursuant to legal notice issued by the respondent- Indiabulls, the Business Standard has acknowledged that the information given by them was inadvertent and without any premise. The Business Standard has offered settlement for making false allegations against the respondent-Indiabulls. 47. The categoric stand of respondent-Ministry of Corporate Affairs is that inspection under Section 206(5) of the Companies Act, 2013 in respect of three companies i.e. IBVL, IBHFL and IBREL was directed on 23.07.2018 and as per Inspection reports dated 15.11.2019 and 19.11.2019, the loans given by IBHFL to five companies, i.e. DLF, Americorp, Vatika, ADRG, Chordia, which is the subject matter of the present writ petition, have been repaid and the loans given to the other entities, i.e. Vatika and Chordia, are reported to be 'Standard Accounts' and the remaining issues/violations reported in the Inspection Report were under examination. The final inspection reports in respect of Indiabulls were submitted to the Central Government on 15.11.2019 and 03.02. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made to Indiabulls Pvt Ltd. 52. The Auditor's report further suggested that 198 loans were advanced by IHFL to 52 Vatika Group entities and three of it, were fully repaid by Vatika Group to IHFL as on 31.03.2019 and some of the loan accounts were nill as on 31.12.2019. Out of fifty two companies, one company, namely, Aspire Promoters Pvt. Ltd. did not have any outstanding. Besides ADPL, i.e. Agnes Developers Private Limited, who had further invested amount in Karkinos Construction Private Limited and India Best Buy Private Limited, had fully repaid the loan. 53. Hence, the Auditor's report of NHB speaks a volume that necessary investigations and inspections were carried out pertaining to the financial accounts of the companies belonging to the Indiabulls group of companies and in most of the cases, the loans advanced by IBHFL stood repaid and for the remaining, the investigation was in progress. 54. The petitioner has also relied upon a letter dated 28.07.2019 written by Dr. Subramanian Swamy to the Prime Minister in respect of alleged embezzlement of amounts by Indiabulls and his tweets in this regard. The respondent-Indiabulls is stated to have preferred CS(OS)475/2019, ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Tiwari Vs. Union of India & Ors. 2024 SCC OnLine SC 15, while dealing with a batch of petitions in February 2023, under Article 32 of the Constitution , raising concerns over the precipitate decline in investor wealth and volatility in the share market due to a fall in the share prices of the Adani Group of Companies, which was purportedly caused by a report published on 24.01.2023 by an "activist short seller", Hindenburg Research, wherein it was alleged that the Adani group manipulated its share prices and failed to disclose transactions with related parties and other relevant information in violation of the regulations framed by SEBI and provisions of securities' legislation, observed as under:- "34. This Court does have the power under Article 32 and Article 142 of the Constitution to transfer an investigation from the authorized agency to the CBI or constitute an SIT. However, such powers must be exercised sparingly and in extraordinary circumstances. Unless the authority statutorily entrusted with the power to investigate portrays a glaring, willful and deliberate inaction in carrying out the investigation the court will ordinarily not supplant the authority which has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the aforesaid decision. An aggrieved person can only claim that the offence he alleges be investigated properly, but he has no right to claim that it be investigated by any particular agency of his choice. 53. The principle of law that emerges from the precedents of this Court is that the power to transfer an investigation must be used "sparingly" and only "in exceptional circumstances". In assessing the plea urged by the petitioner that the investigation must be transferred to the CBI, we are guided by the parameters laid down by this Court for the exercise of that extraordinary power." (emphasis supplied)" 60. The Hon'ble Supreme Court in Vishal Tiwari Vs. Union of India (Supra), held as under:- "73. Before concluding, we must observe that public interest jurisprudence under Article 32 of the Constitution was expanded by this Court to secure access to justice and provide ordinary citizens with the opportunity to highlight legitimate causes before this Court. It has served as a tool to secure justice and ensure accountability on many occasions, where ordinary citizens have approached the Court with well-researched petitions that highlight a clear cause of action. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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