NAME- Jovita Kurian
CLASS- FYMMS
ROLL NO- M2218
TOPIC – CASE LAW
COLLEGE- Fr. C. Rodrigues Institute of Management Studies
In the High Court of New Delhi
referee:
Justice Arun Mishra
Justice Uday Umesh Lalit
Justice D. Y. Chandrachud
Justice Rohinton Fali Nariman
Justice Navin Sinha
Advocates:
M. L. Lahoty
Gaurav Bhatia
Ashwarya Sinha
Ravi Bhardwaj
Ajit Sinha
Pawan Shree Agarwal
JP Morgan India Pvt Ltd v. Special Director, Directorate of Enforcement
Decision date 05/25/2021
The petitioner is a private limited company incorporated under the Companies Act of India; 1956. It is a subsidiary of JP Morgan India Securities Holding Limited, Mauritius. The inquiry initiated by the respondents stems from a judgment titled Bikram Chatterji v/s Union of India which found various fraudulent transactions of Amrapali Group of Companies. It involves allegations of financial irregularities and mismanagement by the Amrapali Group, a real estate developer in India.
The Supreme Court observed, inter alia, that below
• The Amrapali Group’s transactions with JP Morgan were clearly intended to circumvent the provisions of the Companies Act. Amrapali Group diverted funds from its real estate projects to other companies owned by group directors It is clear that Mr. Anil Mittal, statutory signature not digitally verified Signed: SHALOO BATRA Date of signature: 27.05.2021, has not declared his interest and disclosed about his relatives and junior employees as directors and shareholders. Mr. Chandan Kumar was a junior employee and Mr. Atul Mittal was his relative.It was clear that this was done inorder to siphon funds from homebuyers through JP Morgan.
• The ED also found that the group had violated FEMA regulations by not repatriating funds received from foreign investors. FEMA rules prohibited the type of transactions that were made with J.P. Morgan. FEMA Rule 4 was clearly violated. External commercial loans and business loans clearly state that external commercial loans are not allowed to be used for real estate transactions in an automatic manner. The term real estate excludes the development of an integrated township. It was not about the development of an integrated township. Even if it is considered to be a case of an integrated township as submitted on behalf of J.P. Morgan, then also for the approval route, security is required as indicated by the forensic auditors in their report.
• The company was also found to have received an amount of Rs 140 crore from IPFFI Singapore PTE Limited during the financial year 2012-13 under the Foreign Direct Investment Scheme. According to FEMA rules, this amount was to be invested only in real estate construction projects that were not used in the prescribed manner.
The court issues the following direction
• In 2019, the Supreme Court canceled the Amrapali Group’s registration under the Real Estate (Regulation and Development) Act, 2016 (RERA) and directed the state-owned National Buildings Construction Corporation (NBCC) to complete the group’s unfinished projects.
• In the same year, the court also ordered the attachment of the personal assets of the group’s directors and appointed a forensic auditor to investigate the group’s financial transactions.
• In 2020, the court directed the ED to auction the assets of the group’s directors to recover funds owed to the homebuyers. The court also directed the chief executive to investigate the role of auditors and chartered accountants in the financial irregularities.
The case has been hailed as a landmark judgment in the real estate sector as it sets a precedent for holding developers accountable for financial irregularities and ensuring the rights of home buyers are protected.