Supreme Court suspects cartelisation as Amrapali's 5-star hotel unsold in auction

Taking strong exception to two prime properties including a five-star hotel of the embattled Amrapali Group finding no bidders, the Supreme Court on Monday said that prima facie it looks like "cartelisation is at work" and sought to know whether "banks are part of cartels". The top court said that it is "shocking and disturbing" that bankers are not coming forward to finance the properties.

The Supreme Court said that banks are ready to finance projects for National Building Construction Corporation (NBCC) but they are not coming forward to finance the Amrapali properties being sold by Debt Recovery Tribunal (DRT) in an auction.

A five-star hotel 'Amrapali Holiday Inn Tech Park' constructed in Greater Noida and prime land in Vrindavan in Uttar Pradesh were put up for auction on January 31 by the DRT but no bidder had come forward to bid. A bench of Justices Arun Mishra and U U Lalit said that it was earlier worried over undervaluation of the properties but strangely in the auction held on January 31, no bidders came to buy the prime properties.

"It seems there is a systematic effort that properties go unsold, as no bids have come forward in the auction. Involvement of unforeseen hands cannot be ruled out. Prime facie it appears that cartelisation is at work. Are the banks part of the cartel?", the bench said.

The court allowed the NBCC to issue advertisement for the unsold flats of two Amrapali Projects -- Eden Park and Castle -- being constructed by it so as funds could be raised. It said that interests of the homebuyers is at receiving ends as they are the ultimate sufferers.

"There were newspaper reports recently that banks are ready to finance the projects constructed by NBCC but they are not ready to finance the bidders, who wanted to buy the Amrapali properties," the top court said after being told no interested party came forward to purchase the properties worth hundred of crores as banks were not willing to finance them.

The bench said that it cannot leave the situation like this and if necessary it can pass necessary orders. The court appointed forensic auditor Pawan Kumar Aggarwal told the bench that he identified 5,229 unsold flats from where around Rs 6,000 crore could be raised by selling them.

Aggarwal told the court that Amrapali Group liability towards Greater Noida authority is Rs 3,200 crore, for Noida authority it is around Rs 1,900 crore and of banks it is around Rs 2,000 crore.

The bench asked the counsel for Amrapali Group as to how they were planning to settle the liabilities as unless they clear the outstanding no body would be coming forward to put their money in the projects. "Homebuyers interest is supreme. You (Amrapali) also have outstanding towards the home buyers which you will have to pay. You have taken everything from them," it said.

The forensic auditors also pointed out that multi-national firm JP Morgan Real Estate fund, which had invested Rs 85 crore in Amrapali Zodiac in 2010 by purchasing its share and later selling them to the sister companies of the realty firm has violated several then existing norms.

Aggarwal pointed out that shares purchased and agreement of JP Morgan Real Estate fund and Amrapali Group were in violation of the provisions of law as out of Rs 85 crore money received by Zodiac project, Rs 60 was transferred to other projects. "The shares purchased by JP Morgan were later purchased for Rs 140 crore by Amrapali's two sister companies -- Neelkanth and Rudraksh -- which were floated by a peon and one office boy -- who were working in the office of statutory auditor of the Group," he said.

The bench asked forensic auditors who was the actual beneficiary in the transaction prima facie it does not appear to be a bona fide transaction.The auditors replied that they have written to the JP Morgan but they have not yet shared the name of actual beneficiary.

Counsel for the JP Morgan said that every transaction with Amrapali were legal and investments were made as per then existing law. He said that besides Rs 85 crore in 2010, JP Morgan has also invested Rs 140 crore in Amrapali but so far they have not got any benefit.

The counsel for JP Morgan said that they can submit the name of actual financier, who had invested in Amrapali Group to the court but cannot share with other parties as it is prohibited under the US laws.

The bench said it is not passing any orders and is listing the matters for February 14. On January 25, the apex court had given NBCC go-ahead to complete two stalled projects of Amrapali Group.

The NBCC had told the court that it has floated tenders for completion of two projects - Eden Park and Castle - of Amrapali and would start construction in the month of February.

On January 16, the court-appointed forensic auditors have said in their report that posh flats were booked on sums as low as Re 1, Rs 11 and Rs 12 per sq ft in the name of home buyers. The court is seized of a batch of petitions filed by home buyers who are seeking possession of around 42,000 flats booked in projects of the Amrapali Group.