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Amrapali received Rs 85 crore from JP Morgan in violation of FEMA and FDI norms, says Supreme Court

The forensic audit, ordered in 2018 by the Supreme Court, revealed that JP Morgan knew Amrapali Zodiac was diverting money received from homebuyers to other group companies.

July 24, 2019 / 03:55 PM IST
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JP Morgan violated foreign exchange as well as investment rules and helped Amrapali Group divert funds meant for housing projects, the Supreme Court said on July 23, ordering an investigation against the embattled real estate firm.

JP Morgan, a global merchant bank, invested Rs 85 crore in Amrapali Zodiac Developers Pvt Ltd, a group company, in violation of foreign exchange management act (FEMA) and foreign direct investment norms, the apex court said. The shares were later sold for Rs 140 crore to firms owned by an office boy and a nephew of Amrapali auditor Anil Mittal, a court-ordered forensic audit has found.

"Our investigation reveals that this company has been used to perpetuate a fraud enabling JP Morgan Investments to sell its shares of Amrapali Zodiac Pvt Ltd to other Group Companies of Amrapali group namely, Rudraksh Infracity Pvt Ltd and Neelkanth Buildcraft Pvt Ltd at a valuation amounting to Rs 140 crore which is not justified," a bench headed by justices Arun Mishra and UU Lalit said.

JP Morgan and others helped the Noida-based realtor launder money through dummy companies, fake bills and by undervaluing apartment prices, the audit found.

"They (Amrapali directors) have obtained investment from JP Morgan in violation of FEMA and FDI norms. The shares were overvalued for making payment to JP Morgan," the court said, asking the Enforcement Directorate that looks into money laundering to probe Amrapali, which also faces an investigation for FEMA violation.

The audit, ordered in 2018, also revealed that JP Morgan knew that Amrapali Zodiac was diverting money received from homebuyers to the other group companies. "This company has been used as a tool to transfer the money to other Amrapali Group companies," the court said, calling it an organised fraud.

The court named Amrapali Zodiac, Rudraksh Infracity, Neelkanth Pvt Ltd, JP Morgan Investments, Mannat Buildcraft Private Limited and HDFC Bank as "the persons seems to be involved in this organized fraud".

The investigation found that the equity shares of the group were purchased at an inflated price to suit JP Morgan and Amrapali Zodiac diverted the funds.

It was also found that the JP Morgan investment and other funds availed for construction were not needed, as the money paid by homebuyers was higher than the cost of construction and land for most projects.

Funds were diverted "on the day of receipt itself to the closely held companies and to the companies created for the sole purpose for using them as a conduit for diversion and to the suppliers of bogus supplies. It is very surprising that when funds were borrowed a high rate of interest was paid ranging from 14 -18 percent to so called investors and the same investors were given loans to their group companies without charging any interest. In such a scenario, the possibility of taking cash in the form of interest cannot be ruled out," the order said.

"JP Morgan also received returns at the rate of more than 20 percent on its investment of Rs 85 crore and was agreeing with Amrapali Zodiac Developers Private Limited to invest in Amrapali Leisure Valley Developers Private Limited a substantial part of its investment i.e., Rs 60 crore out of Rs 85 crore at the rate 0.01 percent.

"It categorically demonstrates that JP Morgan invested Rs 60 crore in Amrapali Leisure Valley Developers Private Limited without complying FEMA (Foreign Exchange Management Act) for its investment of Rs 60 crore in Amrapali Leisure Valley Developers Private Limited. It is not out of place to mention that Amrapali Zodiac Developers Private Limited was a project where home buyers were required to pay on the basis of progress of the construction of the project. Meaning it was construction linked payment project," the court said.

Homebuyers took Amrapali to court over delays in completion of the apartments. The court on July 23 appointed the government-run National Buildings Construction Corporation to complete all pending projects, bringing relief to around 40,000 homebuyers.

Vandana Ramnani
Vandana Ramnani
first published: Jul 24, 2019 03:54 pm

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