Lifting Corporate Veil, Allahabad HC Orders ED Probe Against Directors Of Hacienda Project, Three C Universal For Defrauding Lotus 300 Flat Buyers

The Allahabad High Court has lifted the corporate veil to hold the Promoters/Directors of M/s Hacienda Projects Private Limited and M/s Three C Universal Developers Pvt. who are in default, liable for defrauding flat-buyers of the Lotus 300 project in Sector 107, Noida.The bench comprising Justice Mahesh Chandra Tripathi and Justice Prashant Kumar has directed the Enforcement Directorate under the Prevention of Money Laundering Act, 2002 to proceed against all the directors/promoters/designated promoter/officer who are in default, companies/other entities in which money from Hacienda Projects is syphoned or parked.The Court expressed surprise as to how the directors had been let go freely by the State and neither the State nor the NOIDA Authority involved are able to recover the defaulted amount due to insolvency. The Court observed,“This is a classic case of conning, as to how the promoters without investing any amount gets huge tracts of prime land allotted, launches a project and collects Rs.636 crores from the home buyers, out of which they again syphon off almost Rs.190 crores (then sell off a portion of land to a 3rd company, pocket and then syphon the entire sale proceeds (Rs.236 crores), and pay a pittance to Noida Authority, towards the cost of land/premium for land and lease rent, which they were supposed to pay, and defrauded the home buyers, Noida Authority, Banks and other creditors.”The Court observed that in addition to the above the promoters defrauded hundreds of home buyers in various projects by collecting money and diverting it in different schemes. It was observed that after diverting funds, the directors resigned from the companies pushing them into insolvency to escape criminal and civil liabilities. The Court observed that the NOIDA authorities had failed to discharge its burden by not cancelling the lease in accordance with the conditions of the lease agreement. The Court held that the NOIDA cannot now recover any money from the company as it is already under insolvency. “The Noida Authority merely acted as a private trader (rather than a trustee and regulator) selling rights of these lands to developers, who prospered by making a huge profit. The promoters/developers in cahoots with the officers of the Noida Authority kept defrauding innocent buyers. Astonishingly, while buyers were struggling to get possession of their apartments in such incomplete projects of this developer, Noida continued further to allot large tracts of land to new companies floated by one of the promoters.”Factual BackgroundA consortium of companies applied were allotted land in Sector 107 under a scheme for group housing floated by Noida Authority. M/s Hacienda Projects Private Limited (HPPL) was made a special purpose company for building and developing a residential project. The lease for the land was executed in 2010 with Mr. Nirmal Singh, Mr. Surpreet Singh Suri and Mr. Vidur Bhardwaj as the Promoters/Directors of the HPPL.The project was named Lotus 300 as only 300 apartments were to be constructed on an area of 67,941.95 square meters. A Builder Buyers Agreement was executed in 2011 where it was stipulated that builder was supposed to charge a fine at the rate of 18% per annum on the delay of payment by an allottee. After sanction of floor plan, builders sold 27,941.95 Sq mts. of land from this project to some other company for Rs.236 crores reducing the area on which 300 flats were to be constructed. Thereafter, 30 more flats were added and total of 330 flats in six towers were sold for Rs. 636 crores. The entire money was collected by the developer from home-buyers. The construction of 4 out of 6 towers was completed and possession was handed over to the flat owners. Out of Rs. 636 crores, Rs.190 crores which was supposed to be utilized for construction/development of the project was syphoned by the promoters of Hacienda Projects into other companies of which they were the promoters. According to the petitioner the resignation as directors of Hacienda Projects was tendered in 2014 and 2015. The construction of flats in towers 5 and 6 was not completed and the promoters told the flat-buyers to 'take it or leave it' as it is (unfinished flats). Since they had no other choice, the flat owners took the possession of the flats and made repeated requests to the developer to complete the unfinished flats. FIRs were lodged and investigation was carried by the Economic Offences Wing. In chargesheet various frauds by the Director/promoters were brought to light. Subsequently, all three directors were arrested on 30.11.2018. Upon arrest, they entered into an MOU (as a personal guarantee) with the home-buyers stating that they will arrange funds required to complete the project and obtain 'Completion Certificate' within 9 months. Based on the MOU, bail was granted to the three promoters by Chief Metropolitan Magistrate, South Saket Court, Delhi. Since the promoters had flouted the conditions of MOU which were...

Lifting Corporate Veil, Allahabad HC Orders ED Probe Against Directors Of Hacienda Project, Three C Universal For Defrauding Lotus 300 Flat Buyers

Upasna Agrawal

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Lifting Corporate Veil, Allahabad HC Orders ED Probe Against Directors Of Hacienda Project, Three C Universal For Defrauding Lotus 300 Flat Buyers

Upasna Agrawal

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