Pragmatic Approach Needed To Combat Rising Trend Of Real Estate Fraud, If Unchecked May Lead To Recession Like Situation: Punjab & Haryana HC

The Punjab & Haryana High Court said that a "robust and pragmatic approach" is warranted to combat the rising trend of deceitful manipulation involving real estates. It flagged that allowing such activities to continue unchecked would contribute towards creating serious repercussions contributing to recession-like circumstances.In a Serious Fraud Investigation Office (SFIO) report it was alleged that promoter of WTC Noida Development Company Private Limited collected about Rs 423 crore from 1162 clients. However, instead of using the amount to construct the real estate project, the company allegedly siphoned off Rs 77 crore. Justice Harpreet Singh Brar said:"In the present case, an ECIR has already been registered by Directorate of Enforcement alleging money laundering on part of the accused, including the petitioner, as well as diversion of funds to foreign countries. Allowing such activities to continue unchecked would be detriment to larger interest of the society and contribute towards creating serious repercussions contributing to recession-like circumstances...Of late, economic offences have become increasingly prevalent, attracting public attention, with many high profile cases coming to the fore. Therefore, a robust and pragmatic approach is warranted to combat this rising trend of deceitful manipulation, particularly involving real estate. An objective investigation is of the utmost importance to inquire into these sophisticated financial frauds, as they call for scrupulous unearthing of the modus operendi."Commonly, the perpetrators of economic offences evade responsibility by hiding behind the corporate veil and attempt to swoop the illicit gains made by them by engaging in illegal practices like money laundering and tax evasion under the rug, added the Court.The Court further said, these offences, more often than not, involve complex mechanisms and pertain to multiple jurisdictions, which falls beyond the scope of traditional investigating tools.Justice Brar opined that therefore, the Courts are under an obligation to take a sophisticated approach, illustrating even higher standards of care, so as to ensure that the perpetrators do not take advantage of technical loopholes in the legal framework.The Court was hearing plea a filed by Suparna Bhalla seeking quashing of FIRregistered under Section 420 (cheating) of the IPC. It was alleged that Bhalla's husband is a promoter of WTC. In 2015, the company launched a commercial project in Mohali namely WTC Chandigarh and in 2022, complainants were allured to invest an amount of Rs.50,23,203 in the same. The units hence purchased by the investors were scheduled to be handed over by June, 2023. However, they were unable to take possession of the same, as the construction never picked pace, in spite of multiple re-assurances. The SFIO report alleged that the company allegedly siphoned off Rs 77 crore, instead of finishing the projects.Suparna Bhalla argued that she had been wrongly added as an accused in the FIR. She said that she has never been a Director or even a shareholder in the accused company. In fact, neither she has been named in the FIR nor any specific allegation has been levelled against her. Further, nowhere it has been alleged that the petitioner deceived the complainants or dishonestly induced them to part with their money, as she did not have any role in the day to day functioning of the accused company. Opposing the plea, the State submitted that the investigating agency is in the process of collecting more evidence and the present petition is filed only to stop the investigating agency from making recoveries of the relevant documents and electronic devices in the possession of the petitioner. It was argued that the petitioner is evading all attempts of service of notices issued by the investigating agency. It was also argued that thousand of investors have been defrauded; the case has impacted the lives of 1162 victims, who have lost their hard earned life savings. It would only be revealed after completion of the investigation, who is beneficiary of such serious economic fraud. Further, the State argued, that it was immaterial that the petitioner has never been a Director of WTC and she is not vicariously liable.After hearing the submissions, the Court noted that the case at hand does not pertain to corporate liability, rather, it is a serious economic fraud, committed in a pre-planned manner with an intention to cheat and deceive thousands of gullible investors."Due to its unique characteristics and wider ramifications, economic offences form a special and separate category within the realm of criminal jurisprudence and stand on a different pedestal than other conventional criminal offences," added the Court.The bench pointed that such offences have "significant cascading effects not only on the lives of the victims, but also on the economic stability of the State."Reliance was also placed on Y.S. Jagan Mohan Reddy Vs. Central...

Pragmatic Approach Needed To Combat Rising Trend Of Real Estate Fraud, If Unchecked May Lead To Recession Like Situation: Punjab & Haryana HC

Aiman J. Chishti

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