A Public Interest Litigation (PIL) was filed in the Delhi High Court on Thursday, 5 September, accusing Indiabulls Housing Finance Limited (IBHFL) of perpetrating a scam to the tune of Rs 9,000 crore against public and private sector banks.
The PIL by the Citizen Whistle Blower Forum (of which Prashant Bhushan is a member) claims that Indiabulls ‘granted loans to large corporations, and routed those back to the accounts of companies owned by Indiabulls’ promoters to augment their personal wealth.’
The petition alleges that the loan money was 'round tripped' to Indiabulls’ promoters via five major corporate groups: Reliance ADAG owned by Anil Ambani, Americorp Group, DLF Group, Vatika Group companies, and Chordia Group companies.
What is round-tripping?
In finance, the term ‘round-tripping’ is used to describe arrangements whereby money goes out from a company or corporate group, in what appear to be legitimate transactions like loans or investments but are actually not commercially feasible, and then this same money is returned (in whole or in part) to the same company/group or its owners through similarly dubious transactions. This is often used as a way to avoid taxes, launder money or to transfer money belonging to the company to private individuals, which would otherwise not be possible.
The petitioners have used corporate documents to argue that over 12,000 companies were registered at the same address, suggesting the creation of dummy companies by IBHFL to facilitate this alleged scam.
The petitioner has filed the writ petition under Article 226 of the Constitution of India, and seeks “an in-depth, thorough and time bound investigation by Special Investigative Team (SIT) into the various alleged illegalities and violations committed by the promoters of IBHFL, its subsidiaries and their promoters.”
Indiabulls Denies All Allegations
In response to the petition in the Delhi High Court, Indiabulls has issued a statement in which they have refuted the allegations and questioned the motives behind it:
“Instead of going to the right forums of various regulatory agencies and making the complaint, the petitioners have deliberately chosen the route of PIL to attract attention and play into the hands of blackmailers and corporate rivals at a sensitive time of merger process of Indiabulls Housing Finance and Laxmi Vilas Bank. For the past three months, the company is already undergoing various inspections and scrutiny of all the different regulators as a part of the merger process. The company is determined to fight out the petitioners in the court.”
But what exactly are these allegations? Here are the key details of the claims being made against IBHFL and the alleged routes used for 'round-tripping’.
Route 1: Reliance ADAG
The petitioner has alleged that at least five companies belonging to the Reliance ADAG corporate group together received a sum of Rs 1,580 crore in loans from IBHFL.
Based on the documents in possession of the petitioner, it is alleged that Rs 570 crore of this sum was “ploughed back into nine companies” which are either owned or promoted by Sameer Gehlaut (owner of IBHFL) or which are subsidiaries of the Indiabulls group of companies. This was allegedly done through the issue of optionally convertible debentures to the nine companies.
Route 2: DLF Group
The DLF group of real estate companies allegedly received loans worth Rs 1705.54 crore from IBHFL in 48 companies. The petitioner alleges that many of these 48 companies have “negative worth” which were basically created “to garner huge sums of loans and use them for purposes other than intended ones.”
Felicity Builder & Developers Pvt Ltd is one such company with negative worth (ie, it has more liabilities than assets and so would be considered a risky company to loan money to), which still managed to get Rs 173 crore from IBHFL.
Route 3: Americorp Group
IBHFL allegedly extended loans worth Rs 151.90 crore to the Americorp Group, promoted by Harish Fabiani, an NRI based out of Madrid, Spain.
The loan money was allegedly siphoned back to five companies of the Indiabulls group through equity investment, namely Indiabulls Ventures Limited, Indiabulls Housing Finance Co Ltd, Myrina Builders Pvt Ltd, Iphito Real Estate Pvt Ltd and Indiabulls Real Estate Co Ltd.
Route 4: Vatika Group
The petitioners allege that IBHFL gave loans totalling nearly Rs 4,600 crore to 51 companies of the Vatika Group, owned by Gautam Bhalla. Out of the 51 companies, 40 companies have a paid-up capital of only Rs 1 lakh and yet the loans granted to these companies range from Rs 16 crore to Rs 184 crore.
In what they term the "Most shocking" among these loans, the petitioners allege that one of these companies called Shivsagar Builders, which has a paid-up capital of Rs 25 lakh, was granted a loan by IBHFL worth Rs 1,575 crore.
In response to the PIL, the Vatika Group denied all allegations. It said,
This is to clarify that Vatika group companies do not have any association with any company associated with Mr. Sameer Gehlaut. Further Vatika Limited and any of the group companies have not made any investment in any of the companies associated with Mr. Gehlaut.”
You can read the full statement issued by the Vatika Group here.
Route 5: Chordia Group
Three limited liability partnerships from the Pune-based real estate group – AC Realty Spaces LLP, Built To Live Realty LLP and Mahalunge Land Developers LLP – allegedly received loans of over Rs 1209 crore from Indiabulls.
Each LLP only has a paid-up capital of Rs 50,000, which is why it is argued that these loans are not commercially viable. The LLPs then allegedly repaid the loans to IBHFL using the money loaned to the other LLPs. One of them also paid Rs 50 crore to IBHFL for unspecified services.
Is There Any Truth to the Allegations?
The Quint has not been able to independently verify these allegations. We have reached out to Indiabulls and the five companies for their responses to the allegations and this story will be updated when they are received.
The petitioners allege that a “huge amount of public money involving Lakhs of crores is being looted” and that the “clout of the promoters of these companies is such that the regulators have closed their eyes to these frauds happening right under their noses”.
However, it remains to be seen how the court will view these claims, and if the impugned transactions are actually found to have no commercial basis.
It should be noted that this is not the first time in recent months that allegations of irregularities have been made against Indiabulls, leading to significant damage to the company.
The statement issued by Indiabulls in response to the petition, which they sent to the various stock exchanges on which the company is listed, notes that the allegations made in the petition are similar to those raised in a PIL against the company in the Supreme Court a few months ago by a shareholder, Abhay Yadav.
Yadav later withdrew this petition, and said he did not know anything about the allegations, that he’d just signed on a complaint provided to him by others.
Non-bailable warrants were issued against two lawyers who were accused of masterminding a conspiracy to extort money from Indiabulls and the Gurugram police arrested them as well. You can read more about this here.
You can read the whole statement issued by Indiabulls in response to the new PIL below:
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