“The shares were overvalued for making payment to JPMorgan… It was adopted as a device for siphoning off the money of the homebuyers to foreign countries,” the apex court said, adding that JP Morgan was aware about diversion of homebuyers' money by Amrapali Zodiac Developers.
JPMorgan violated India’s foreign exchange and investment rules and helped tainted real estate developer Amrapali group to divert funds from its housing projects in Noida and Greater Noida, the Supreme Court said and has ordered an investigation into the matter. While agreeing with the court-appointed forensic auditors, it said that JP Morgan had invested around Rs 85 crore in Amrapali Zodiac Developers and the shares were later sold by the multinational for Rs 140 crore to dummy firms owned by an office boy and a nephew of Amrapali auditor Anil Mittal.
“The shares were overvalued for making payment to JPMorgan… It was adopted as a device for siphoning off the money of the homebuyers to foreign countries,” the apex court said, adding that JP Morgan was aware about diversion of homebuyers’ money by Amrapali Zodiac Developers.
While directing the Enforcement Directorate to investigate serious fraud and money laundering charges against the embattled Amrapali group and its directors, an SC bench, led by Justice Arun Mishra, on Tuesday said that the US investment bank had routed money in violation of FEMA and FDI norms through dummy companies, fake bills, paying dividend without generating profits, and by overvaluing shares.
When contacted by FE, JP Morgan’s Mumbai-based spokesperson Mollica Senapati declined to comment.
According to the forensic auditors, Neelkanth Buildcraft and Rudraksha Infracity were floated in 2013 for the specific purpose of buying shares from JPMorgan. Neelkanth, which consisted of office boys and relatives of the statutory auditor, was formed to buy shares from JPMorgan at exorbitant rates. Another firm Rudraksha, also consisting of office boys and Mittal’s relative, was incorporated to receive money from Mannat Buildcraft (created by CFO Chander Wadhwa through his close associates) and the money was later transferred to JP Morgan Investments for purchasing equity shares of Amrapali Zodiac at an exorbitant price.
JP Morgan invested Rs 85 crore in 2010 with an understanding to have a preferential claim on profits (distributable surplus) in the ratio of 75% to JPMorgan and 25% to promoters, Amrapali Homes Project and Ultra Home Construction, the forensic auditors had noted.
“There was no transaction before or after these transfers of monies in the dummy companies and the same have been camouflaged to make it look with business transactions on the basis of the valuation report. To suit the requirement of JPMorgan Investments, incorrect valuation report was prepared by M/s. Sudit K Parikh & Co, Chartered Accountants,” the SC said.
“The valuation of the shares did not follow the correct methodology of discounted cash flow as detailed out by the forensic auditors. The valuation exercise was done backwardly in order to inflate the value of share to siphon out the money of homebuyers through JPMorgan. We are in agreement with the findings of the forensic auditors in this regard,” the apex court stated. The SC indicted JPMorgan while cancelling the Real Estate Regulatory Authority registration of the Amrapali group. It also directed state-run National Buildings Construction Corporation to complete all its stalled projects, thus bringing relief to around 42,000 stranded homebuyers.