When 42-year-old MNC professional Ravi Dhankar’s mother was told that her son had gone bankrupt after making a dud real estate investment in a Greater Noida residential housing project, Shiv Kala Charms, she suffered a brain haemorrhage.
The haemorrhage was followed by a paralytic attack that left half of her body immobile and rendered her bed-ridden. All Dhankar is now left with are steep medical bills, bounced EMI cheques and a financier chasing after him for repayments.
Dhankar is not alone. More than 400 people have been cheated of amounts ranging from Rs. 25 lakh to Rs. 35 lakh after they fell prey to the promise of Shiv Kala Charms. Like Dhankar, many found that “their” apartment had been sold to multiple buyers and that big commercial lenders had granted overlapping mortgages on them.
Prominent among these lenders are Banks such as Axis, Oriental Bank of Commerce, Syndicate Bank and housing finance companies such as HDFC, LIC Housing Finance Limited (LICHFL), Dewan Housing Finance Corporation Limited (DHFL), Punjab National Bank Housing Finance and Indiabulls.
Unearthing of a scam
On August 31, 2011, HDFC Bank came out with a list of 78 apartments in Shiv Kala Charms, stating that these were legally mortgaged to the bank. This opened a can of worms. Buyers who had either taken loans from other banks or organised finances on their own were shocked to find their apartment numbers listed by banks with which they had no dealings.
Officials at other financial institutions that had approved loans for the same flats also sat up and took notice. Soon after, DHFL, LICHFL and Axis Bank came out with their own lists, revealing multiple duplicate sales and loans.
Among those who took notice of this list was Avneesh Kaushik, who filed a case against the developer in the economic offences wing (EOW) of Delhi Police. Kaushik bought apartment number 2093 on the ninth floor of tower 2 in the project in January 2008 with a home loan from Syndicate Bank. Unknown to him, the developer had sold the apartment to another buyer who was granted finance by LICHFL.
Documents filed in the multiple legal processes surrounding the housing society show clearly that this was not an isolated error. “Flat number 2294 has been allotted to two buyers - Nathu Ram Saini and Rajesh Behl, both of whom have been given home loans by Axis Bank. Clearly, the fraud being committed by the builder was within the knowledge and with active collusion of the banks,” wrote seven homebuyers in a complaint to the director general of police, Uttar Pradesh, in June this year.
“It is now clear that four banks have together financed 170 of Shiv Kala Charms buyers. Many other banks have financed five to 10 buyers and in many cases people have made payments from their own sources. The developer, at a meeting with some buyers, himself confessed of selling 154 flats to 420 to 430 people,” alleged Vijay Sahai, who bought an apartment in the project by taking a personal loan of `18 lakh.
Another home buyer who filed a case with the Delhi State Consumer Disputes Redressal Commission said, “Banks didn’t approach the office of registrar of firms, societies and chits in Lucknow to find out the names of the genuine flat allottees. Why should we trust such banks? Don’t we take loans because we have faith in the bank’s diligence measures?”
Following complaints by the buyers, inquiries were initiated by the Reserve Bank of India (RBI) and the district magistrate of Gautam Budh Nagar. The RBI asked the National Housing Bank (NHB), to look into the suspect transactions while the Gautam Budh Nagar DM appointed the Chief Development Officer to investigate the case.
Both have produced reports that indict the builders and question the financiers’ role.
Whom do you blame?
Shiv Kala Charms is a part of a cooperative society, Golf Course Sahkari Awas Samiti Ltd, which was formed in 2004. The society leased 9731.79 square metres of land from the Greater Noida Development Authority (GNIDA).
Avnish Kaushik’s FIR names builders Mahim Mittal, Ranjeeta Mittal, Asit Mittal, Navita Mittal and Sandeep Gupta as the accused. HT could not reach them for comments despite many attempts.
Officials investigating the scam, however, stress that it could not have assumed such proportions without serious failures on the part of the banks and finance companies. The National Housing Bank report prepared by V Rajan, deputy general manager of the department of regulation and supervision in the NHB, states: “It appears that one of the reasons (behind the scam) may be due to the lack of proper due diligence by the concerned housing finance companies (HFCs) while approving the captioned project/sanctioning the loan to individual borrowers.”
Rajan’s report revealed that LICHFL had financed 49 “non-existing flats” in the Shiv Kala Charms project, of which HDFC financed 17. It identified 15 cases where more than one mortgage had been granted over a single flat by LICHFL. The report detailed numerous other similar instances, including cases like flat number 2003 that was sold to three buyers and financed by Indiabulls, HDFC and LICHFL.
Rajan instructed the financiers:”You are hereby requested to look into the matter and also furnish us following information at the earliest (i) The attributable reason for multiple financing in each case, (ii) Action taken by HFCs against the concerned officials (iii) Action taken to tone up the process in your HFCs to avoid recurrence of such frauds in the future (iv) Detailed report on the present stage of investigation of the case by outside agency and (v) The efforts made to mitigate the hardship faced by the borrowers/purchasers.”
When HT contacted all these financial institutions, they declined to comment citing ongoing legal processes.
The March 2012 report of the CDO of Gautam Buddh Nagar, Noida was just as damning. It stated that a fraud of this magnitude was not possible without the connivance of bank officials and the office-bearers of the society.
Apartment numbers 2234, 2294, 2281, 2531 and 2553 in Shiv Kala Charms were “imaginary” and did not exist, the report alleged. “Possibly, SU Zafar (secretary of Shiv Kala Charms) and Mahim Mittal, on the basis of fake documents, sold one flat to many purchasers with loan approvals from multiple banks. It’s important to note that this kind of fraud is not possible without the connivance of the bank officials. It’s quite clear from this evidence that SU Zafar and Mahim Mittal colluded with bank officials for loan approval, which is a serious issue,” the report added.
HT compared the public notices issued by the banks, which bear the official reports. For example, non-existent apartments such as flat number 2531 had been financed by HDFC and LICHFL and flat number 2234 had been financed by Axis Bank as well as LICHFL. Several other “imaginary” apartments listed by the CDO appear on the lists published by more than one bank.
But the banks not only granted multiple loans to different buyers over the same properties, there are serious questions over other aspects of their diligence.
The fact that the developer had not been paying installments for the lease on the land regularly and had been sent repeated notices by GNIDA appears not to have come to their notice. GNIDA cancelled the lease for the land in 2011 for non-payment, according to an RTI response to one of the buyers. What is more, the CDO report alleged that the society’s bank account has not been audited since 2006.