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Siphoning home buyers’ money: 1,700 buyers did not get flats, plots despite paying IREO, ED finds
Due to buy-back and transfer of customer receipts to overseas companies, the Indian operating companies became short of funds and few became insolvent: ED
Around 1,700 of the 4,705 IREO Group customers did not receive possession of flats or plots despite making payments to the group companies, the Enforcement Directorate (ED) has said in a supplementary prosecution complaint pertaining to alleged siphoning of investors and home buyers’ funds.
The ED said of these, 1,175 did not get possession of their flats or plots even after a lapse of more than five years.
The supplementary prosecution complaint filed before a Panchkula court said of the 4,705 customers who had made booking for plots, flats, villas in different IREO group projects, 640 customers had made payments of more than ₹1,376 crore (till March 2017) against their bookings. These 640 customers were not handed over the possession even after a delay of over four to five years, said the complaint.
The federal agency said 30 first information reports (FIRs) had been registered against IREO Group, its vice-chairperson, Lalit Goyal and others by Haryana, Punjab and Delhi police for cheating and diverting investor money.
Scrutiny and analysis of documents and records during search operations on IREO group establishments had led to the discovery of these facts, the ED said.
More than ₹1,700 crore transferred
out of country flouting FDI policy
The complaint said IREO Private Limited, Gurugram, and its other group companies had received ₹8,300 crore (US $1.83 billion) by way of foreign direct investment (FDI) and equity shares/fully convertible debentures (FCDs) from a company named IREO Fund, Mauritius.
“Multiple numbers of companies have been identified in the name of land-owning companies used for layering and diverting funds of the IREO Group,’’ the agency said.
The supplementary prosecution complaint said that IREO Group transferred approximately ₹1,777 crore outside India during 2011 to 2021 under the cover of buy-back of shares, redemption/purchase of shares/FCDs on the instructions of Lalit Goyal, in contravention of the FDI policy.
Four ways of siphoning funds
The ED said siphoning of home buyers’ money was done in four ways. “Funds accumulated through customer receipts were siphoned to offshore parent companies of IREO without completion of the projects.
They were paid to directors, auditors, legal consultants, key managerial persons and associated companies in the form of management fee, special allowances, loans, incentives, bonus, extra fee for their active participation and involvement in siphoning the money to overseas parent companies of IREO Fund, by paying them to Lalit Goyal and his family in the form of rent for a guest house for a property personally used by the latter and through M3M Group of companies, the agency said.
The complaint said the structural model of IREO Group of companies in India comprised two types of functional companies — 22 operating and 138 land-owning companies. The IREO Group remitted funds to its overseas related companies situated in Mauritius and other countries by way of buy-back, purchase, redemption of equity, fully and compulsory convertible debentures etc.
The decision regarding the outflow of remittances was taken by their corporate planning team after necessary discussion and approval of Lalit Goyal/Anurag Bhargava after which directions were given to the accounting team to process the payments, the ED said.
The complaint said IREO along with other group companies diverted funds to operating companies. which in turn infused them in land owning companies for the purchase of the land and against transfer of development rights. The funds related to complete and incomplete projects were allegedly sent out of India in the form of buy-back, redemption, purchase of equity, etc. Due to such buy-back and transfer of customer receipts to overseas companies, the Indian operating companies became short of funds and few of them like IREO Five River and Puma Realtors became insolvent.
Offshore investments, apartment in Burj Khalifa
During investigations, analysis of digital records seized during search operations, the ED said, it was found that Lalit Goyal was holding investments in shares having estimated net value of US $27,01,316 (as on April 30, 2019) in foreign entities — ACP Lens Limited, Trentriver Associates Limited and ACP Libra Limited.
The complaint said Goyal has been holding shares in a Bermuda headquartered company Global Dynamic Opportunities Fund Limited which had a market value of US $5,58,682 in 2017. It said that Goyal owned, controlled and managed overseas assets such as an apartment in Burj Khalifa, Dubai despite having denied having overseas assets during questioning.
