Appoint new competent authority under MPID Act: HC tells state | Mumbai news (original) (raw)

MUMBAI: The Bombay High Court on Friday directed the state government to appoint a new competent authority under the Maharashtra Protection of Interests of Depositors (in Financial Establishments) (MPID) Act, 1999 after noticing that the current authority had committed “fraud” by disposing off properties attached in the National Spot Exchange Limited (NSEL) case at throwaway prices.

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“We find that the competent authority has played fraud not only upon the state but also upon the court,” the division bench of justices AS Gadkari and Kamal Khata said while setting aside the sale of a prime property in Karnal, Haryana, and ordering the Maharashtra government to investigate the matter and take appropriate action against members of the authority and Quiker Realty, a property valuer.

The court was hearing a bunch of appeals filed by Primezone Developers Pvt Ltd and others, challenging an order passed by the special MPID court on February 6, 2018, confirming attachment of Promezone’s properties in Karnal.

As chief financial officer of Dunar Foods Ltd and director of PD Agro Processor Pvt Ltd, Ranjeev Agarwal, who later became chairman of Primezone, had allegedly laundered ₹31 crore received from NSEL and invested in Primezone Developers. Resultantly, in August 2014, their two properties, totaling to 35.768 acres and located in Assandh Road in Karnal district of Haryana, were attached.

On February 6, 2018, the special MPID court made the attachment absolute and in August 2020, the properties were sold in an auction to Rudraveerya Developers Ltd. Though the first two auction notices mentioned a reserve price of ₹60 crore, the property was sold to Rudraveerya Developers for just ₹10 crore following a subsequent auction notice, which was published only on the Quiker Realty website without mentioning the reserve price.

The high court bench was irked to note that the June 2020 valuation report described the land as agricultural, though it was in a residential zone.

“Both the competent authority and Quiker Realty knew the land was part of a residential plotted development project and not agricultural land,” the bench said. “This mischief appears to be ill-intended to reduce the value of the subject properties to ₹10 crore.”

The court refused to accept the argument advanced on behalf of the competent authority, that the license to develop the property had lapsed between the two valuations and therefore it had been assessed as agricultural land the second time. It was “impossible to accept” that the valuation of the property measuring over 35 acres could be reduced from ₹60 crore to ₹10.41 crore, the court said.

The court also suspected foul play in the bidding process after noticing that two of the bidders, including Rudraveerya, had a common director, while the other two bidders had both quoted a price of ₹5 crore. The circumstances had led the court to infer that the competent authority under the MPID Act, along with Quiker Realty, had contrived a situation that enabled Rudraveerya to become the successful bidder.

“In our view, the advertisements and auction were pre-planned to create an illusion of due process while being conducted in a manner designed to favour Rudraveerya Developers Ltd. The notice misrepresented and concealed material facts to mislead the prospective purchasers. There was no wide publicity, the auction was conducted through sealed bids and the property was grossly undervalued. This amounts to a fraud played upon the state, the court, and the victims of the (NSEL) fraud,” the court said.

Holding that Quiker Realty had abused its position and acted unfairly, causing enormous loss to the 13,000 investors/ victims of the NSEL fraud, the court directed the state government to disqualify it from conducting valuations or public auctions for at least five years.