NEW DELHI: On Friday, the Enforcement Directorate revealed an incident involving the misuse of the Insolvency and Bankruptcy Code (IBC) in the land sale of an insolvent real estate firm.
During recent raids, Rs 50 lakh in cash was confiscated from a lawyer at the NCLT and another individual.
The federal agency stated it conducted searches on Thursday in Delhi and Gurugram as part of an investigation into Universal Build Well Pvt. Ltd. and its promoters, concerning unfinished real estate projects and alleged fraud against homebuyers and investors.
The company was in a corporate insolvency resolution process. The National Company Law Tribunal (NCLT) ordered certain assets of the firm to be allocated to homebuyers, while the remaining assets would be sold according to the resolution plan, as per the agency.
Investigations revealed that the company’s land was sold for a “throwaway” price, significantly lower than its market value, even at government rates, raising suspicions of profit-seeking from the process.
Searches targeted certain intermediaries not involved in the insolvency process, the designated Resolution Professional (RP), NCLT lawyers, and the property buyer, RDB Infrastructure and Power Ltd., run by Vinod Duggar.
As a result of the raids, approximately Rs 50 lakh in “unexplained” cash was seized from two middlemen, including an advocate who facilitated the undervalued sale, the agency reported.
Digital data retrieved from their phones included draft invoices hinting at illicit arrangements for illegal profits outside the IBC/NCLT framework, without creditor or successful resolution applicant (SRA) approval.
The ED noted evidence of manipulation in the bidding process, with pre-determined and “artificially suppressed” bids, including a submission from the advocate middleman, indicating blatant collusion and bid rigging.
Messages found on online chat platforms revealed connections between the intermediaries and a private bank official (a secured creditor), who allegedly aided the under-valuation scheme during the sale process.
The private bank took a haircut on the asset despite its increased value, according to the ED.
The investigation also indicated that homebuyers, who stood to gain from maximizing asset value, were kept in the dark, reflecting negligence by the RP, as indicated by the materials retrieved.
