The ED report revealed that Amrapali Group and its directors created a web of shell companies and dummy directors in collusion with the foreign investor
The Enforcement Directorate (ED) is probing the “ultimate beneficiaries” of the Amrapali group’s homebuyers’ money, allegedly diverted abroad through shell firms in collusion with investment banking firm JPMorgan
India, according to an official at the federal agency.
Even though the ED is evaluating the Indian assets of JPMorgan
India to make provisional attachment as directed by the Supreme Court, it has also found violations of provisions in relation to anti-money laundering laws.
This follows an investigation into violation of forex rules involving foreign direct investment of Rs 85 crore and Rs 140 crore by JPMorgan
and Amrapali group firms (Amrapali Zodiac Developers, Amrapali Silicon City), respectively, between 2010 and 2012. During the FEMA proceedings, 19 persons/entities were examined. The total foreign exchange transaction in these entities is pegged at Rs 1,100 crore, according to the ED investigation report.
The ED report revealed that Amrapali Group and its directors created a web of shell companies
and dummy directors in collusion with the foreign investor (JPMorgan) and had diverted Rs 140 crore of homebuyers’ money. The funds were routed to shell companies
using sham transaction by re-purchasing the shares at a steep price.
Explaining the transactions, the ED report said equity shares of Amrapali Zodiac Developers were allotted to promoters of the company at a premium of Rs 180 per share in September 2010 and to the foreign investor —JPMorgan India Property Mauritius Company II, at the premium of Rs 1,070 per share within a gap of just 10 days.
This was done without any change in the business model of the company or any significant or sudden gains during the period, it noted. Later, the promoters of developers re-purchased the share of the foreign bank at an exorbitantly high premium of Rs 2,280, Rs 2,560 and Rs 3,000 per share.
The face value of the share was Rs 10 per piece in 2009 when Amrapali Zodiac was incorporated with authorised share capital of 10,000 shares worth Rs 100,000.
The allotments were made to promoters — Ultra Homes (7,500 shares) and Amrapali Homes (2,500 shares). In less than a year, the authorised share capital was increased to 1 million equity shares and allotted to promoters at a premium of Rs 180 per share.
Shares of Amrapali Zodiac from JPMorgan were ultimately purchased for Rs 140 crore by Neelkanth Buildcraft and Rudraksha Intracity — shell firms owned by a peon and an office boy connected with an executive of Amrapali. In an email response to this newspaper, JPMorgan India spokesperson said, “JPMorgan is not a party to the Supreme Court proceedings, and it has received no communication or notification from the Supreme Court to date. It appears that news
reports are referring to investments and exits that were made by offshore real estate funds. Compliance with applicable laws, regulations, and policies, including foreign direct investment rules is fundamental to how we do business at JPMorgan.” Sources said ED had interrogated JPMorgan’s former nominee directors, who were on board of two companies
Amrapali Zodiac and Amrapali Silicon City. If required, the probe would reach out to more executives of the foreign firm. During the FEMA probe, developers had attributed the jump in value of premium to the terms and conditions of the share subscription agreement between JPMorgan and the Amrapali Group. The foreign investors would be entitled to dividend at the rate of 25 per cent of the distributable profit.
ED argued that the newly incorporated firm had no track record of earning substantial distributable profit in the first year of operation (2010) and that there was no earning of such profit even at the time when investment in shares by the foreign investors was made. “These have further proved that even the investor (JPMorgan) has not acted as prudent businessman and has purchased shares at steep premium for the reason other than business consideration and for oblique purpose,” ED said.
Amrapali group's assured returns to JPMorgan under foreign direct investment (FDI) were unauthorised in nature
ECB borrowing made in the guise of FDI
Shares of Amrapali Zodiac wrongly transferred by JPMorgan to two Indian developers
Unauthorised place of business in India by the foreign investor group company without RBI approval
Developer diverted homebuyers' money through dummy companies, obtained investment from JPMorgan