ED finds IBC 'misuse' in land sale; seizes Rs 50 lakh in cash from NCLT lawyer, others

New Delhi, Nov 21 (PTI) The Enforcement Directorate on Friday claimed to have unearthed a case where the Insolvency and Bankruptcy Code (IBC) process was "misused" in the land sale of an insolvent real estate company.

It said Rs 50 lakh in cash was seized during raids from a lawyer practising at the NCLT and another person.

The federal probe agency said in a statement that it conducted searches on Thursday in Delhi and Gurugram as part of a probe against a company named Universal Build Well Pvt. Ltd. and its promoters for non-completion of real estate projects and for "cheating" homebuyers and investors.

The company was undergoing a corporate insolvency resolution process, and the National Company Law Tribunal (NCLT) directed certain assets of the firm to be handed over to the homebuyers while remaining assets were to be liquidated as per the resolution plan, it said.

A probe found that the land of the said company was sold at a "throwaway" price. The market value of the property, even at government rates, was significantly higher than the sale value, indicating an attempt to profit from the process.

The agency said searches were launched against certain middlemen who were not part of the insolvency process, the designated Resolution Professional (RP), NCLT advocates and buyer of the property -- RDB Infrastructure and Power Ltd., promoted by Vinod Duggar.

The raids led to the seizure of "unexplained" cash of about Rs 50 lakh from two intermediaries, including an advocate practising before the NCLT. These persons were involved in facilitating the "under-valued" transaction, the agency said.

"Digital data recovered from their mobile phones contained draft invoices reflecting proposed illicit and unaccounted consideration, indicating arrangements for illegal gains outside the IBC/NCLT framework and without such approval process of creditors or SRAs (successful resolution applicants)," the agency said.

The searches, according to the ED, found "manipulation" of the bidding process through pre-determined and "artificially suppressed" bids, including one submitted by the middleman advocate himself, indicating "clear collusion" and bid "rigging".

Messages retrieved from online chatting platforms "established" a nexus between the intermediaries and an official of a private bank (which was a secured creditor) who appears to have facilitated the under-valuation scheme while overseeing the sale process, it said.

The private bank, according to the ED, took a haircut (reduction in the value of an asset) despite a significant appreciation in the value of the property.

The probe also found that the homebuyers, who had a direct stake in maximising asset value, were deliberately kept uninformed, and material seized points to "negligence" on the part of the RP, the agency said. PTI NES RHL