NCLT flags undervalued, fraudulent HDIL property sale in 2019

Mumbai: The National Company Law Tribunal (NCLT) has held that a 2019 property transaction involving former promoters of Housing Development and Infrastructure Ltd (HDIL) and a private buyer was undervalued and fraudulent, citing discrepancies in the sale consideration, lack of evidence of payment and inconsistencies in documents submitted to establish ownership.

The order relates to a commercial office premises in Dheeraj Pali Arcade Building on Pali Road, Bandra West, which was transferred to the buyer through a registered sale agreement dated July 4, 2019. The transaction involved former HDIL directors Rakesh Kumar Wadhawan and Sarang Rakesh Wadhawan.

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The tribunal examined the timing of the transaction, which was registered on the same day that the insolvency petition filed by Bank of India against HDIL was reserved for orders. The case highlights the scrutiny that property transfers by real estate developers shortly before insolvency proceedings can attract from resolution professionals and creditors.

HDIL's resolution professional challenged the transaction, arguing that the sale consideration of Rs 49.94 lakh was substantially below the property's ready reckoner value of Rs 2.38 crore. He also pointed out that there was no corresponding entry in the company's books of accounts to establish receipt of the money.

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The buyer contended that the premises had been allotted to her in April 2004 and that her father had paid the entire consideration in cash during 2004-05. She argued that the 2019 registration merely formalised an earlier transaction, which had been delayed because the premises were in the possession of Punjab and Maharashtra Co-operative Bank.

The tribunal, however, found inconsistencies in the documents submitted to support the claim. It noted that the allotment letter bore the signature of Sarang Wadhawan, who was appointed a director of HDIL only in March 2005, although the document was dated April 2004. The company's registered office address mentioned in the letter also came into effect only in March 2006, it observed.

The NCLT further noted that the allotment letter recorded receipt of only Rs 9.90 lakh, while the sale agreement and accompanying receipt contained inconsistencies regarding the consideration and its payment.

Allowing an application filed by resolution professional Abhay Narayan Manudhane under Sections 45 and 66 of the Insolvency and Bankruptcy Code, the tribunal directed the buyer and the two former directors to jointly contribute Rs 2.38 crore to HDIL's assets within 60 days. Failure to comply would render the sale void and require the premises to be handed over to the resolution professional, it said.

The ruling highlights how property transactions undertaken during periods of financial distress can be challenged on grounds of undervaluation, absence of verifiable payment trails and inadequate documentation, even when buyers claim that the underlying allotment dates back several years.