Six years of IBC - impact on Real Estate sector

Six years of IBC 2016 www.infralive.com 36 InfraLIVE January 15, 2023 flats in 5 projects and 45 per cent to 75 per cent work in other projects at the cost of Rs 46.75 crore in Phase 2 against the target for completion of 907 units in9 projects. Interim Report of Forensic Auditors In their interim report submit- ted in December 2019, the forensic auditors stated that Rs 14,270 crores was collected by Unitech Group from 29,800 homebuyers, out of which Rs 13,364 crores has been traced in the bank statements. However, Rs 5,063 crores of the collections were potentially not utilized by the Unitech Group towards the construction/ execu- tion of the 74 identified projects. Moreover, due to limited informa- tion provided to them, Auditors have not been able to ascertain outflows aggregating to Rs 2,390 crores, particularly on whether this amount was utilized for the 74 projects. Unitech had also availed of financial facilities aggregating to Rs 1,806 crores from six financial institutions for the construction/ execution of 74 projects. Out of which, 42 per cent amounting to Rs 763 crores, has not been utilized for the construction/ execution of these pro j ec t s . Fur ther , the Forensic Auditors were not able to perform their analysis on 23 projects as relevant records were notmade available to them. Diversionof funds The Forensic Auditors have found several instances of diver- sion/ siphoning of funds from the company. They found that the company had made high value investments/ advances in off-shore tax-haven countries/ companies and later on, written them off. During 2007-2010, three subsid- iaries of Unitechmade investments of Rs 1,746 crores in ten companies in Cyprus while in between 2016- 2018, Rs 1,406 crores or 80per cent of the total investment value was written off in those investments. The remaining amount of Rs 339 crore is appearing as equity investments in the books of accounts. S imi l a r l y , i n 2007 - 2008 , Unitech Global Ltd, a company registered in Jersey and a subsid- iary of Nuwell Ltd, another subsid- iary of Unitech, advanced a loan of Rs 294 crores to Kortel Ltd, another step-down subsidiary of Unitech. Kortel made 27 invest- ments of Rs 293 crores in three foreign entities based in Cyprus during 2015-2016. The entire amount of Rs 294 crores (100 per cent of total investment value) was written off in the books of Kortel. High value of receivables due from related/ undisclosed relatedparties The Forensic Auditors have also pointed out several instances of high value of receivables due from related/ undisclosed related parties. Firstly, Unitech sold five wholly owned subsidiaries to three undisclosed related parties during 2009-11 for Rs 494 crores, out of which Rs 294 crores is receivable as on November 30, 2018. Secondly, during March 2011 to October 2013, Unitech advanced Rs 238 crores to a related party, Millen- nium Construction Pvt Ltd, for the acquisition of the shares of Gran- deur Buildwell Pvt Ltd. No shares of the company were allotted to Unitech and the entire advance is still receivable. ing f rom January 01 , 2006 . Accordingly, Grant Thornton an empanelled forensic auditor of the Securities and Exchange Board of India (SEBI) was directed to conduct the forensic audit of the UnitechGroup inDecember 2018. The Bench also directed Justice Dhingra Committee to take up on priority those projects where 70 per cent construction is complete so that flats can be handed over to the home buyers who seek possession. In disbursing the amounts which are realised by the monetising of the assets, the bench felt that it was necessary to protect both groups of home buyers viz those who are seeking possession as well as those homebuyers who are interested in seeking refund. Justice Dhingra Committee completed882 flats In regard to those projects which can be completed at an early date, as assessed by Justice Dhingra Committee, the bench also allo- cated funds to ensure that the flats a r e h a n d e d o v e r t o t h e homebuyers. Justice Dhingra Committee completed 514 flats in 5 projects located at Gurgaon, Noida, Greater Noida and Mohali in Phase I at a cost of Rs 21 crore by March 31, 2019 and the possession was handed over to homebuyers by the nd company. In the 2 phase, Justice Dhingra Committee completed 368