• LAWGIC STRATUM

Criminal action upon directors - TNRERA's Verdict

Updated: Feb 24

Author: Shusna Santra



Tamil Nadu RERA in its recent case called for criminal action against the former Managing Director of a real estate firm for allegedly transferring 8.86 crores of funds illegally, collected from home buyers.


Le NID flat owners and association, Rejoice flat Buyers Association and a few others filed a complaint against Antony Projects and its former MD Antony Sahayaraj. The petition of the complaint association alleged that about 140 allottees have been cheated by the respondent promoter.


The complainants booked flats in Le NID, a real estate project in Urappakkam, based on an advertisement in the year 2012 promoted by the 1st Respondent Company. Buyers had paid the sale consideration by way of various instalments. The flats were not completed even after four years and came to halt in 2014. The promoter assured completion of the project by 2016 but construction activities never resumed. The case was similar to the company's other projects. The main relief the Complaints prayer for is that the flats should be completed and handed over to them. The Managing Director of the Company (2nd Respondent) did not appear before the court right from the first hearing till the Respondent Company was ordered to be liquidated by Hon'ble NCLT[1] under IBC[2] proceedings. The Respondent Company ordered for liquidation on 22nd January 2019 under section 33 of the Bankruptcy Code, 2016 by NCLT.[3] The liquidator had allowed completing the project and file a final claim for refunds of the amount spent by the Association beyond the scheduled payments.


According to the Association, the total consideration agreement entered was Rs. 18 crores and the allottees had paid about 14 crores. Further, it had engaged KPN promoters to complete the project which amounted to Rs.4.30 cr.


Meanwhile, Rejoice fat buyers and 16 other allottees had booked flats in Chengalpattu. The agreement was executed in 2014 but the promoter failed to complete the project.

The Liquidator had requested to complete the project and the buyers would incur an additional cost of ₹4.50 cr. In its response, the liquidator noted that no explanation was provided by Antony Sahayaraj for the transaction of ₹8.86 crores for the alleged supply of furniture.


No explanation regarding the details of the transaction from the promoter made it clear that the erstwhile promoter has siphoned off the company for his gains for which he was directed to pay back the money. However, he did not.


Liquidator prayed the Authority to direct the respondent to submit the following documents as proof that the money was utilized for the project,

1) Copies of invoices to the tune of 8.86cr

2)Copies of a delivery challan issued by M/S Antony Furniture Private LTD.

3) Details of furniture supplied along with details of flats i.e. flat no. Block no. etc.


TN RERA noted that it was very clear that the former promoter had not utilized the ₹8.86 crores for the project but misappropriated the money which leads to a criminal breach of trust.


The Complainants further prayed that the project may be registered with the available documents. TNRERA said that the order had to be forwarded to the DGP,Tamil Nadu, and the Commissioner of police for initiating appropriate criminal action against Antony Sahayaraj. Plus, it directed for the cancellation of excess undivided shares registered in its Rejoice Project by the Company.


References:


Case: C.Nos 043/2017, 2, 3, 8 to 19, 22 & 23/2018 and 416/2019 [1]NATIONAL COMPANY LAW TRIBUNAL (NCLT) [2]INSOLVENCY AND BANKRUPTCY CODE [3]INITIATION OF LIQUIDATION Source:https://www.thehindu.com/news/cities/chennai/tnrera-directs-criminal-action-against-promoter/article33652739.ece

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