The National Company Law Tribunal (NCLT) has ruled that a 2019 property transaction involving former promoters of Housing Development and Infrastructure Ltd (HDIL) and a private buyer was undervalued and fraudulent. The tribunal found significant discrepancies in the sale documents, insufficient evidence of payment and inconsistencies in records submitted to establish ownership of a commercial office property in Mumbai’s Bandra West.
The transaction involved a property in Dheeraj Pali Arcade Building on Pali Road, which was registered for ₹49.94 lakh despite having a ready reckoner value of ₹2.38 crore. The NCLT has directed the buyer and former HDIL directors Rakesh Kumar Wadhawan and Sarang Rakesh Wadhawan to jointly contribute ₹2.38 crore to the company’s assets within 60 days. The ruling is significant because the transaction was registered shortly before insolvency proceedings against HDIL reached a critical stage.
NCLT Finds Problems With HDIL Property Transaction
The case concerns a commercial office premises in Dheeraj Pali Arcade Building, located on Pali Road in Bandra West, Mumbai.
The property was transferred through a registered sale agreement dated July 4, 2019. The transaction involved former HDIL directors Rakesh Kumar Wadhawan and Sarang Rakesh Wadhawan, along with a private buyer.
HDIL’s resolution professional challenged the transaction, arguing that the property had been sold at a substantially undervalued price.
According to the application, the sale consideration was ₹49.94 lakh, while the property’s ready reckoner value was ₹2.38 crore.
The resolution professional also pointed out that HDIL’s books of accounts did not contain a corresponding entry establishing that the company had received the sale proceeds.
The tribunal examined the transaction and found that the available documentation did not adequately establish the claimed payment and ownership history.
Why the ₹49.94 Lakh Sale Price Came Under Scrutiny
One of the central issues was the difference between the registered sale consideration and the property’s official ready reckoner value.
| Transaction detail | Amount |
|---|---|
| Registered sale consideration | ₹49.94 lakh |
| Property ready reckoner value | ₹2.38 crore |
| Difference | Approximately ₹1.88 crore |
| Sale price as a share of ready reckoner value | Around 21% |
The difference raised questions about whether the property had been transferred at a substantially lower value than its official benchmark.
The resolution professional argued that the transaction had not been supported by adequate evidence showing that HDIL received the money.
The absence of a corresponding accounting entry became an important part of the tribunal’s examination.
However, the dispute was not limited to the property’s valuation. The NCLT also scrutinised the documents used by the buyer to establish that the transaction had originated much earlier.
Buyer Claimed Property Was Allotted in 2004
The buyer argued that the commercial premises had originally been allotted to her in April 2004.
According to her submission, her father had paid the entire consideration in cash during 2004–05. She maintained that the 2019 registration was only a formal completion of an earlier transaction.
The buyer also explained that the registration had been delayed because the premises were in the possession of Punjab and Maharashtra Co-operative Bank.
However, the tribunal identified inconsistencies in the documents submitted to support this explanation.
The allotment letter was dated April 2004 and carried the signature of Sarang Wadhawan. The tribunal observed that he had become a director of HDIL only in March 2005.
The document also mentioned the company’s registered office address, which came into effect only in March 2006.
These discrepancies raised questions about the authenticity and timing of the allotment documentation.
NCLT Finds Inconsistencies in Payment Records
The tribunal also examined the amount of money allegedly paid for the property.
The allotment letter recorded receipt of only ₹9.90 lakh. However, the sale agreement and accompanying receipt contained inconsistencies regarding the total consideration and the payment.
The buyer maintained that the full amount had been paid in cash during 2004–05.
The resolution professional, however, argued that there was no corresponding evidence in HDIL’s accounting records to establish receipt of the money.
The NCLT considered these discrepancies alongside the timing of the registered sale agreement.
The tribunal noted that the agreement was registered on July 4, 2019, the same day the insolvency petition filed by Bank of India against HDIL was reserved for orders.
This timing became another important factor in the examination of the transaction.
NCLT Orders Joint Contribution of ₹2.38 Crore
Allowing an application filed by HDIL resolution professional Abhay Narayan Manudhane, the tribunal directed the buyer and the two former directors to jointly contribute ₹2.38 crore to HDIL’s assets within 60 days.
The application was filed under Sections 45 and 66 of the Insolvency and Bankruptcy Code (IBC).
Section 45 deals with transactions at an undervalue, while Section 66 addresses fraudulent trading and wrongful conduct during insolvency-related proceedings.
The tribunal also specified the consequences of non-compliance.
If the directed amount is not contributed within the prescribed 60-day period, the sale will become void and the property will have to be handed over to the resolution professional.
The direction is intended to protect the company’s assets and the interests of its creditors during the insolvency process.
How the HDIL Insolvency Case Began
Housing Development and Infrastructure Ltd was once a prominent real estate developer with projects across Mumbai and surrounding areas.
The company entered insolvency proceedings after Bank of India approached the NCLT over a loan default of approximately ₹522 crore.
On August 20, 2019, the Mumbai bench of the NCLT ordered the commencement of the Corporate Insolvency Resolution Process (CIRP) against HDIL.
The National Company Law Appellate Tribunal (NCLAT) subsequently upheld the insolvency order in July 2020, rejecting an appeal by promoter Rakesh Wadhawan.
The insolvency process brought the company’s financial transactions under scrutiny, including property transfers and other dealings that could affect the assets available to creditors.
The latest ruling is another example of how transactions involving companies facing financial distress can be examined by insolvency authorities, particularly when there are concerns about undervaluation or inadequate payment documentation.
What the Ruling Means for HDIL’s Creditors
The NCLT’s direction could help restore value to HDIL’s insolvency estate if the amount is recovered.
During insolvency proceedings, the resolution professional is responsible for identifying and protecting the company’s assets and examining transactions that may have reduced the value available to creditors.
A successful challenge to an undervalued or fraudulent transaction can potentially bring assets or their value back into the insolvency process.
For HDIL’s creditors, the ₹2.38 crore contribution order represents a potential recovery from a disputed property transaction.
The ruling also reinforces the importance of maintaining verifiable payment records, accurate ownership documents and transparent accounting entries when dealing with companies undergoing financial distress.
The Bigger Picture
The HDIL case highlights the role of insolvency proceedings in examining property transactions completed before a company formally enters bankruptcy protection. Transactions involving unusually low consideration, missing payment records or inconsistent documentation can face scrutiny when creditors or resolution professionals believe that company assets may have been transferred improperly.
For India’s real estate sector, the ruling underlines the importance of transparent property documentation and verifiable financial records. It also demonstrates how Sections 45 and 66 of the IBC can be used to challenge transactions that may have reduced the assets available to creditors.
Looking Ahead
The immediate focus will be on whether the buyer and former HDIL directors comply with the NCLT’s direction to contribute ₹2.38 crore within 60 days. If they fail to meet the deadline, the sale will become void under the tribunal’s order and the property will have to be handed over to the resolution professional. The outcome could affect the recovery process and the value available to HDIL’s creditors.
The ruling may also encourage resolution professionals to examine other property transfers and financial transactions undertaken by companies before insolvency proceedings begin. For buyers dealing with distressed real estate developers, the case serves as a reminder that registered agreements alone may not be sufficient when the underlying payment history and ownership documents contain inconsistencies.
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