The Andhra Pradesh Industrial Infrastructure Corporation (APIIC) on Monday reiterated its allegations against the Emaar group stating that the company had played a fraud on it by entering into development agreement with one of its subsidiaries in the township project even as the latter argued before the AP High Court that a civil dispute between the two was made out to be a criminal case amounting to abuse of the process of justice.
The division bench headed by Chief Justice Nisar Ahmed Kakru on Monday completed the arguments in a writ petition involving APIIC-Emaar case. The high court also ordered a preliminary inquiry by the Central Bureau of Investigation (CBI) into the alleged fraud in the 258-acre township project in the city.
The project was to be developed by Emaar Hills Township Project Limited (EHTPL) in which the Dubai- based company and APIIC hold 74 per cent and 26 per cent equity respectively. However, the subsequent appointment of Emaar MGF, a subsidiary of the company, as developer of the project ‘without the consent of the board of APIIC’ led to a reduction in shareholding of the state agency in the project, according to the petitioners, including a state minister.
It was also alleged that the housing plots in the project were sold at a grossly undervalued price by the developer, and the money was siphoned off by the company leading to a loss to the APIIC.
Questioning the court’s move to order a preliminary inquiry by the CBI against the Emaar group, Supreme Court lawyer L Nageshwar Rao, who appeared before the bench on behalf of the group companies, insisted that no decision that was taken while developing the project affected the interests of APIIC.
Claiming that the original shareholding pattern in EHTPL was still intact, the counsel, however, explained that a new business model only was later adopted in which the developer (Emaar MGF) takes 75 per cent of the gross revenues while sharing 25 per cent of net profits with EHTPL. APIIC gets 26 per cent of the net profit which goes to EHTPL leaving the rest for Emaar Properties, the parent company. This arrangement, according to the Emaar Lawyer, only benefits the APIIC. He also said the decision to sell initial 100 plots at Rs 5,000 per square yard was taken as part of a promotional activity.
Citing various court orders issued in similar instances in the past, Rao argued that a CBI inquiry without the consent of the state government would impinge upon the federal structure of the Indian state and no such inquiry was warranted before establishing prima facie findings of criminal culpability based on the material on record. He also stated that the division bench could not proceed with parallel inquiries as the high court itself had stayed the inquiry by the ACB court on the same allegations.
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However, APIIC’s counsel as well as the court appointed amicus curiae disputed Emaar’s claims stating that those decisions were taken without prior consent of the APIIC board and all of of them had in fact put the government agency in a disadvantageous position. “Without APIIC’s knowledge or consent, Emaar MGF had pledged the land with Axis Bank in 2005 to raise a loan of Rs 150 crore. The bank had valued the land at Rs 22 crore per acre while the sale price of plots only yielded Rs 1 crore per acre. Is this not a fraud?” the amicus curiae argued.
Meanwhile, the CBI counsel informed the court that the final reports on the allegations of the APIIC-Emaar deal and the questionable investments into the companies set up by Kadapa MP Y S Jagan Mohan Reddy, had been submitted to the court on Monday. The division bench will hear Jagan’s case on Tuesday. The respondents in the case had filed counters on Monday.