New Delhi / Chandigarh: On 15 October, India’s Supreme Court will consider applications before it from two companies to buy out the assets of Golden Forests (India) Ltd (GFIL) in a move that could bring relief to around 1.7 million investors of the company who are owed around Rs2,000 crore.

Only dreams: Golden Forests’ office building. Hindustan Times

In 2007, two Delhi based companies Vavasi Telegence Pvt. Ltd and the Chadha Group independently submitted applications before the Supreme court to buy out assets and liabilities of GFIL. The potential buyers hope to develop approximately 7,750 acres of land on GFIL’s books, and repay investors.

“What we have offered is a comprehensive settlement and an offer to make a provision for further unforeseen claims. This would mitigate the aspirations of around two million investors and reconcile the situation," said Farid Arifuddin, managing director of Vavasi Telegence.

“This is not a bid. We are trying to find a solution to the problem and other people are also making offers. We are not looking at the property as a real estate play."

Arifuddin, however, admitted that Vavasi proposes to develop GFIL’s land “as a model for sustainable habitation".

Ponty Chadha, managing director of the Chadha Group, which is in the real estate business, could not be reached for comment.

One of the promoters of GFIL, R.K. Syal, could not be reached immediately for comment because he is in jail. Syal’s lawyer Shailendra Bhardwaj said that his client has been in Model Jail, Chandigarh, since 23 December 2000.

Land prices have soared since the 1990s, the time when GFIL and other similar finance companies, especially those in the so-called plantation business, acquired land across the country. Plantation companies promised investors returns based on teak and other agricultural produce grown on their plantations.

Many of these companies went bust in the late 1990s under the combined weight of a slowing economy, the inability to continue to attract new investors, and the long gestation periods involved in making money from agricultural produce. Investors who had put money into these companies took them to court, effectively freezing the use of the land on their books.

If the court positively considers the applications of Chadha Group or Vavasi, it will bring relief to investors such as Updesh Kumar Verma.

Verma, a resident of Hamirpur in Himachal Pradesh, invested Rs100,000 with GFIL in 1991. The company promised the amount would double in three years. In 1994, when he wanted to collect his amount, he was told that he should wait for two more years and take back triple his initial investment. In 1996, Verma realized he would receive nothing. Since then, he has been waging a legal battle on behalf of all investors in GFIL. Verma heads a body called The All India Forum for the Protection and Welfare of Investors and Agents of Golden Forests (India) Ltd; he claims that he represents 450,000 of the 2.4 million investors in the company. Court records, however, put the number of investors at around 1.7 million.

‘Social forestry’

R.K. Syal, one of the promoters of GFIL, has been in jail since 2000 after being arrested by Punjab’s vigilance department for defrauding the public. Hindustan Times

Chandigarh-based GFIL commenced its business of developing agricultural land and creating social forestry farm in March 1987. By 1998, it had raised around Rs1,037 crore.

Many of the cases against the company were initiated by investors in 1997. The same year, India’s capital markets regulator Securities and Exchange Board of India, or Sebi, asked all so-called collective investment schemes across the country to furnish their details and register themselves with it.

When GFIL refused to do so even after being served a Sebi order to stop raising funds from investors and selling its assets, the regulator approached the Bombay high court and asked for an order restraining the company from continuing its business.

The high court passed a few orders but asked Sebi and the banking regulator Reserve Bank of India to set up a committee to study the issue. In July 1998, GFIL informed the court that it had formulated a scheme for repaying investors.

Based on the company’s plan, the high court appointed retired justice M.L. Pendse to sell 19 properties to repay investors. Investors filed numerous petitions across several high courts in the country to stop the sale of these 19 properties.

Meanwhile, Syal was arrested by Punjab’s vigilance department after a case was registered against him in Patiala for defrauding the public. Syal’s lawyer Bhardwaj said that five similar cases were also registered in other parts of the state. In 2003, Sebi petitioned the Supreme Court to transfer all cases from the high courts to the apex court. By 2004, all cases including a petition seeking the winding up of GFIL in the Punjab and Haryana high court were transferred to the Supreme Court.

In 2004, the court constituted a committee to invite and receive claims of GFIL’s investors and depositors, value GFIL’s properties and submit a report after scrutinizing the claims and assets. Retired justice R.N. Aggarwal was appointed head of the committee. Since then, investors, depositors, bidders, buyers of certain properties sold earlier in the course of court proceedings, and people and companies interested in GFIL properties have filed more applications before the apex court.

Unravelling value

Verma said it won’t be easy to make money from the land on GFIL's books. “Much of the land is under litigation and is under dispute. I will rather settle for money along with interest rather than land," he said.

Vavasi and Chadha Group think otherwise. Vavasi has made an offer of Rs2,700 crore to take over and develop the land on GFIL’s books. In its application filed last year, it asked the court to facilitate the merger of the 110 companies through which GFIL operated.

Details of the Chadha Group’s bid could not be ascertained.

Justice R.N. Aggarwal said much would depend on how the offers of the two companies are viewed by GFIL and the court. There are two companies which have made the offer, but on the other side are “110 companies which may have to be merged towards a final settlement," he added.

Aggarwal said that a memorandum of understanding (MoU) would have to be signed as an initial step seeking merger of all these companies since the interests of 1.7 million investors are at stake.

Arifuddin of Vavasi Telegence claimed his company had signed a memorandum of understanding with Syal.

“Since Syal is under custody of the state, the memorandum of understanding had to be endorsed and submitted to the court through the jail authorities. This has been complied with. Now, the memorandum of understanding is pending before the Supreme Court that will have to take cognizance of this," he said. Syal’s lawyer Bhardwaj confirmed that such an agreement has been signed. “The MoU was placed on the court’s record along with Vavasi’s application last year."

“Also, some sales have been made which will have to be confirmed by the apex court," Aggarwal said, referring to 14 properties of GFIL in Dera Bassi, Punjab, which were auctioned and sold by the court-appointed committee. Some of the properties have been encroached upon, he added.

Some investors have waited almost two decades to be repaid their original investments in GFIL. They are hoping 15 October will be the day that the court finds a way for that to happen.