Lavasa resolution bid winner DPIL fudged financial statements, say home buyers | Mint

Lavasa resolution bid winner DPIL fudged financial statements, say home buyers

The home buyers also allege that DPIL has neither the resources nor management expertise and competence to successfully implement the resolution plan.
The home buyers also allege that DPIL has neither the resources nor management expertise and competence to successfully implement the resolution plan.

Summary

  • The home buyers allege this happened when DPIL submitted the resolution plan for Lavasa two years ago.

Mumbai: The home buyers of Lavasa Corporation have alleged fudging of financial statements by Darwin Platform Infrastructure Ltd (DPIL), the company that won the bid to acquire Lavasa after completion of a resolution process. The home buyers allege this happened when DPIL submitted the resolution plan for Lavasa two years ago.

An affidavit to this effect was filed by Mukesh Mangale along with 135 more home buyers of Lavasa (there are in all 1,100 home buyers) in the Mumbai National Company Law Apellate Tribunal (NCLAT) on 27 November, which Mint has seen along with other relevant documents.

In the affidavit, the home buyers alleged that DPIL showed assets worth 4,167.5 crore at the end of fiscal year 2021 in the resolution plan as against only surplus of profit and loss account worth 10.7 crore in its filings with the ministry of corporate affairs (MCA).

Conversely, the affidavit states the company claimed a liability of 1,914 crore at the end of fiscal year 2021 in its resolution plan, when the actual liability stood at 8,290 crore in the MCA filings.

This understatement of liabilities by 4,000 crore and overstatement of reserves & surplus by an identical amount presents “an extremely optimistic & promising background and impression", the affidavit stated, and further alleged that DPIL does not have any immovable property on its books. The company revised its accounts in 2019 to remove the immovable property appearing in the books of accounts, which is actually an off-balance sheet item.

The homebuyers also allege that DPIL has neither the resources nor management expertise and competence to successfully implement the resolution plan. “Thus, it is evident that the entire corporate insolvency resolution process is now at a standstill and no one is accountable for day-to-day running of the Dasve Township of the corporate debtor, which is at an inflection point," said the affidavit.

Initially, in December 2021, 96.4% of the creditors had supported a settlement offer from DPIL, which promised a payout of 1,814 crore to lenders over eight years, resulting in a haircut of 79% to financial creditors. This offer also included delivering fully constructed houses to 837 home buyers. The plan was approved by NCLT in July this year.

But the resolution process took a sudden U-turn when, two months later, lead bank Union Bank of India filed an appeal in the NCLT, asking to invite resolution plans anew based on fresh valuation of Lavasa’s assets. The bank’s submission was that the valuation of the company’s real estate assets, which were valued in 2018, had substantially improved in the past five years.

The lender also alleged connivance between resolution professional (RP) Shailesh Verma and DPIL to undervalue the real estate assets of Lavasa, resulting in a loss to creditors of the company.

“I would not like to comment anything other than that the whole process was carried out as per the IBC, with knowledge and approval of the erstwhile CoC," replied Shailesh Verma to Mint’s query. Calls and messages to DPIL founder Ajay Harinath Singh went unanswered.

IBC refers to the Insolvency & Bankruptcy Code, and CoC, the committee of creditors.

The NCLT rejected Union Bank’s contention, but then another creditor, State Bank of India, filed an appeal in the NCLAT in November, making similar observations. The NCLAT is yet to give its verdict.

Following the resolution in July 2023, DPIL was required to inject 100 crore for expenses and an additional 100 crore in upfront or equity funds. However, DPIL is yet to infuse these funds into Lavasa, casting a doubt over its acquisition plan.

Established in 2010, DPIL is engaged in infrastructure contracts and services. It is part of the Darwin Group of companies, founded by Ajay Harinath Singh and his two brothers, with diversified investments in sectors like infrastructure, refineries, realty, mass media, aviation, and pharma. Darwin claims to be a debt-free group, holding assets valued at 15,000 crore.

Lavasa Corporation was set up in 2000 by Ajit Gulabchand-led HCC (Hindustan Construction Company) to develop India’s first privately developed city, spread over 20,000 acres in the Mulshi and Velhe areas in Maharashtra’s Pune district.

Lavasa City by Lavasa Corporation is a joint venture between HCC (68.7% share), Avantha Group (17.18%), Venkateshwara Hatcheries (7.81%) and Vithal Maniar (6.29%).

The township was planned for a population of 300,000 people. The project was to include apartments, villas and hotels. As of 2021, it owes dues worth 6,412 crore to financial creditors.

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