Whistleblowers, Real Estate Sector, And Home Buyers
If one thinks of blowing the whistle, think again as a whistleblower’s cautionary tale unfolds as both the accused parties and the informant face incarceration.
The case involves Ireo and M3M India, a prominent real estate developer in Gurugram, who are alleged to have orchestrated a colossal scam worth thousands of crores.
This scam has victimized numerous unsuspecting homebuyers and wealthy foreign investors, and Ramesh Sanka, the former CEO of Ireo, emerges as the whistleblower. During his tenure, Sanka unearthed suspicious transactions between Ireo and M3M India, prompting him to blow the whistle.
However, as the legal system in our country is full of loopholes, it so happens that both parties land behind bars; while the motives behind the imprisonment of both parties differ, this scenario shows the chaos prevailing in India’s real estate market, the sorry plight of cheated homebuyers, and the cost of whistleblowing in this country!
The Ugly Side Of India’s Real Estate
The once-promising cities of Noida, Gurugram, and Pune have shattered the expectations of hopeful homebuyers; however, unfortunately, in cases like Ireo-M3M, the interests of these homebuyers are marginalized.
Sanka’s determination to seek justice for the affected homebuyers led him to amass evidence against Ireo, compelling him to approach the Supreme Court for an investigation by a central agency.
Legal proceedings ensued after the Supreme Court acknowledged Sanka’s complaint and issued notices to investigative bodies. The Enforcement Directorate (ED) initiated an inquiry and apprehended key figures, including Lalit Goyal, the former managing director of Ireo in November 2021.
In June 2023, the ED was also able to establish the role of M3M India in the alleged scam, and thus, it arrested Roop Kumar Bansal, Basant Kumar Bansal, and Pankaj Bansal — the promoters of M3M India.
The Mindblowing Twist
However, an unexpected twist emerged with the alleged scam’s exposure. Ireo responded by accusing Sanka of data theft, alleging he unlawfully acquired documents as evidence. Sanka’s fight to clear his name escalated, resulting in his arrest for allegations of document theft and breach of trust.
The ongoing court battle leaves both parties confined behind bars, even as the intriguing legal documents shed light on the intricate journey of the whistleblower’s fight against corruption.
The Start Of The Scam
This intricate saga begins with the establishment of Ireo by Anurag Bhargava in 2004. Lalit Goyal joined Bhargava (former managing director of Ireo), initiating a sequence of high-profile investments in Ireo by renowned hedge funds and private-equity firms.
Ireo’s innovative approach involved employing land brokers to acquire property due to restrictions on non-resident companies buying agricultural land. They provided loans to these brokers, eventually obtaining development licenses for commissions.
Accusations against Ireo focus on Goyal’s alleged collusion with land brokers to inflate land prices, diverting proceeds to his own companies. Furthermore, it is claimed that Goyal used a complex web of companies to acquire ownership of land-owning entities, diverting ownership from Ireo to himself.
The Bansals, promoters of M3M group, joined forces with Ireo, becoming land brokers and purportedly collaborating with Goyal to orchestrate the scam. This partnership led to M3M India’s foundation and the launch of premium projects in Gurugram.
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The Discovery
As Ireo’s CEO, Sanka discovered numerous complaints by homebuyers and, investigating the matter, found evidence substantiating the misappropriation of funds; Sanka alerted investors, filing whistleblower complaints and initiating legal action across various forums.
Investors, including Axon Capital and TCI, filed complaints against Goyal for fraud. The Supreme Court acknowledged these complaints, prompting ED’s intervention and Goyal’s arrest.
The situation took a turn when Ireo accused Sanka of data theft, leading to his arrest. Ireo filed a criminal complaint asserting that Sanka breached confidentiality agreements by sharing sensitive data with investors. Despite Sanka’s claims that the evidence was acquired through legitimate channels, his arrest ensued.
Investor Support for Sanka’s Cause
When Sanka raised concerns about alleged fraud within Ireo, two investors associated with Ireo formally collaborated with him to delve deeper into the matter.
In January 2018, Sanka agreed with Axon Capital and TCI to engage as a consultant, and this consultancy agreement was divided into two distinct phases.
The initial phase focused on sharing all pertinent information, knowledge, and data related to the alleged fraud and other misconduct attributed to Ireo, its personnel, and connected entities.
The subsequent phase involved Sanka assisting TCI, Axon, and their legal representatives in any potential litigation, legal proceedings, or discussions aimed at addressing the matters with Ireo and Goyal, including the possibility of reaching a settlement.
In the first consultancy phase, Sanka offered his services at a rate of USD 1,000 per hour and committed to dedicate a minimum of 500 hours. For the second phase, the agreed-upon fee was USD 850 per hour, accompanied by a commitment to provide a minimum of 1,765 hours.
Both Axon Capital and TCI agreed to share the associated expenses evenly.
The agreement stipulated that its validity would extend until November 31, 2019, unless mutually renewed by the parties involved. Throughout the initial phase, the relationship between Sanka, Axon, and TCI was functioning smoothly.
Approximately 33 complaints were registered across various platforms, encompassing accusations of tax evasion, accounting irregularities, and more against Goyal and Ireo.
However, as the consultancy transitioned into its second phase, tensions arose during the negotiations for a settlement involving the investors and Goyal.
Investors Withdraw Their Support
In early 2019, negotiations for a settlement between the investors and Goyal commenced. During this time, the investors began sidelining Sanka and disregarding his recommendations.
An email exchange between Ramesh Sanka and Dinkar Singh from Axon highlighted this shift, with Singh mentioning, “The Supreme Court strategy has put us in a difficult position…”.
Another email exchange between the two pertained to tax-related raids on Ireo offices, where Singh expressed his discontent with Sanka’s pursuit of complaints filed with tax authorities.
He noted, “Initiating this kind of trouble isn’t very productive. It hasn’t applied much pressure so far, but it creates uncertainty for our future efforts.”
Further communication between the two on March 1, 2019, contained more confrontational language.
Singh expressed, “And honestly, please refrain from claiming that your actions are driven by concern for homebuyers. As you are aware, any potential settlement necessitates substantial new equity to revitalize all of Ireo’s projects.
Hence, the best chance for Punjab’s Ireo homebuyers to secure their homes hinges on management changes and fresh capital infusion.”
In another email, Singh voiced his displeasure regarding Sanka’s involvement in lawsuits filed by homebuyers where he was implicated, considering this contrary to his instructions.
In yet another email, Singh criticized Sanka for what he perceived as destructive actions, urging him to cease his disruptive activities.
He stated, “At this point, you’re only eroding value. Please desist from causing further disruptions… It’s time to salvage whatever remains. Please stop generating more liabilities that investors will have to cover.”
These email exchanges occurred during the negotiation period with Goyal.
In one of his emails, Sanka addressed the investors, acknowledging their financial pressures and stating, “I understand that it’s your money, and you’re under pressure to protect it… Lalit Goyal is seeking to drain any remaining funds and, on top of that, demanding additional money… Lalit Goyal is coercing you.”
By June 2019, Sanka was requested to withdraw all 33 complaints lodged against Ireo and Goyal on various platforms.
Subsequent email exchanges between Sanka and the investors reveal an agreement encompassing the following points: Sanka would sign a withdrawal letter to retract all complaints filed against Goyal and Ireo.
Investors would release Sanka’s outstanding payment. Goyal would retract two cases filed against Sanka in the Gurugram court. However, Sanka persisted in attempting to explain to the investors that once evidence had been presented to the Supreme Court and investigative agencies were probing the matter, it would not be feasible to withdraw the cases.
In one of his emails, Sanka remarked, “…How can I instruct statutory authorities to halt ongoing investigations? Am I to convey that due to the settlement between Ireo investors and Mr. Lalit Goyal, they wish for ongoing fraud investigations to be terminated?”
Finally, in April 2022, Sanka initiated a writ petition in the Chandigarh High Court, naming Singh of Axon Capital as a respondent.
In his petition, Sanka contended that Singh was obstructing his pursuit of complaints filed by him regarding fraud at Ireo. He additionally asserted that punitive action should be taken against Singh for impeding the investigations stemming from his complaints.
The Judge Is The …..
Amid the legal drama, a suspended judge’s alleged bribery adds another layer of complexity.
The judge, Sudhir Parmar, who was hearing the ED’s case against Goyal and Bansals, was himself suspended for allegedly taking bribes from the M3M India group for delaying the proceedings and passing judgment in favour of M3M India.
It has been alleged that he was taking bribes through his nephew Ajay Parmar, who was given employment in M3M India and his salary was initially fixed at around INR10 lakh per annum, but after a charge sheet was filed and provisional attachment order was passed in the case, his salary was substantially hiked.
Whistleblowers, Guardians of Accountability
The role of whistleblowers in modern society cannot be overstated, as they serve as crucial catalysts for exposing corruption, fraud, and wrongdoing, often in environments where the truth would otherwise remain concealed.
Their courage to come forward with evidence of wrongdoing helps safeguard the interests of stakeholders, customers, and the general public.
The case of Ramesh Sanka, the former CEO of Ireo, and the allegations against Ireo and M3M India, emphasize the vital importance of whistleblowers in upholding transparency and justice.
Sanka’s actions shed light on alleged financial improprieties that would have adversely impacted countless homebuyers and investors.
Builders’ Scams, Deceptive Practices and the Plight of Innocent Homebuyers
The case of Ireo and M3M India shows how unscrupulous builders can orchestrate complex scams that deceive and defraud unsuspecting homebuyers and investors.
In this unfortunate reality, the dream of owning a home or making a secure investment often becomes a nightmare due to the deceitful practices of certain players in the real estate industry.
The consequences of builders’ scams are dire and innocent homebuyers who invest their hard-earned money and aspirations into homeownership, or real estate investments can find themselves in a situation where their dreams are shattered. The financial strain caused by delays and hidden costs can push families into distress, impacting their overall quality of life.
The Last Bit, With both the whistleblower and accused parties behind bars, the court proceedings continue. Justice for the homebuyers remains elusive amidst this intricate legal battle.
