Insolvency tribunal NCLT has directed the government to investigate the affairs of real estate firm Wave Megacity following serious allegations of siphoning of money collected from its homebuyers. Evidence has been produced by the homebuyers that Wave Megacity was taking huge amount of cash from them but has failed to either give them possession of flats or return the money, observed a two-member bench of the National Company Law Tribunal (NCLT).

“Therefore, we are of the view that the affairs of the Corporate Debtor were conducted with the intent to play fraud on the creditors of the Corporate Debtor. In light of above circumstances, we direct the central government to make necessary investigations into the affairs of the Corporate Debtor,” NCLT said in its order.

NCLT also imposed a fine of Rs 1 crore on Wave Megacity for attempting to play fraud on thousands of homebuyers by filing a petition under Section 10 of the Insolvency and Bankruptcy Code (IBC) to initiate insolvency proceedings against itself.

“We have concluded that the Application filed under Section 10 of IBC, 2016 was an attempt on the part of the Corporate Debtor to play fraud on thousands of Home Buyers, Noida Authority, Government Authorities etc.

“Therefore, we are imposing Rs 1 crore penalty on the Corporate Debtor which shall be deposited in Prime Minister’s Relief fund within 15 days from today,” said the NCLT bench comprising members Bhaskara Pantula Mohan and Hemant Kumar Sarangi.

Meanwhile, Wave Megacity Centre in a statement said it has received the NCLT order and will approach the appropriate court for legal recourse.

“We have just received the judgment of the honourable tribunal… We will approach the appropriate court for legal recourse in the best interest of the company and home-buyers,” a company spokesperson said.

The tribunal pronounced its order on Monday. However, a detailed copy of the judgement was uploaded on Wednesday.

Wave Megacity Centre, which is developing commercial and residential projects in sectors 25A and 32 of Noida, Uttar Pradesh, had in March 2021 approached the NCLT under Section 10 of the Insolvency and Bankruptcy Code.

Section 10 of IBC allows a debtor to initiate an insolvency resolution process against itself if it has committed any default.

The realty firm, in its petition filed last year, had claimed that it had to pay an amount of Rs 1,222.64 crore to Noida Authority and it was unable to clear the dues.

Rejecting the plea, NCLT in its 33-page order said in the garb of insolvency proceedings, Wave Megacity has “attempted to play fraud” on its stakeholders.

“The IBC proceedings can not be utilised to make the illegal acts legal. We conclude that the application under section 10 has been filed with malicious and fraudulent intent to cause injury to the stakeholders of the corporate debtor,” it said.

After considering the evidence, it appeared that Wave Megacity was “indeed involved in malpractices and was reducing the market value of its own assets.”

Moreover, there are 285 pending litigations against the company and this cannot be overlooked while declaring a moratorium after initiating insolvency proceedings, it added.

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