Bhagtani's Crushed Victims: Estimating the Damage from a Financial Earthquake

11th October, 2017, Mumbai: Over 2000 persons who booked flats in four real estate projects, namely Riyo, Serenity, Sapphire and Savannah (and over 100 who booked in less-known projects like Bhagtani B14, Krishaang, and Executive) have been cheated of large chunks of their life savings -- typically between Rs 8 lakhs and 80 lakhs. Roughly half of these are people who booked flats in the Riyo project.

A couple of hundred NRIs in USA, UK, Australia, Singapore, Kuwait, Dubai, etc. have lost large amounts, ranging between Rs 25 lakhs to 80 lakhs. 

A couple of dozen high-net-worth individuals (HNIs) like doctors have lost Rs 1.5 crore or more. 

The total amount collected is conservatively estimated to be upward of Rs 600 crore. This is a total of principal amounts collected, without accounting for interest.

Over 400 among them were tricked into signing cancellation deeds and accepting post-dated cheques for as much as 24 to 36 months later. Those cheques were for the most part not honoured. And then the bounced cheques were collected from the victims, and exchanged for worthless letters promising payment by RTGS -- more empty promises.

Another 400 or so were tricked into opting for transfer of investment. Although their money was in fact not repaid, the debts of these people were erased from the account books of JVPD Properties Pvt. Ltd. through an elaborate accounting trick, and the money was transferred to a different entity belonging to or controlled by Bhagtanis. This money has been siphoned away in conspiracy with some other builders. 

Please note, this is money-laundering and organized crime. All participants, including Bhagtani employees and builders of other projects are guilty of being part of a crime ring. Will the police and court see this larger dimension of the crime? Roughly 200 among all the above-mentioned victims from various real estate projects have registered group FIRs or are at a preliminary or advanced stage of getting FIRs filed. At this point, the FIRs are focusing only on IPC sections like cheating (Section 420) and offenses under MOFA, such as collecting more than 20% of the total consideration without entering into registered agreement. 

On the sidelines are cheated creditors, vendors, contractors etc., who also got left high and dry with Bhagtanis' cheque-bouncing and false promises. There may be 15-20 persons in this category, whose total dues may be to the tune of over Rs 10 crore.

 
Cash-payers -- a crushed minority

There is a sizeable section of Bhagtani victims who are silent, namely people who were induced to pay large amounts of cash for flat-bookings. They are completely crushed, because the law is not available to protect them. Some paid in cash and also by cheque, in various proportions. A good number of people lent cash to Bhagtanis in return for 24% interest per annum. People who lost large amounts of cash in this way, may never speak out for fear of the Income-Tax authorities, and will therefore never approach the police. Their numbers are at least higher than 100, and the total amount paid are at least to the tune of Rs 50 crore or higher.

Below are some papers that offer a glimpse of one such cash transaction, sent by a rare person who is angry enough or foolhardy enough to speak out. Offering repayment, the Bhagtanis have issued huge cheques dated for March 2018.

First look at these cheques that will never be honoured:

Now read the story below:

 

There are at least a few dozen persons like this one, who will not speak out. It may be argued by moralists that people who pay large amounts by cash don't deserve our sympathy. Maybe so...

But the fact remains that Bhagtanis have crushed the hopes and dreams of at least 2000 families by taking away their life savings, their working capital, their investable surplus, their safety-net. Most are poor and middle-class people who struggle hard to make ends meet, and scrape together enough money to buy a modest house. Among those who paid by cash are small businessmen eking out a meagre living by cutting corners.

Massive and extensive damage has been done. The confidence of people in the real estate sector has been shaken. Will the system change in response to their cries for help? How much of this damage will be repaired by the judiciary? 

One may be excused for being a bit pessimistic.

ISSUED IN PUBLIC INTEREST BY
Krishnaraj Rao
9821588114
Krish.kkphoto@gmail.com