"Scam Within Scam": Bombay High Court Quashes Primezone Property Auction In Rs 5,600-Crore NSEL Scam

The Bombay High Court on Friday set aside the auction sale of Primezone Developers' Haryana properties linked to the Rs 5,600-crore NSEL fraud, calling the valuation and sale exercise a “scam within the scam” and finding that the process was manipulated to favour a pre-determined buyer.

Calling the exercise deeply compromised, the division bench of Justices A.S. Gadkari and Kamal Khata held,

“According to us, this is a scam within the scam. The Competent Authority bear primary responsibility, and Quiker Realty is equally complicit. By assisting in undervaluation and facilitating sales to predetermined entities, they deprived investors of the full realization of their funds. It appears that the Competent Authority deliberately contrived circumstances to favour select parties."

The Court allowed appeals by Primezone Developers, Union Bank of India and several plot purchasers, quashing the auction sale and sale certificate issued in favour of Rudraveerya Developers Ltd.

According to the Court, the auction process created only a façade of fairness. “The aforesaid facts lead us to infer that the Competent Authority, along with Quiker Realty, contrived a situation that enabled Rudraveerya to become the successful bidder,” the bench said.

It added, “In our view, the advertisements and auction were pre-planned to create an illusion of due process while being conducted in a manner designed to favour Rudraveerya Developers Ltd.”

The case arose from allegations that accused Ranjeev Agarwal diverted about Rs 31 crore of NSEL-linked investor funds from PD Agro Processors into Primezone Developers. The Haryana properties were attached in 2014 under the Maharashtra Protection of Interest of Depositors Act.

The High Court noted that the land had been given a distress valuation of about Rs 56 crore in 2018 using the discounted cash flow method. In 2020, after Primezone's development licence had expired, the same property was revalued at about Rs 10.41 crore on an “as is where is” basis before being auctioned.

Questioning the haste in conducting the sale, the bench said the timing itself reflected bad faith. “In our opinion, the entire exercise carried out by the Competent Authority reflects mala fide intent.”

Explaining why, the Court added, "There was absolutely no reason to finalize the sales immediately after the Covid period, when the Nation was at its weakest economic condition due to the pandemic. It is common knowledge that the correct market value of land could not have been realized at that time.”

Holding the Competent Authority chiefly responsible, the Court said it ignored a critical fact while proceeding with valuation and sale.

“We find that, the Competent Authority is the main culprit in this sale process,” the bench held.

It added that the authority “either knew or in any event ought to have known, that the license granted to Primezone had expired much earlier on 9th December, 2016 and was not renewed.”

The Court directed a fresh valuation and auction, along with refund of the auction amount with interest to Rudraveerya Developers. It also ordered the appointment of a new Competent Authority and action against Quiker Realty over its role in the valuation and sale process.