New Delhi, Dec 29 (IANS): Real estate developer Emaar Properties has filed a complaint with the National Company Law Tribunal (NCLT) against MGF, its Chairman Shravan Gupta, among others, over an alleged fraud.

Emaar Properties alleged fraud by Gupta and his associates while he was the MD and CEO of their erstwhile joint venture, Emaar MGF Land.

In its petition, it has sought security in the form of bank guarantees of Rs 2,400 crore to cover losses in the joint venture in India.

According to Emaar, around Rs 2,400 crore, or over one quarter of its FDI, was siphoned off by Gupta and his family for their personal benefit.

The UAE-based developer, which entered India in 2005, invested about Rs 8,500 crore in the Indian real estate market through Emaar MGF.

Besides, Emaar said it had commissioned a private investigation into the matter by the Globe Detective Agency to probe connections between MGF and shell entities.

As per Emaar, the investigation revealed that Emaar MGF, under the leadership of Gupta, had given unusual discount of over Rs 540 crore for the sale of over 1,800 units spread across five projects - Apartments at Palm Springs, Capital Towers, Colonnade, Commerce Park and Digital Greens.

The probe allegedly also revealed that the company had given several land parcels which were purchased from third parties at prices higher than the market value.

Citing several instances of alleged fraud and illegal acts through joint development agreements, transfer of land parcels to MGF shell entities without approval from Emaar or transfer of inferior land parcels from MGF entities to Emaar's subsidiaries, Emaar has sought a restraint order on Gupta and associates from any transaction on their movable or immovable funds and assets.

Emaar issued a legal notice on October 29, 2019 to Gupta, his wife and MGF about the fraudulent conduct of MGF on breach of their fiduciary responsibility, after it received the investigation report earlier in the year.

Gupta was the Managing Director and CEO of the joint venture Emaar MGF Land until 2016.

The petition said that the joint venture company suffered constant losses and faced multiple legal disputes due to MGF's dominant position and breach of contractual and fiduciary duty and the true reasons for the losses and legal disputes were only discovered by Emaar recently.

Under the joint venture agreement, the foreign partners acted as financial investors and infused funds based on representations of MGF and Gupta, who under the arrangement was responsible for management and operations including the day-to-day operations, as per Emaar.

Gupta finally resigned as the Managing Director of the joint venture company in 2016 and the demerger of MGF was approved in July 2018.

The petition said, though representing that the demerger would assist in improving business efficiency, MGF only wanted to escape its liability for gross illegality and causing irreparable damage to the business and reputation of Emaar MGF.

Emaar claim MGF and Gupta used shell companies to siphon funds from Emaar MGF or its subsidiaries.

The modus operandi for siphoning off funds included joint development agreements (JDA) with MGF group shell companies - owned by employees or relatives of the Gupta family -- without disclosing their true relationship with MGF or its promoter families, and under these agreements, deriving revenue or benefits from Emaar MGF despite having paper or no obligations.

Rakshit Jain, Rajeev Gupta, Rahul Upadhyay, Vijay Kumar Sharma, Naveen Goswami, Arun Mitter, Praveen Kumar Sawarni, Siddharth Gupta and Parul Gupta are some of the persons named in the petition.

The petition said that the transactions revealed after the internal investigation were intentionally suppressed by MGF to mislead and defraud Emaar MGF and Emaar Properties.

These transactions include siphoning of Rs 143 crore out of the Imperial Garden Project to an entity called Saum, which is an entity owned by Gupta and his family, and Rs 37.34 crore out the Palm Hills project to an entity called Nanny, owned by Gupta and his family.

Noting various provisions, the petition sought repayment from MGF due to the extent of losses emanating from fraudulent and illegal acts and sought from the NCLT a direction for in-depth investigation into all dubious transaction including with subsidiaries and associates, as Emaar did not have authority to investigate various entities related, connected or associated with Gupta.

While seeking the bank guarantee from respondent group cover losses for a minimum amount of Rs 2,400 crore for securing the financial losses as part of interim prayer, the petitioner sought direction from the Tribunal to the MGF, Gupta and associates for compensation of the losses along with interest of 18 per cent from the date of respective loss to be determined by the bench of the NCLT.