Forensic audit reveals massive misappropriation of funds by Unitech

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Forensic audit reveals massive misappropriation of funds by Unitech

Over Rs 5,000 crore, 40 per cent home buyers’ money, was not used for construction purpose.

Forensic audit reveals massive misappropriation of funds by Unitech

New Delhi: A Supreme Court-appointed forensic audit team on Unitech case revealed that massive fund diversion by the company. In its report, the team submitted that money invested by homebuyers and banks were used for purposes other than construction of houses.

As per the report, after examining the account of Unitech group, the auditors found that over Rs 5,000 crore, which is nearly 40 per cent of the money deposited by the homebuyers, was not used for construction purpose.

The forensic auditors further revealed that around Rs 14,270 crore was deposited by the homebuyers and Unitech took loan of Rs 1,805.86 crore from six financial institutions for the construction of 74 housing projects.

The team told the top court that nearly 40 per cent of the money raised from financial institutions, amounting to Rs 763 crore, had not been utilised for the construction. The auditors also told the court that 23 projects have not been analysed as the company failed to provide relevant data.

"Forensic auditors have done a commendable job despite the fact that they were not placed in possession of full information and data. The data which have been analysed by auditors would indicate that the actual extent of mis-appropriation, siphoning and diversion of funds may be much higher than of what has been estimated in the report, which has been presented on the basis of data," the court stated.

Submitting details in the court, the auditors said high value investments were made in off-shore tax-havens, which was later written off. "Between 2007-2010, three subsidiaries of the Unitech made investments of Rs 1,745.81 crore in ten companies in Cyprus. Between 2016- 2018, an amount of Rs 1,406.33 crore or 80% of the total investment value was written off while the remaining amount of Rs 339 crore is appearing as equity investments in the books of accounts," the report said.

"Similarly, in 2007- 2008, Unitech Global Limited, a company registered in Jersey and a subsidiary of Nuwell Limited, another subsidiary, advanced a loan of Rs 294.47 crore to Kortel Limited, another step-down subsidiary of Unitech. Kortel made investments of Rs 292.99 crore in three foreign entities based in Cyprus during 2015-2016. Rs 294.47 crore (100% of total investment value) was written off in the books of Kortel," it said.

The forensic auditors have pointed out that between 2009-2011, the Unitech sold five wholly owned subsidiaries to three undisclosed related parties at an amount of Rs 493.72 crore for which a balance of Rs 294.30 crore is receivable. "During March 2011 to October 2013, Unitech advanced Rs 237.63 crore to a related party, Millennium Construction Private Limited, for acquisition of shares of a company by the name of Grandeur Buildwell Priv, the ate Limited. No shares of the company were allotted to Unitech and the entire advances are still receivable," it said.

After hearing the auditors, the Supreme Court ruled, "We would now expect the Union of India to act productively in the matter and inform this court on the next date of hearing on the steps which is initiates to replace the existing management and ensure that the management of Unitech Ltd is handed over to an independent group of directors who can fulfill the mandate and responsibility of attending to the concerns of homebuyers by completing the remaining projects."