This follows an investigation into alleged violations of foreign exchange rules involving foreign direct investment of Rs 85 crore and Rs 140 crore by JP Morgan India and Amrapali Group firms.
The Enforcement Directorate (ED) has attached JP Morgan India’s accounts worth Rs 187 crore, besides documents related to its assets, for its alleged involvement in siphoning off homebuyers’ money in collusion with Amrapali Group.
The Supreme Court had on Friday allowed the ED to attach the investment banking firm’s assets to recover the amount identified as the proceeds of crime under the Prevention of Money Laundering Act (PMLA).
This follows an investigation into alleged violations of foreign exchange rules involving foreign direct investment of Rs 85 crore and Rs 140 crore by JP Morgan India and Amrapali Group firms (Amrapali Zodiac Developers, Amrapali Silicon City), respectively, between 2010 and 2012.
Even though the case was first examined under forex rules, the probe agency later also found the breach of anti-money laundering rules.
In a statement, JP Morgan India said it had received a provisional attachment order dated May 26 from the ED, imposing “a debit freeze to the extent of Rs 187.35 crore on one of its accounts”.
The company said it had neither invested in, nor received any proceeds from Amrapali Group companies.
“Offshore India property funds made foreign direct investments in two Amrapali projects in 2010 and 2012 in compliance with applicable laws.
"The management rights to these funds were transferred to Apollo Global Management in September 2018.
"We intend to vigorously defend ourselves against these claims in accordance with procedure established by law and have also filed an application in the Supreme Court to this extent,” the statement said.
A Supreme Court bench of Justices Arun Mishra and U U Lalit, while hearing the matter on Wednesday, asked the ED to file a short reply on the grievance raised by JP Morgan India.
According to an ED official, the attachment was provisional.
"This is for a period not exceeding 180 days, and the attachment will come into effect after the court confirms the final order,” said the official.
He said the attachment order had been issued under Section 5 of the PMLA, which deals with those in possession of the proceeds of crime.
The ED investigation had found that Amrapali Group and its directors created a web of shell companies and dummy directors in collusion with the foreign investor (JP Morgan) and diverted Rs 140 crore of homebuyers’ money.
The funds were routed to shell companies using sham transactions by repurchasing the shares at a steep price.
In January, the apex court had allowed the ED to take into custody the defunct group's CMD, Anil Kumar Sharma, and two other directors, Shiv Priya and Ajay Kumar, for interrogation on alleged money-laundering charges.
On December 2, 2019, the ED had informed the top court that it had prima facie found evidence of violations of forex rules by the multinational firm and recorded the statements of the country head of the company with regard to dealings with Amrapali Group.
Besides, the ED had examined at least 19 persons and entities.
The total foreign exchange transaction in these entities was pegged at Rs 1,100 crore, according to an ED's initial estimation.
Explaining the transactions, the ED report said equity shares of Amrapali Zodiac Developers were allotted to promoters of the company at a premium of Rs 180 per share in September 2010, and to the foreign investor - JP Morgan India Property Mauritius Company II -- at a premium of Rs 1,070 per share within 10 days.
This was done without any change in the business model of the company or any significant or sudden gains during the period, it noted.
Later, the promoters repurchased the shares of the foreign bank at an exorbitantly high premium of Rs 2,280, Rs 2,560 and Rs 3,000 per share.
The face value of the share was Rs 10 in 2009, when Amrapali Zodiac was incorporated with an authorised share capital of 10,000 shares worth Rs 100,000.
The allotments were made to promoters - Ultra Homes (7,500 shares) and Amrapali Homes (2,500 shares).
In less than a year, the authorised share capital increased to one million equity shares and allotted to promoters at a premium of Rs 180 per share.
Shares of Amrapali Zodiac from JP Morgan were ultimately purchased for Rs 140 crore by Neelkanth Buildcraft and Rudraksha Intracity - shell firms owned by a peon and an office boy connected with an executive of Amrapali.
During the FEMA probe, developers had attributed the jump in value of premium to the terms and conditions of the share subscription agreement between JP Morgan and Amrapali Group: foreign investors would be entitled to dividends at the rate of 25 per cent of the distributable profit.
The ED argued that the newly incorporated firm had no track record of earning substantial distributable profit in the first year of operation (2010) and that there was no earning of such profit even at the time when investment in shares by the foreign investors was made.
“These have further proved that even the investor (JP Morgan) has not acted as prudent businessman and has purchased shares at steep premium for the reason other than business consideration and for oblique purpose,” said an ED official.