After Logix Infratech was directed to bankruptcy court in September 2022, the list of Noida-based builders waiting up at the insolvency arbitration became longer, putting thousands of homebuyers in the lurch. That was a troubling sign of Noida’s real estate market rot.

Logix Infratech Private Ltd is being investigated for allegedly manipulating its business records, diverting funds from homeowners to questionable affiliated groups, and fraudulently allocating apartments to selected organisations & person.

These disturbing facts were made public as an element of the insolvency process by a transaction audit conducted by the resolution expert for Logix Infratech.

The transaction audit classified transactions worth INR 380 crore with ten related companies as preferential, undervalued, fraudulent, and extortionate (PUFE). Surprisingly, some of these organisations have already been dissolved, while the existence of others appears to be in dispute.

The inspection finds that the corporation allocated apartments at an overvalued pricing to 383 organisations & individuals. In other circumstances, it is less than 5% of the typical rate at which flats are assigned to other homeowners.

Many of these entities were listed as Logix Infratech’s operating creditors. These entities have been assigned apartments at an undervalued rate instead of their existing debts. This leads to their conversion to financial creditors, who have precedence under the bankruptcy code’s waterfall procedure.

Aside from these companies, some people were allocated units at discounted prices. Logix Infratech and the allottees named in the narrative did not react to e-mail inquiries on this topic as of the time this report was published.

Shakti Nath, the current chairman & managing director of Logix Group, created the company in the late 1990s. The business quickly became a key commercial real estate industry participant by establishing (IT) parks and (SEZs) in Noida. It has built approximately 25 office buildings for the IT and ITES industries.

Later, the business expanded into residential real estate, developing 4 residential complexes in Noida.

According to RoC (Registrar of Companies) reports, Logix Infratech, the group’s main firm, had sales of INR 12.43 crore and a net loss of INR 123 crore for FY21.

An operating creditor, Ahluwalia Contracts (India), hauled Logix Infratech to the insolvency court for a default totalling INR 7.72 crore, which is part of the payment for civil & structural works worth INR 260 crore for the former’s residential project, Blossom Greens.

On September 29, 2022, the National Company Law Tribunal (NCLT) approved Ahluwalia Contracts India’s request, commencing the insolvency process against the Noida-based realtor.

There are about 1,400 homebuyers who have filed claims against the firm. Their claims total more than INR 900 crore.

Atul Mittal, a resolution expert, commissioned the transaction audit & Aanand P Jangid and Associates, a Delhi-based chartered accountancy company, was tasked with identifying any illegal business practices by Logix Infratech. A six-year time range was selected for the audit to discover transactions connected to fund syphoning through related parties, identify frauds on or by the firm, and build a fund movement trail for the same period. If necessary, the study term may be prolonged.

According to the deal audit report, Logix Infratech diverted INR 380 crore from homeowners to ten affiliated organisations.

New Heights Interior and Decorators received the most money, INR 84.87 crore, followed by Logix Infradevelopers Private Ltd, which received INR 63.62 crore.

Ministry of Corporate Affairs records show that three of these ten organisations have been legally dissolved. For example, on July 13, 2010, INR 4.75 crore was sent to Logix Soft-Tel Private Ltd, and the firm was disbanded the same day.

The audit also discovered a transaction in which INR 2 crore was sent to VC Solutions, which went bankrupt on the same day.

Furthermore, the auditor indicated in the report that the six businesses to whom the monies were moved were likewise suspicious since their existence was doubtful.

The auditor listed up to 25 connected entities as operational creditors of the corporation, and their outstanding debts were satisfied by allotting them residential units.

According to the transaction audit report, these firms were given flats at an overvalued rate in place of their outstanding debts, making them financial creditors of the corporation with greater rights than an operational creditors.

Organic Blaze Private Ltd, for example, had outstanding dues of INR 1.79 crore and was allocated five residential apartments in place of its rights at an allotment fee of INR 3,451.29 per sq ft, much below the average pricing for other units sold, which was INR 5,275.89 per sq ft.

Another business, Space Infra Consulting Private Ltd, owed INR1.79 crore and was assigned five residential units at a comparable cost.

CK Construction received the most residential apartments (28) of any entity for its unpaid dues of INR10.85 crore.

The report also mentions a journal voucher transaction on December 15, 2020, between Logic Buildtech Private Ltd and Noida Cyberpark Private Ltd, valued at INR2.94 crore.

The audit report could not verify the entity’s real existence and the transaction’s authenticity since the firm did not explain the marketing.

Surprisingly, Logic Buildtech was given two residential units in place of the dues on the same day of the transaction.

The investigation also identified over 590 undervalued deals with individual homebuyers. The financial transaction with the homebuyers could not be determined in several circumstances.

Anand Kumar, the brother of former Uttar Pradesh chief minister Mayawati, and his wife, Vichiter Lata, are the most prominent examples.

When Logix Infratech distributed 269 units to homeowners in FY17, Kumar and his wife received 215 flats.

In Logix Infratech’s accounts, Kumar is referred to as “an investor” in the project, and he purchased 2,00,130 sq ft for INR2,300 per sq ft, which is much lower than the average fee of INR4,350 per sq ft for other house purchasers who were given flats during the same year as Kumar and his wife.

Other homeowners have already taken ownership of the properties assigned to Kumar. According to the audit report, such overlapping shows some misrepresentation or dishonesty in the allotment procedure.

Furthermore, the cash received from Kumar was reported as a customer advance rather than an investment, raising questions regarding the nature of the transaction.

In addition, several parties with overlap allotments have supplied documentation of purchase & distribution for the units in issue.

According to the report, these homebuyers were later reallocated to other units per the terms of the agreement with the company, and orders of the Real Estate Regulatory Authority indicated that there may have been some irregularities in the allotment process, classifying the transaction as doubtful.

Aside from Kumar, a layer of money transactions contributed to allocating 12 flats to Anil Kumar Agarwal.

Two of Agarwal’s residential apartments were first assigned to Logix Soft-Tel Private Ltd to satisfy outstanding debts. On the same day, Agarwal designated the apartment.

Similarly, two flats allocated to Reena Agarwal and Arpit Agarwal were earlier allotted to Logix Soft-Tel Private Ltd, and the apartments were transferred to them on the same day.

The auditor could not identify any commercial deals between Agarwals & Logix Group in place of flat allocation.

The Comptroller and Auditor General examined Logix Group, which was named as one of three Noida-based real estate developers, along with Wave Group and 3C Group, that received the highest share of land allotments from the New Okhla Industrial Development Authority between 2005 and 2018.

According to the CAG study, despite owing more than INR 14,000 crore, the three developers received 79.8% of all land allotments.

Logix Blossom Zest, a residential project in Sector 143, Noida, launched in 2011, is at the heart of Logix Infratech’s bankruptcy.

The project has 3,400 units in 14 buildings, nine still under construction. Despite waiting for over a decade, over 1,400 purchasers have yet to take possession of their apartments.

While Logix Infratech is presently through insolvency proceedings, the destiny of these homebuyers is in jeopardy.

Conclusion.

Logix Blossom Zest, a residential project in Sector 143, Noida, includes 3,400 units in 14 towers, nine of which are still under construction. Despite waiting for over a decade, over 1,400 purchasers have yet to take possession of their apartments.