Hiranandani Group into Legal Troubles

Published on Dec 29th, 2013
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Hirco Plc, a UK based  investment firm, has filed a law suit against its former chairman, developer Niranjan Hiranandani and his daughter Priya, in an Isle of Man court  demanding 220 million pounds (about Rs 2,200 crore)  in damages. Hirco Plc, which is listed on London's Alternate Investment Market, has been named in a loan default cases involving two construction projects in Chennai and Panvel.

Hirco Plc was floated by Hiranandanis and  Cyrus Vandrewala (Priya's husband) in 2006 and it raised about 350 million pounds (about Rs 3,500 crore)  from individuals and financial institutions. The company invested in preference shares of  Mauritius-based companies which invested  the amount in residential projects in Chennai and Panvel. Hirco Plc says the Mauritius based companies are linked to the Hiranandanis and it had no control in the affairs of these companies.

Punjab National Bank has served a possession notice on the Panvel construction project and Tata Capital has filed a winding up petition against Hiranandani Palace Gardens which runs projects in Chennai and Panvel. Niranjan Hiranandani and his daughter Priya have fallen apart over the development of the projects.

"Hirco Plc does not own land or properties in Chennai or Panvel. It has also not raised the loans. All that we want to know is where has the 350 million pounds gone. Where is the money  (about Rs 978 crore)  that was raised from banks for the projects and where is the money raised from property purchasers,'' asked John Chapman, Hirco Plc chairman, in a media briefing here on Monday. Chapman joined the Hirco board in 2011. Chapman and his colleague in the board Peter Burke ( who joined the board in 2009) are in Mumbai to meet lawyers, real estate developers and bankers to get further clarity in the case.

Hirco requested suspension in trading of its  shares in August after the loan default cases came to light."The suit should come up for trial next year. This is our best remedy. Arbitration proceedings are also underway in Singapore,'' Burge said without divulging details.

According to Burge investment in  preference shares in Mauritius companies promised  a 12 percent interest rate, a share in profits in residential projects and return of share capital in phased manner. However there has been no cash accrual, he said. Burge said there has been little progress on the projects in Chennai and Panvel.

Hiranandani, however, said he was not connected with Hirco projects. " Niranjan Hiranandani has not been associated with Hirco plc for almost three years. The current directors have been managing the affairs at Hirco plc and its subsidiaries, since his resignation as non-executive Chairman of Hirco plc in late 2010. All monies that were invested into the project companies by Hirco plc have been put in towards projects in Panvel and Chennai until his time. The Hirco entities invested in the projects in 2007. Firdose Vandrevala was CEO and Managing Director of the developer, Hirco Developments, who was charged with delivering the projects. The Hiranandani Group is not connected with the Hirco projects in any way and these projects are neither controlled nor developed by the Hiranandani Group,'' the group's spokesperson Bipin Gajra said in a statement.

"Niranjan Hiranandani (in the interest of the banks and the thousands of customers) has even offered to buy out these projects from the Hirco subsidiaries but this was not taken up by the  Hirco entities. Hirco Plc had been raising allegations against Niranjan  Hiranandani from about 12 months ago and he has  initiated arbitration proceedings against Hirco's subsidiary in Singapore to resolve their issues. Hirco plc have sued him  in the Isle of Man for fraud, however, they are resorting to slander, libel, and defamation since they have realized that their case is trumped up and false. There are currently no allegations of financial irregularities that we are aware of.."  the spokesperson said.

Update 29/12

In a blow to one of the biggest names in the real estate industry, the Bombay high court has appointed a court receiver to manage the property of Hirco Plc's subsidiary Hiranandani Palace Gardens (HPG) in Chennai. The court passed the order on December 24 while hearing an arbitration plea filed by Tata Capital Financial Services Ltd (TCFSL) after HPG defaulted on a loan of 76 crore.

Earlier in a statement, Hirco, which comprises majority foreign investors, reiterated that it had no involvement in borrowing this money from various banks, including TCFSL, and had no control or involvement in any of the affairs of HPG. "Hirco Plc had no involvement in the development of the Panvel and Chennai projects or the sale or collection of money from people, who purchased units in these developments. These activities were carried out by Hiranandani-controlled entities," said the statement, which was sent to the London Stock Exchange.

The statement further said it had initiated legal proceedings against Hiranandani and his daughter Priya Hiranandani-Vandrevala for fraud. "Hirco Plc has no physical presence in India. It was created in 2006 to invest in FDI-compliant Indian real estate development to be sourced by Niranjan, his wife Kamal and entities controlled by them. Money was used to purchase land, which is now controlled by Hiranandani-owned entities," the statement said.

source:TOI & Business Standard