The Directorate of Enforcement (ED) has provisionally attached 88.47 acres of land parcels belonging to Jai Corp Ltd in Alibaug, Maharashtra. The properties, currently valued at ₹336 crore, were seized under the provisions of the Prevention of Money Laundering Act (PMLA), 2002.
Background of the Investigation
The ED's Mumbai branch initiated an investigation into an Urban Infrastructure Venture Capital Fund (UIVCF) that Jai Corp had launched in 2006-07. This fund successfully collected ₹2,434 crore from various investors, including public sector banks and other financial institutions. The collected capital was then invested into multiple special purpose vehicles (SPVs) for real estate projects across India.
According to the ED, the UIVCF's term was unlawfully extended beyond its permissible duration without the necessary approval from SEBI (Securities and Exchange Board of India). Consequently, SEBI ordered the fund to be wound up, mandating that investors be provided an exit based on independent valuations of the fund's SPV investments.
Allegations of Fraudulent Valuation
The core of the ED's allegations centers on the fraudulent valuation of the fund's stake in these SPVs. The agency claims that the fund's interest was deliberately undervalued at ₹269.20 crore, a figure significantly below its actual fair market value. This alleged connivance with the UIVCF management resulted in investors receiving substantially lower exit values for their investments.
Furthermore, the ED investigation revealed that residual units of the fund were subsequently acquired at a significantly reduced price by five entities reportedly linked to Jai Corp's promoters. One such SPV, Neelkanth Township and Constructions Private Limited, had received ₹51 crore from UIVCF, which was used to acquire a land parcel in Alibaug.
The ED found that the fair market value of the fund's stake in Neelkanth Township was suppressed, and this stake was acquired at an undervalued price by the five promoter-linked entities. These transactions are believed to have generated proceeds of crime amounting to ₹230 crore. The provisional attachment order, initially issued for properties worth ₹230 crore as of October 31, 2022, now reflects a present market value of ₹336 crore for the attached immovable assets.