Insolvency Process Initiated Against DSK Group

In a big blow to embattled DS Kulkarni Group, the Mumbai Bench of the National Company Law Tribunal (NCLT) has accepted an insolvency petition filed by Bank of Maharashtra against the developer for defaulting a loan worth Rs 119.8 crores. The Bench has also appointed an interim resolution professional and called upon financial creditors, fixed deposit holders and homebuyers to submit their claims with proof by October 9, 2019. Bank of Maharashtra classified DSK as a non-performing asset in July 2017, and issued notice initiating recovery process in the same year.

Earlier on August 28, 2019, the Enforcement Directorate (ED) attached as many as 29 properties belonging to DSK Developers, worth over Rs 900 crores. This has led to the Deepak Sakharam Kulkarni-promoted Pune-based builder losing land, flats, showrooms, farm houses and office spaces, in parts of Maharshtra and Karnataka. 

Maharashtra Government Opposes Investors' Claim On DSK's Phursungi Project

In a setback to the investors, the Maharashtra government has opposed the application of over 40 buyers demanding possession of plots in a DS Kulkarni Developers Limited’s project at Phursungi, on the grounds that the project land had been mortgaged with the Credestrial trusteeship company against the debentures raised, and the layout plan prepared by Deepak Sakharam Kulkarni and others were false and fabricated. 

According to media reports, the DS Kulkarni Developers Limited firm had raised money from the public after getting approval from the Securities and Exchange Board of India (SEBI) for developing the ‘Dream City’ project at Phursungi. For protecting the interest of the debenture holders, SEBI had imposed certain conditions, like the firm would have to mortgage the property with the trusteeship company. If the firm failed to repay money of the debenture holders with interest, then the company would have the right to sell the property and repay money to the debentures. The developer and his wife prepared forged documents and issued plot allotment letters collecting Rs 135 crores from the buyers. While the investors who have the allotment letter are seeking plots in the project, the government has filed the application saying that the investors' application for the claim is not maintainable and the court had no jurisdiction to decide the rights of the parties since the property is mortgaged. 

The court will hear the application on August 19, 2019.

In connection with a Rs 2,000-crore fraudulent deal, DSK Group Chairman Deepak Sakharam Kulkarni’s brother Makrand has also been arrested by the police. Kulkarni is held for selling a land parcel at an inflated price and misappropriation of Rs 184 crore through a deal that was signed between 2006 and 2008.

It was in February 2019 when the ED has attached the Pune-based developer’s immovable properties worth Rs 904 crores. Kulkarni, his wife Hemanti and son Shirish are accused of cheating nearly 35,000 depositors and investors of Rs 1,129 crores in the deposit schemes. The company is involved in various businesses, including real estate, automobile, sports, IT and education sector. In a fresh development, the economic offences wing (EOW) of Kolhapur police has filed a charge sheet against the developer and his wife, son for fraud worth crores. 

It was in November 2017 when the Economic Offence Wing (EOW) of the Pune Police conducted searches at the Kulkarni’s offices and residence based on the complaints filed by over 600 homebuyers and depositors. The homebuyers complaint that the developer had stopped construction of the project they had invested in. The developer has also been accused of not paying the interest on their deposits.

The ED’s investigation has revealed that the Kulkarni family had formed eight partnership firms through which they collected funds between 2006 and 2017 to invest in deposit schemes. This money was used to buy land in India and the US.

At present, Kulkarni and his wife are serving jail term in Pune for not returning depositors' money. In a recent hearing, the developer had promised to complete all the pending projects within two years with the assistance of Maharashtra Housing and Area Development Authority (Mhada). For this, the developer would pay Rs 501 crore to the authority.

Meanwhile, a list of 143 properties has been submitted in the special court which can be auctioned to recover the money, reasoning that if the projects were unfinished in four years, there could be no way it could be finished now. However, a group of investors had filed an application before the court requesting a settlement plan and that the government should look at developing these properties and not auction them which would bring in a revenue of Rs 4,000 crore that could be used for compensating homebuyers.

Timeline

October 2017: The Pune Police registers a case against the developer after the construction work stops.  

November 2017: The EOW conducts a raid on DSK Group’s offices and residence.

December 2017: Kulkarni promises the Bombay High Court (HC) that it would pay Rs 50 crore as security but fails to pay.  

January 2018: The company tells the Bombay HC that the amount is being transferred from offshore banks but turns out to be a false assurance.

February 2018: The Pune Police arrests the developer from Delhi.