Introduction:

The Allahabad High Court has made a significant move by lifting the corporate veil to hold the Promoters/Directors of M/s Hacienda Projects Private Limited and M/s Three C Universal Developers Pvt. responsible for defrauding flat-buyers in the Lotus 300 project, Sector 107, Noida. The court directed the Enforcement Directorate under the Prevention of Money Laundering Act to take action against those in default. The case unveils a complex scenario of fund diversion, insolvency, and the exploitation of home-buyers.

Arguments of Both Sides:

The home-buyers argued that the directors orchestrated a series of frauds by diverting funds and resigning from the companies, pushing them into insolvency to evade liabilities. NOIDA Authority faced criticism for not canceling the lease in accordance with the terms and conditions, rendering it unable to recover the defaulted amount due to insolvency. The directors argued that the project stalled due to a stay order by the National Green Tribunal, and the Insolvency Resolution Professional should handle the dues.

Court’s Judgment:

The Allahabad High Court expressed surprise at the directors’ freedom despite fraud allegations and urged swift action. It criticized the Noida Authority for acting more as a private trader than a regulator, allowing the developers to defraud home-buyers continuously. The court lifted the corporate veil, finding the directors in effective control of the company and holding them liable. It directed the Enforcement Directorate to investigate money laundering aspects, emphasizing the need for justice and piercing the corporate facade to exposefraud.