Benami deals under realty garb?
As lakhs and crores are invested in property through unscrupulous means with the use of fake accounts, Kolkata today hinges on the risk of another major Ponzi scheme, writes Amit Pal
Colourful hoardings promising exclusive homes at minimal prices dot Kolkata's landscape today. While a promising reality, these ads veil behind them an unscrupulous trade of purchasing disguised land through illegal transactions which are later colourfully decorated into lush structures – never narrating the truth behind their existence. As lakhs and crores are invested in property through unscrupulous means with the use of fake accounts, Kolkata today hinges on the risk of another major Ponzi scheme that would loot citizens, deprive them of their homes and ultimately dispose them helpless.
Soon after the promulgation of the Benami Transaction Prohibition (Amendment) Act, 2016, entities like Primarc Group are facing the unpleasant prospect and risk of having their real estate project attached. The people running the show, i.e. the Pansari Family, which enjoys the patronage of one Mukul Roy, are hardly perturbed by the consequences. Their association with Roy protects them from the scanner of law enforcement authorities and is sure to continue for now. So much so that Mukul Roy's present residence at 8, Elgin Road, Kolkata: 700020, a property owned by the Primarc Group, is also where Siddharth Pansari operates his business.
Land has, for long, been a contentious issue in West Bengal. To the extent that governments have assumed power and, been subsequently voted out of power, on their response to land acquisition rights. At the centre of this debate lies a key legislation, The Urban Land (Ceiling and Regulation) Act. Enacted in 1976, this landmark legislation prevents the concentration of urban land in the hands of a few people. The speculation and profiteering therein, with the social objective of ensuring just and equitable distribution of land, is to sub-serve the common good. The Act imposes a ceiling on vacant land and empowers the State Government to acquire excess vacant land, for public welfare.
The idea of equal distribution of land could not be fulfilled due to various factors including legislative loopholes, indecisiveness and the absence of uniformity in the enforcement of the Act. In Kolkata, the ceiling limit of vacant land that can be retained by an individual and/or company in terms of the Act is up to 500 sq. metre or 7.5 Cottahs. However, despite the limit, a number of real estate companies have devised illegal means to circumvent the prohibition laid down in the statute. Such companies are known to enter into benami transactions to avert the land ceiling laws and ensure that the real owner can have more landed property than s/he is legally permitted. Transactions are commonly undertaken to transfer the property in the names of relatives and/or acquaintances of the real owner to evade taxation in violation of the provisions of the Income Tax Act, 1961. These transactions, then, quickly become a method to conceal ill-gotten black money obtained by corrupt and illegal practices.
One such real estate player blatantly violating the legislation is the Primarc Group of Companies. The group controlled by Siddharth and Mahesh Pansari, sons of Nand Kishore Pansari, has a number of upcoming projects in and around the periphery of Kolkata. Their modus operandi is as good as a study on "exploiting loopholes in Indian legal framework for illegal and wrongful gains". Primarc is one among several companies across our city and, indeed, country who are blatantly flouting laws to usher in exorbitant gains at the cost of citizens' safety.
A close look at Primarc Group's operations would reveal that the group, in order to evade the land ceiling limit imposed by the Urban Land (Ceiling and Regulation) Act, forms shell companies with no genuine business. Interestingly, these shell companies share a common set of shareholders, directors and registered address, all of whose genesis can be traced back to the Primarc Group. These shell companies buy huge tracts of vacant agricultural land for the development of high-end residential projects under the garb of the West Bengal Land Reforms Act in a most unlawful and dishonest manner. Once these shell companies become owners of the converted piece of land, they jointly enter into a development agreement with other sister concerns of Primarc Group. Interestingly, Primarc Group has a pecuniary interest in all these companies.
Primarc – Riya Aura is an upcoming project undertaken by the Primarc Group at Mankundu. The agricultural land for this project was purchased in the name of 47 benami companies. All these companies are either indirectly owned or funded by the Primarc Group and its associates. The registered office of 18 of these companies is at 6A, Elgin Road, Kolkata: 700020. Surprisingly, Mahesh Pansari and Siddharth Pansari, whose names are recorded as directors and shareholders in some of the landowning companies, are also the authorised directors who act as signatories on the development agreement entered into by and between the landowning companies and the developer. Mahesh Pansari is also one of the designated partners in Primarc-Riya Projects LLP, which is the developer. Manju Pansari, wife of Nand Kishore Pansari, the backbone of Primarc Group, also appears as the shareholder in the landowning companies along with her sons Mahesh and Siddharth. Additionally, Primarc Projects Pvt. Ltd. which is one of the partners in the Primarc-Riya Projects LLP, also happens to be a shareholder in the landowning companies. These statistics make it abundantly clear that all the individuals involved in the process are directly or indirectly linked to the Primarc Group, sharing common roots.
As till date, few individuals who are closely associated with the Primarc Group can be seen acting as directors in the land holding companies. They include, Dinesh Sharma (Deputy Manager, Commercial – Primarc Group), Siddhartha Bhalotia (DP – Primarc Riya Projects LLP), Chandresh Bader (AGM, Accounts & Finance – Primarc Group) and Anand Agarwal (VP, Accounts & Finance – Primarc Group).
Primarc Group is also developing Southwinds, another residential project in Sonarpur. For this project too, agricultural land had been purchased in the name of more than 100 benami companies indirectly owned and/or funded by the Primarc Group and its associates. Most of these companies have a similar set of shareholders, directors and share the address of their registered office i.e. 6A, Elgin Road, Kolkata: 700020. Here also, Primarc Projects Pvt. Ltd. and Mahesh Pansari, both have a significant stake in Southwinds LLP with the two Pansari brothers acting as its designated partners. Additionally, five of the eight partners in the development company are also landowners in their own right. The web of transactions undertaken in this project bears an uncanny resemblance to the practice followed by the Primarc Group in the Primarc-Riya Aura Project.
For developing Oxford Squares, another upcoming project of the Primarc Group, the agricultural land was purchased in the name of 14 companies. These companies are again controlled and/or owned by the above-mentioned individuals. This project is another example of how the Primarc Group, through a web of sham transactions, circumvents the law for making illegal gains. An overview of the joint development agreement, the shareholders and directors will clearly indicate that all the entities involved in the transactions have been formed for the sole purpose of avoiding the ceiling limit set forth in the Urban Land (Ceiling and Regulation) Act, 1976.
From the aforesaid, it becomes clear that all individuals privy to such sham and bogus transactions are habitual offenders who follow a similar structure for all their projects. It is, therefore, evident that this entire corporate structure of transactions is controlled by the same set of individuals, who simultaneously enter into a deed of convenience and, subsequently, after developing an agreement with another entity, also owned and controlled by the same set of individuals, give fuel to a fake and motivated set-up resulting from blatant violation of laws. The ultimate losers are the ordinary citizens who embolden the companies with their money and trust but are shammed through a process that is inherently illegal.
This ruthless corporate structure dehors the Companies Act, 2013 as well as the Benami Transaction Prohibition (Amendment) Act, 2016. In a recent judgement of the State of Rajasthan & Ors. -Vs- Gotan Lime Stone Khanij Udyog, the Supreme Court of India reiterated, "Where protection of public interest is of paramount importance and the corporate entity is in an attempt to evade legal obligations, lifting of the veil is necessary to prevent a device to avoid welfare legislation."
THE PRIMARC NETWORK
In the end, save an early intervention by the Regulatory Authority, it is the innocent homebuyers who eventually suffer at the hands of the unscrupulous promoters like Primarc Group. These illegal businesses also lay the bedrock for potentially dangerous ponzi schemes, which, in the past, have already caused havoc across the state. If not curtailed in time, citizens and their land, intended to provide security, will be fallible to intervention, its status will become deeply suspect and they will face the risk of their land being vested at any point of time in the future.