The Aryavarth Express
Agency(Allahabad): In a pivotal judgment, the Allahabad High Court has ordered the Enforcement Directorate (ED) to investigate the promoters, directors, and companies associated with M/s Cloud 9 Projects Private Limited under the Prevention of Money Laundering Act, 2002. This decision, made by a bench comprising Justice Mahesh Chandra Tripathi and Justice Prashant Kumar, comes in response to allegations of illegalities and fraudulent activities concealed behind the company’s corporate identity.
The Court’s directive was influenced by findings that indicated M/s Cloud 9 Projects Private Limited, a special-purpose entity created for a Group Housing Project in Sector 100, NOIDA, along with its significant shareholders and consortium members, including Civic Properties Limited, engaged in dubious financial transactions. These activities reportedly included siphoning funds to other entities and failing to fulfill financial obligations to the New Okhla Industrial Development Authority (NOIDA) and home-buyers.
Highlighting the sanctity of the corporate veil, the Court underscored that while the principle of a separate legal entity fosters trade and commerce, it should not serve as a shield for committing illegal acts or defrauding stakeholders. The judgment emphasized the Court’s obligation to look beyond the corporate facade to address the underlying realities, especially when such actions jeopardize public interest and the rights of innocent parties.
The case revealed that despite the completion of several towers within the project and the handing over of flats to buyers, NOIDA’s dues remained unpaid, leading to the withholding of occupancy certificates for remaining flats. The Court criticized NOIDA’s passive response to the developer’s breaches of the lease agreement, pointing out a systemic failure to safeguard the interests of home-buyers.
The directors’ resignations and attempts to dissociate from the company’s liabilities were scrutinized by the Court, which concluded that these actions were part of a broader scheme to evade financial responsibilities and legal accountability. By piercing the corporate veil, the Court sought to ensure that justice is served, not only by holding the individuals behind the company accountable but also by safeguarding the rights and investments of the affected home-buyers.
The Court’s decision mandates the ED to conduct a thorough investigation into the financial dealings of Cloud 9 Projects and its associated individuals and entities. It also instructed NOIDA to facilitate the completion process for the housing project, including the issuance of occupancy certificates and the execution of sale deeds in favor of the flat owners. This ruling marks a significant step in addressing corporate misconduct and protecting consumer rights within the real estate sector, reinforcing the principle that legal entities cannot be misused to circumvent the law and exploit stakeholders.