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OpIndia investigation: State Congress leader’s brother allegedly involved in corporate fraud

Politicians and land deals have a very close-knit connection. Usually, any scam or allegation somehow leads to a property. When top leaders of Indian National Congress and Mr Robert Vadra a “Private” citizen himself are involved in land scams (read deals) then it won’t take too much time for their party members (read followers) to follow suit. One such case has been in the news for a long time but has missed the attention of national media probably because the news is from a relatively small state.

The current case allegedly involves Mr Sachin Upadhyay, brother of a prominent State Congress leader, Kishor Upadhyay and one Mr Mukesh Joshi. Thick in allegations flowing from multiple sides, the case takes strange twists and turns. At one point Mr Sachin Upadhyay is also alleged to have locked Mussoorie Dehradun Development Authority inside a room and they had to be rescued by the police. If you think this is strange, then read the chronological allegations being made by Mr Mukesh Joshi his estranged business partner. Here is a synopsis.

FACTS AND ALLEGATIONS RAISED BY MR. MUKESH JOSHI

The matter is related to activities in 3 Companies

  1. S M Hospitality Pvt. Ltd.
  2. S and N Lifestyle Infraventures Pvt. Ltd.
  3. S and N Lifestyle Hospitality Pvt. Ltd

SM hospitality was incorporated in 31/10/2006 by Mukesh Joshi and Sachin Upadhaya as equal shareholders, each holding 5000 equity shares of Rs 10 each.

The objective of this venture was to construct a hotel. Mukesh Joshi and Sachin Upadhyay both have to bring in equal share of investment for the construction of the hotel.

As per the understanding and the statement given by Mr Joshi in the matter filed before the Company Law Board, he gave a Loan of R.s 1.7 Crores to the company (SM Hospitality) for the purchase of land. Sachin Upadhyay, however, did not contribute his share of investment and kept delaying it on one pretext or another.

Due to the stress caused by the non-fulfilment of promise by Sachin Upadhyay, apart from other harassment, Mukesh Joshi suffered a massive heart attack in October 2010 and was bedridden for more than one year. Allegedly, according to Mr Joshi, taking advantage of Mukesh Joshi’s medical condition Sachin Upadhyay, in blatant disregard of the Law of land and his fiduciary position as the director of the company, fraudulently with the intent to usurp the company and its properties filed various forms with the Registrar of Companies (ROC) to remove Mukesh Joshi from the post of director only to appoint his wife Nazia Yusuf Izuddin. He then proceeded to allot further 2,27,800 number of equity shares to himself in 18/02/2011 which is the same day when the appointment of Ms Nazia was approved.

In essence, it is alleged that Sachin Upadhyay converted the debt in the books of the company which was introduced by Mukesh Joshi into equity shares. He then proceeded to allot the 2,27,800 equity shares to himself thereby diluting Joshi’s stake in the company.

In fact, Form 32 for the appointment of Nazia and removal of Mukesh Joshi along with Form 2 were filed after a gap of 3.5 years (41 months) and on the same day.

It is worthy to note here, that as per the documents filed by Sachin Upadhyay, Mr Mukesh Joshi had allegedly resigned from Directorship in 2007.

However, in the year 2009, the documents filed by Sachin Upadhyay had the signature of Mr Joshi as the Director. The reader must recall that Mr Upadhyay has already conceded that the financial documents filed by him were fraudulent. It is alleged, that Upadhyay fabricated Joshi’s signature on the financial documents that were then retrospectively filed.

In the year 2012, Joshi took the matter to Company Law Board (CLB). In 2012 itself, Joshi also filed an FIR against Upadhyay in the Economic Offences Wing.

Realizing that their actions are bad in law both husband and wife agreed to enter into a compromise before the Company Law Board and entered into settlement dated 06.08.2013 before the CLB, wherein Sachin admitted that the Complainant (Mukesh Joshi) is holding 50% share in SM Hospitality Pvt. Ltd. In essence, Sachin Upadhyay agreed that his act of him allotting 2,27,800 shares to him and appointing his wife as the Director was incorrect and bad in law.

The settlement deed dated 06.08.2013 was submitted by Sachin and the complainant before CLB and CLB vide its orders dated 16.09.2013 declared Complainant as 50% shareholder in SM Hospitality Pvt. Ltd. Sachin under a separate agreement hypothecated his 50% shareholding to the Complainant. Hence complainant owns total 100% shareholding of SM Hospitality Pvt. Ltd. Sachin Upadhyay and Nazia have no right left whatsoever in the same since 2013.

The agreement between Sachin Upadhyay and Mukesh Joshi came into effect in 2013. Ideally, within a few days, Sachin Upadhyay should have taken steps to restore the directorship of Mukesh Joshi by removing his wife Nazia from the board. Further in line with the settlement deed, he should have paid Mukesh Joshi Rs. 2.65 crores as agreed and restore the ownership of the company to a 50-50 status.

 

However, according to Mukesh Joshi, Sachin Upadhyay did not take any concrete steps to honour the settlement deal and kept delaying the process under false pretexts.

While Mukesh Joshi waited and pursued Sachin Upadhyay to make good the settlement agreement, Sachin Upadhyay proceeded to write another chapter of this alleged scam.

Ideally, Sachin Upadhyay and his wife Nazia should have had no right to sell or mortgage any asset of the company. But, while Upadhyay kept delaying the agreement with Joshi, he hypothecated the property of the company SM Hospitality Pvt. Ltd. with a public financial institution like Punjab National Bank. By hypothecating the said properties, Upadhyay availed loan and credit facility to the tune of Rs. 39 crores from Punjab National Bank and 5.2 crores from other Financial Institutions. He had done exactly the same, with another company of theirs called SM Hospitality Pvt. Ltd.

Prima facie, this entire transaction seems dubious and of an illegal nature and would point towards connivance between Upadhyay and officials of the bank.

A keen look at these allegations shows that there are three aspects to this alleged fraud.

  1. Fraud on an individual i.e. Mukesh Joshi
  2. Fraud on a public institution like Punjab National Bank
  3. Fraud on the general public by accepting a large amount of funds from them for running club membership

Mr Joshi claims that he has filed various complaints at different forums against the said individuals. He has even approached the Central Vigilance Commission to take due notice of the apparent illegalities being done under the various companies.

Mr Joshi also claims that Nazia and Sachin have duped scores of people by offering life membership of a club which has no legitimate existence.

“Politicians and their kin are above law whole system collude to protect their interests and shield their crime. My struggle of last 8 years taught me this lesson that No matter what evidence and facts I have against Sachin Upadhyay this battle is futile exercise he will go scot-free and will have the last laugh to add on my agony”, said Mr Joshi when OpIndia spoke to him.

In a media published by The Tribune, it was reported:

“Three officials of the Mussoorie Dehradun Development Authority (MDDA) were allegedly held captive by the owner of a property, Sachin Upadhyaya, a younger brother of Tehri Congress MLA Kishore Upadhyaya when they went to photograph the premises on Rajpur Road here today. The officials could only be freed with the timely intervention of the police”. 

The Media report goes on to say:

“Vice-Chairman, MDDA, RK Sudhanshu said: “The officials had been sent to take pictures of the residential premises, to be shown at the hearing, to describe the kind of commercial activity going on in the building. Moreover, the MDDA has the authority to enter any property under its jurisdiction without permission.” Sudhanshu added the property was in the name of Rajender Nautiyal, a businessman, but a social club was illegally being run there by Sachin Upadhyay. The owner of the property had encroached upon a big chunk of government land in the vicinity and was building a four-storied building there”.

At a time when the banks are struggling with NPA’s and matters are filed before the National Company Law Tribunal across the country, a serious alleged breach and misuse of public funds is done by a prominent person related to tall Congress Leader of Uttarakhand. It remains to be seen when the government starts acting on the complaint filed before the Central Vigilance Commission.

Editor’s note: We sent a detailed questionnaire to Mr Sachin Upadhyay on 22nd September 2018 after a telephonic conversation earlier soliciting answers. On 26th September, we sent Mr Upadhyay a reminder to respond to our questions. After that, Mr Upadhyay reached out to us via telephone and sought more time to furnish answers. Failing which, finally on 6th October 2018, Mr Upadhyay was informed that OpIndia.com will be publishing the story. This story will be updated with Mr Upadhyay’s response if and when he chooses to furnish the answers. 

(This investigation was conducted along with Nupur J Sharma)

Update: Mr Sachin Upadhyay was arrested in this case on 19th January 2019.

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Ashutosh Muglikar
Articles on Corporate Laws, Policy, Economics and Politics. Maverick. Lover of Ideas. Slayer of Hoaxes.

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