Edelweiss ARC refutes Ecstasy Realty’s fund diversion allegation

Edelweiss ARC has issued a detailed press statement refuting a media report that alleged a ₹750 crore fraud case filed by the Economic Offences Wing (EOW) against the company and its group entities. The company clarified that the report is based on incomplete facts and misrepresents the nature of the dispute with Ecstasy Realty Pvt Ltd (Ecstasy), a defaulting borrower.

The controversy stems from an FIR filed by Ecstasy Realty, which owes approximately ₹1,683 crores to Edelweiss ARC as of December 31, 2024. Edelweiss emphasized that the dispute is purely civil in nature and has been under litigation since 2022.

Edelweiss’s response to allegations

• The company dismissed the ₹61.68 crore “siphoning” claim as baseless, stating that all financial transactions were conducted transparently and in compliance with regulatory norms.
• Edelweiss clarified that it is the lender/creditor, not the borrower, and emphasized that Ecstasy owes money to Edelweiss, not the other way around.
• The media report’s headline alleging a ₹750 crore fraud was also refuted, as there is no mention of such a figure in the FIR or complaint.

In its statement, Edelweiss ARC reaffirmed its commitment to protecting shareholder value and pursuing all legal avenues to recover outstanding dues. The company criticized the tactics of defaulting borrowers who attempt to misuse public platforms and the legal system to evade financial responsibilities.

Key Facts and Chronology of Events

Pre-2018: Ecstasy’s Financial Position

• Ecstasy had an existing debt of ₹400 crores with a commercial bank.
• The company approached Edelweiss for refinancing its Parthenon Project in Andheri, Mumbai, claiming that Phase I was complete and the Occupation Certificate (OC) would be obtained by May 2018.

March 2018: First Debenture Trust Deed (DTD 1) Execution

• Edelweiss subscribed to ₹600 crores in Non-Convertible Debentures (NCDs) issued by Ecstasy.
• Funds were disbursed for general corporate purposes and repayment of existing debt.
• Ecstasy failed to obtain the OC by May 2018, leading to delays in sales and cash flow issues.

September 2018: Liquidity Challenges

• Due to sluggish sales, Edelweiss provided liquidity support by purchasing 16 apartments in Phase I for approximately ₹127 crores.
• These apartments were later sold for ₹134 crores, with all transactions executed via legally registered sale deeds.

March 2018: Interest Rate Increase

• The interest rate on Ecstasy’s NCDs was increased from 14% to 15% due to the company’s lower credit rating.
• This change was documented in an amendment to the Debenture Trust Deed, signed by Ecstasy.

February 2019: Further Interest Rate Hike

• The interest rate was further revised to 16.25%, based on market conditions.
• Ecstasy continued making payments at the revised rate until March 2022.

COVID-19 Moratorium and Partial Refinance

• As per RBI guidelines, a moratorium was granted in 2020, allowing interest capitalization.
• In March 2022, partial refinancing was permitted to improve liquidity, but Ecstasy’s account was classified as a Non-Performing Asset (NPA) in June 2022.

September 2018 – March 2022: Defaults and Legal Proceedings

• Ecstasy struggled to pay interest due to slow sales and OC delays.
• By December 31, 2024, the total default amounted to ₹1,683 crores, including ₹480 crores in principal overdues.
• Multiple legal proceedings were initiated against Ecstasy, including:
  • Insolvency proceedings at NCLAT.
  • Recovery suits before DRT/DRAT.
  • Cheque bounce cases in Sessions Court/MM Court.
  • A preliminary enquiry by EOW, Mumbai.

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