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132 years sentence for real estate developer

However, a fine of Nu 5.973 million in lieu of the imprisonment term was allowed

Fraud: The Thimphu district court’s bench V yesterday convicted and sentenced a 40-year old real estate developer to 132 years and nine months in prison for committing various offenses, including tax evasion, fraudulent insolvency, forgery and breach of contract.

The proprietor of Sambhav Real Estate, Dechen Tshering, was found guilty in all three cases filed against him in connection with the transaction of flats with 12 buyers, and defaulting a loan with Bhutan National Bank (BNB).

The court, however, ordered Dechen Tshering to pay a fine of Nu 5.973M (million) in lieu of the imprisonment term, since no criminal charges were filed by the authorities, such as the Office of the Attorney General and Anti Corruption Commission, against the defendant in accordance to the civil and criminal procedure code.

The court also asked the defendant to pay Nu 2.549M for evading tax.  Since most of the mortgaged properties of the eight loan accounts with BNB had already been sold, the defendant was ordered to close the loan accounts and pay the BNB Nu 171.633M within a month. “If he fails to pay within the given time, BNB can seize the mortgaged properties,” the verdict stated.

The defendant was also asked to pay compensatory and exemplary damages to the innocent buyers, amounting to Nu 1.305M.

The BNB filed a case against Dechen Tshering for foreclosure of the nine loan accounts, and seizure of the mortgaged properties on grounds of non-payment of the monthly loan instalment totalling Nu 175.666M on September 13, 2011.  Six of the loan accounts were housing loan accounts.

The defendant, however, argued that most of the buildings were under construction, and that the loan default would be regularised once the buildings were completed.  On the contrary, BNB argued that the buildings were not only completed, but the defendant had sold the flats of the mortgaged buildings in contravention of the loan agreement and relevant laws.

On December 19, 2013, 11 petitioners filed a suit against Dechen Tshering, requesting the court to direct the defendant to transfer the ownership of the flats of the mortgaged buildings, they had purchased from the defendant.  They submitted that, since they had paid the defendant in full for the flats, their rights be pre-empted and BNB be forbidden from seizing the mortgaged properties.

The court stated that, while these two cases were pending, nine flat owners also petitioned the court for ownership and title of the mortgaged flats, which they had purchased from Dechen Tshering.

Another flat buyer, Laxman Dungal registered a new case against Dechen Tshering on April 10, 2014 for ownership and title of a flat, which is mortgaged with BNB.

The defendant had taken loans from BNB to construct the buildings.  The agreement executed between BNB and Dechen Tshering provides that the mortgager is not allowed to gift, sell, mortgage, transfer or carry out any transactions.  Dechen Tshering had received full payments for the flats, but had defaulted the payment of the monthly loan installments.

The verdict stated that Dechen Tshering had received an income of Nu 9.90M in 2008, Nu 13.25M in 2009, and Nu 6.22M in 2012, from the sale of flats.  He had sold a single flat for Nu 3.6M and had executed an agreement with the buyers.  However, the defendant had submitted forged agreements to the Thimphu thromde, wherein the price for the flats was understated as Nu 1.5M.

The court also found that he had not paid any taxes.  He had fraudulently concealed his income, by submitting a false statement to the regional revenue and customs office, stating that his business license pertaining to Sambhav Estate Builder was non-operational.

The verdict also stated that, on several occasions, the defendant refused to obey the court orders, for which he was also liable to be sentenced for contempt of court.

The court states that financial crimes, such as fraud, forgery and tax evasion, in addition to posing a risk to the financial institutions, undermines national security, destabilises financial markets, destroys personal savings, and diverts public resources from benefiting the public. “There is an urgent need for relevant authorities to investigate and prosecute such crimes,” the verdict stated.  “The courts must also ensure just and effective punishment of those who perpetrate financial crimes.”

By Rinzin Wangchuk

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One comment

  1. Development practitioner

    I think many private entities are finance-illiterate, do not keep book of accounts and have no clue about financial performance of their own enterprises. So long as they have cash to play around entwining multiple bank accounts and/or make money without much hard work through operational imposture (aka fronting), the return on investment (ROI) they reckon is non-issue. While the proprietors chill out in BIT season, impersonations clear taxes calculated on lump-sum formula sheltered under Rule No. 4.2 of General Provisions of Rules on Income Tax Act of the Kingdom of Bhutan. So, where is the need for proper private sector accounting (including billing, invoicing, recording transactions, keeping ledgers etc.) and regulatory compliance until the emergence of a Sambhav scenario? Private over indebtedness is never in isolation: it does unfold one after another!

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