Wollongong Coal (formerly known as Gujarat NRE Coking Coal) alleges its former executive chairman used more than $9 million of company money to buy the land and build himself a house on it, before influencing Wollongong Coal to buy the property all over again, and then sending some of the proceeds offshore.

Mr Jagatramka and his wife Mona had "improperly used their position as directors to gain an advantage for themselves", the claim alleges, and damages are being sought.

Mr Jagatramka, who resigned as executive chairman in February, is defending the case and denies any wrongdoing. His defence says he did not have a conflict of interest, and did not use his position to advantage.

He is being sued along with two companies, Gujarat NRE Properties, and Gujarat NRE India.

Mr and Mrs Jagatramka were directors of Wollongong Coal when it loaned $5 million dollars to Gujarat Properties Pty Ltd, a company they also directed, for the Cliff Road land, the statement of claim alleges. The sale price set a new record for Illawarra property.

"The loan was part of a series of transactions where Arun Jagatramka and Mona Jagatramka secured for themselves a right of residence in a luxury dwelling, owned by a company they controlled, without benefit to Wollongong Coal," the statement of claim says.

Mr Jagatramka said in his defence that when the decision was made to advance the purchase money, the couple did not know they were going to live in the house. It was intended to be used for company guests to stay in.

He also denies he caused or encouraged the board of Wollongong Coal to purchase the property.

The statement of claim alleges more than $4.35 million was later given by Wollongong Coal to builder "Popovac Constructions" to build the house. The Mercury understands this refers to leading Wollongong builder Pupovac Constructions.

The claim alleges no reasonable person in the position of the directors could have believed the transactions were in the best interests of Wollongong Coal.

But Mr Jagatramka argues the house had the potential to make a profit for the company.

In 2011, Mr Jagatramka was appointed to a new position as executive chairman with Gujarat NRE Coking Coal. He was provided the house, along with two cars, a million-dollar salary, health insurance for his family, two "domestic aides" and a million-dollar life insurance policy.

His defence states that this deal did not need to be approved by shareholders, under an exemption in the Corporations Act for remuneration packages.

The property has now had a caveat placed over it, preventing its sale while the matter is being settled.

The statement of claim also alleges that a later transaction, about which Mr Jagatramka misled the Wollongong Coal board, had the effect of writing off a $9.35 million debt while removing the property from Wollongong Coal's control.

In return for forgiving the debt, Mr Jagatramka transferred 9.35 million $1 shares in Gujarat Properties to Wollongong Coal, the claim alleges. But Wollongong Coal already had 100 per cent ownership of Gujarat Properties, meaning the debt was forgiven for no return.

Mr Jagatramka then transferred the shares in Gujarat Properties to a company called Basant International, receiving just $3.75 million, it is alleged. This came after a Wollongong Coal board decision to sell Gujarat Properties to another company called Happy Mining Pty Ltd.

Wollongong Coal alleges it ended up with nothing, as the $3.75 million it received for the shares was then dispersed between parent company Gujarat NRE, Gujarat NRE India, and Wonga Coal Pty Ltd, the boards of which all included the Jagatramkas.

Mr Jagatramka denies all the allegations. His defence finishes by saying he "acted honestly in relation to all the matters", and has asked asking the court to be relieved of any liability.

A defence filed by Gujarat NRE India also denies any wrongdoing on the part of Mrs Jagatramka.

The matter will be back in the Supreme Court later this month.