A suspected multi-crore real estate scandal involving the Arunachal Pradesh government has come to light with authorities of the northeastern state allowing a private developer to commercially exploit land leased to it by Maharashtra at subsidised rates to set up a state guest house-cum-emporium.
The City Industrial and Development Corporation of Maharashtra (CIDCO),the state governments town planning agency and the owner of the plot,issued a showcause notice to the Arunachal government on September 25,asking why the lease should not be terminated for parting with possession of the space.
We have issued them a showcause notice and are awaiting their reply. We are examining all sorts of violations, CIDCO joint managing director V Radha said when reached for comment.
A 26,375-sq ft prime plot near the Vashi railway station in Navi Mumbai was allotted to the Arunachal government at Rs 372 per sq ft in August 1994,and the 90-year lease agreement was signed in August 1997.Investigation by The Indian Express has found that barely 10 per cent of the built-up space has been set aside for the guest house-cum-emporium,with the rest diverted to a Navi Mumbai-based developer,US Roofs (USR) Ltd,in violation of lease conditions.
USR,in turn,entered into a formal 60:40 profit-sharing arrangement with another prominent Navi Mumbai developer,Akshar,for the project.
While the Arunachal Bhavan is not yet functional,the developers have rented out 14,000 sq ft space to jewellery chain Kalyan Jewellers. Bids to rent out space for a cafeteria on the ground floor were also invited.
Local realtors said the current market rate for commercial property in the region is Rs 25,000 per sq ft.
Building plans,accessed through the RTI Act,show that the Arunachal Bhavan section will be limited to 6,500 sq ft on the second floor of the 15-floor structure,which involves total construction of over 61,000 sq ft. The CIDCO showcause notice,however,only refers to the space rented out to the jewellery chain.
Arunachal Pradeshs industries secretary,Surendra Ghonkrokta,said his government had drafted a reply to the notice. A senior official in Arunachal Chief Minister Nabam Tukis office said,The CM has taken a serious note of the development and will look into the issue on priority basis.
The lease agreement – a copy of which is with The Indian Express – clearly specifies that the plot is to be developed for a state guest house-cum-emporium only. It bars the Arunachal government from transferring or assigning rights or interests on the plot.
On April 18,2006,the Arunachal government authorised the Arunachal Pradesh Industrial Development and Financial Corporation (APIDFC) to invite bids for appointing builders for the guest house.
A month later,APIDFC invited bids to develop the guest house on build-operate-transfer (BOT) basis. It said the developer would construct and hand over an area of 5,000 sq ft for the state guest house-cum-emporium at his cost while retaining rights to exploit the rest of the FSI.
The BOT arrangement,senior CIDCO officials said,was a serious breach. CIDCO contended the Arunachal government never informed it about this. But Ghonkrokta said the BOT arrangement was not a violation.
Tony Koyu,managing director,APIDFC,said the BOT route was chosen since the Arunachal government did not have funds to take up the project on its own.
USR was shortlisted by APIDFC after it emerged as the highest bidder,offering Rs 10 crore in non-refundable premium and guest house space of 6,500 sq ft.
On October 12,2007,in another alleged violation,the APIDFC entered into an agreement of assignment-cum-development with USR,recognising the latters right to commercially exploit all areas beyond the 6,500 sq ft space for Arunachal Bhavan by means of subletting,transferring,assigning,selling or mortgaging units.
USR was granted an irrevocable power of attorney with complete rights to avail benefits of future increase in area due to FSI hike.
In 2009,following an official representation by Koyu,CIDCO agreed to enhance the FSI of the plot from 1.0 to 1.5. But,in a modified lease agreement signed on December 29,2010,CIDCO imposed the condition that the entire FSI is to be used for state guest house only and no other purpose.
It also reiterated that no third party rights could be created. The lease deed for the plot is yet to be signed.
RTI documents show that at one point in 2001,the Arunachal government had even offered to surrender the plot. CIDCO had processed this request in 2005 but the Arunachal government asked for its 2001 request to be disregarded.
We participated in the tender only after perusing the lease documents and seeking legal opinion, USR group chairman Urmish Udani said when reached for comment. We invested in the plot under the clear opinion that the lease conditions did not bar appointment of an agency on BOT basis. As per the arrangement,the entire property has to be returned to the Arunachal government after the lease agreement with us expires in 60 years.
Bharat Patel,chairman,Akshar,said his involvement was purely financial in nature. A Kalyan Jewellers spokesperson said,The showroom was operating after obtaining all necessary statutory permissions.