Tag Archives: Bombay High Court

When builders turn zamindars

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Bottom Line: Aditya Pratap, Advocate, Bombay High Court, writes about the curse of land banking and the demise of urban planning.

Advocate Aditya Pratap, Bombay High Court, India real estate news, Indian realty news, Real estate news India, Indian property market news, Investment in real estate, Realty Plus, Track2Realty, Realty Fact, Litigations in real estate, Land titles in real estate, Dgitisation in real estate, Consumer complaints in real estateTwelve years ago, sometime around 24thMay, 2006, realty major Unitech Ltd. bagged a prime 300-acre land parcel in an auction held by the NOIDA Authority. Flush with funds from an IPO (Initial Public Offering) and a surging share price, Unitech placed an aggressive bid for INR 1582 crore (INR 15.83 billion) for the land situated alongside the Noida-Greater Noida Expressway.

Competing against DLF, the company won the auction and soon made plans to construct a grant 18-hole golf course surrounded by luxury apartments and villas, to be marketed as the plush “Unitech Golf and Country Club”. Flashy advertisements were immediately published and huge booking amounts were collected from aspiring buyers who looking forward to their dream homes in the project.

Tragically, nothing materialised! Fast forward to 2018, all that exists on site are a few half-built concrete shells, desolate sales offices and a vast expanse of vacant land situated next to a thriving expressway.

Jaypee Wish Town, its next-door neighbour and a sprawling 1162-acre behemoth, too shares a similar fate. Both projects are textbook examples of the dystopian saga of Indian real estate – unfinished projects, delayed possession, protracted litigation and insolvency, not to mention broken dreams and endless despair for homebuyers.

The liability called land banking: A common factor in builder bankruptcies:

While there is much ado about diversion of funds, mismanagement and the like, comparatively little attention has been paid to excessive land-banking carried out by Developers prior to their debacles.

When DLF and Unitech listed on the stock markets in 2006-7 both boasted land-banks comprising several thousand acres each. The bulls gleefully scooped up these stocks, anticipating windfall gains as raw land-banks transformed into saleable real estate. Such was the frenzy that builders all over India, be it the Ansals in Lucknow, DSK Group in Pune and Amrapali Developers in NOIDA, embarked upon a quest to become nouveou Zamindars of the 21stCentury.

However, such grandiose visions were destined to remain unfulfilled. The Unitech brothers Sanjay and Ajay Chandra are currently lodged in Tihar Jail, figuring out ways to liquidate their assets. Sushil Ansal, barely out of prison post the Uphaarfire tragedy, faces a series of FIRs ranging from cheating to molestation, arising from the deserted 6465-acre Sushant Golf City in Lucknow.  

Builder D.S. Kulkarni too is doing time in Yerwada Central Jail as he faces allegations of fraud and misappropriation of INR 2892 crore worth of depositors’ money in acquiring land for the 300-acre DSK Dream City in Pune. Anil Sharma of Amrapali Group is no better, having deposited his passport in a desperate bid to reassure investors that he would not flee the country. 

Governments build cities, not builders:

The common factor underlying the above sagas is the massive banks of land accumulated by the developers in anticipation of a real estate boom which never came. Over-confident about their execution capabilities, they ignored a time-honoured principle of Town Planning – “Governments build cities, Developers construct buildings”.

Fashioning themselves as creators of cities, developers rush to accumulate massive tracts of land where they can convert their dystopian visions into reality. The rich and famous get the best houses set amongst lush greens while the financially weaker sections get pushed to the side-lines, if they are accommodated at all. 

The sacrosanct principles of urban planning demand that public authorities must first acquire the entire land, prepare a master plan and define land-use zones. This must be followed by construction of public infrastructure such as roads, parks and community centres along with laying down water supply, sewer and electricity lines.

Thereafter individual plots must be demarcated for residential and commercial use, which may be subsequently auctioned or allotted to private parties, who would then develop the same. The roles of public and private entities are clearly defined and none can bite off more than what he can chew.

It may be noted that Section 9 of the Uttar Pradesh Area Development Act, 1973 envisioned Zonal Development Plans which would provide for proper demarcation and zoning of land. It stated that each Zonal Plan would provide for gardens, roads, open spaces, recreation, hospitals, schools and a host of other facilities which define a city.

Minute details such as elevation, alignment, height restrictions and architectural features were to be provided for. The Act thus set a blueprint for planned urban development whose fruits would be enjoyed by all citizens, irrespective of class, caste or creed. 

Handover of entire sectors to private parties for development – wilful neglect of town-planning duties by NOIDA Authority: 

Delhi’s next-door neighbour NOIDA (New Okhla Industrial Development Area), since its establishment in 1976, presented a relatively decent example of planned sectoral development. The Authority first acquired farmland and demarcated it into plots which were subsequently zoned and allotted. This way, the city was developed in an integrated manner trying to adopt the principles of sustainable development. Each Sector, in addition to housing, had its own gardens, sports complexes, community centres as well as retail and office zones.

The planned development of NOIDA, which had been satisfactory until 2000, took an unexpected turn when Jaypee Infratech Ltd., a group company of Jaiprakash Associates headed by business tycoon Jaiprakash Gaur, was allotted a 1162-acre land parcel by the Mayawati Government. By combining Sectors 128, 129 and 130 into a private gated community, the company aspired to build a 27-hole golf course surrounded by 34,000 apartments.

Similarly, in 2006, Sectors 96, 97 and 98 were amalgamated into a single 300-acre parcel auctioned to Unitech. Amrapali too, was allotted huge tracts of land in several sectors in Noida along with over 100 acres in NOIDA Extension (Greater Noida West), with a developmental potential of about 35 million square feet.

The strings accompanying the bounty were land dues of INR 3,000 crore to the Noida and Greater Noida Authorities and INR 1,000 crore to banks, with another INR 3,000 crore required for construction. Such grandiose schemes represented corporate ambition bordering on megalomania, which by applying Murphy’s law, became financial powder kegs awaiting a spark. 

Thus, the Noida Authority deviated from the policy of planned sectoral development and instead cleared the field for private developers. The private vision of urban development supplanted the socialist vision of land and housing for all. Public parks were replaced by private golf greens; community sports complexes by luxury clubs whose memberships sold in millions and closed gated communities sprang up in place of open residential colonies which were hitherto designed to facilitate inclusion and interaction.

Thus, the constitutional object of town planning, which was to facilitate people from different backgrounds to live and interact together, was defeated. It is needless to add that corruption and palm-greasing accompanied such decisions at every step, as the arrest of Noida Authority Chief Engineer Yadav Singh would later point out. 

Saving our Cities in the nick of time – land pooling as an effective counter to colonizers and land-bankers:

However, all is not lost. While India may have failed to build upon the example set by Chandigarh in the 1950s, new cities of the 21stCentury are using land-pooling as a model to create sustainable urban habitats as well as remunerate landowners. Naya Raipur in Chhattisgarh and Amaravati in Andhra Pradesh are prime examples.

By agglomerating farmland into a single pool and demarcating plots and green zones, city planners have discouraged land-bankers and speculators, who usually refrain from buying land parcels vulnerable to acquisition. 

Once the land parcels are combined, each landowner is awarded developed land proportionate to the area contributed by him, usually twenty to thirty per cent (20%-30%). The balance land goes into creating infrastructure, community and green spaces with residential and commercial plots being allotted or auctioned.

The result is a green and health city equally accessible to all. Further, proper planning of sectors ensures that households of all income groups have equal access to parks, clubs, sports facilities and schools. Hence the concept of elitist ‘posh areas’ disappears and instead, citizens of all income groups reside in green and beautiful areas.

The need for a Central Model Law on urban-planning and development:

Since land improvement and colonization are state subjects under List II of the Seventh Schedule of the Constitution of India, the power to wrest urban planning from the clutches of land-bankers and speculators lies with the State Governments alone. A nation-wide consensus under Article 252 of the Constitution is necessary which will enable the Central Government to come out with a model law on town-planning.

By giving ‘land-pooling’ the force of a parliamentary statute along with placing curbs on colonizers and speculators (in short, the land mafia), the model law will foster sustainable urbanisation and enhance the quality of life enjoyed by Indians.  

Given that half of India’s citizens are projected to live in cities by 2050, the time to act is now, failing which India’s megacities will find themselves down to road towards an urban dystopia riddled with pollution, disease, crime and depression.

Aditya Pratap is a practising lawyer at the Bombay High Court. He appears in diverse civil and criminal cases as well as before the Real Estate Regulatory Authority. Questions pertaining to the article may be emailed to him at aditya@adityapratap.com.

FIR against Niranjan Hiranandani

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Bombay High Court, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Ravi Sinha, Track2Media, Track2RealtyTrack2Realty: The Bombay High Court on Wednesday, June 26, ordered the Mumbai police Crime Branch to file an FIR against four persons, including Hiranandani Developers co-founder and managing director Niranjan Hiranandani and two police officers, in a complaint filed by a 28-year-old woman from Powai.

The woman has accused Hiranadani of getting residents of the Jai Bhim Nagar in Powai forcibly evicted by slum lords and destroying evidence of a shrine damaged by the men who tried to evict the slum dwellers.

She has also pressed charges of criminal intimidation and criminal conspiracy against the real estate baron.

The woman has also made allegations of rape against two police officers attached to the Powai police station.

“The incident took place on June 14. The police officers raped the petitioner in the morning but when she went to the police station, the police officers did not register her complaint. They also refused to carry out medical examination,” alleged the petitioner’s lawyer Gunratan Sadavarte.

“The court has directed the crime branch to register the FIR against Sanjay Sansare, Prakash Wadkar, senior police inspector Y S Jadhav and Niranjan Hiranandani,” Sadavarte said.

An email sent to Hiranandani’s communication team did not get any response. 

Mumbai builder lodge defamation suit of Rs. 1,086 Crore against false complainant

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Bombay High Court, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Ravi Sinha, Track2Media, Track2RealtyTrack2Realty: While the customers lodge complaints against builders, here is a case in which a builder has registered a defamation case against a customer. The Mumbai-based reputed Haware Engineers & Builders have filed a defamation suit amounting to Rs 1,086 crore against one of its former customers in the court.

Doma Bapu Brahmankar, the accused in the case, was engaged into filing wrongful complaints and maligning the reputation of Haware Builders after he failed in making payment against a property to Haware Builders.

About nine years ago Brahmankar had entered into an agreement of purchasing a commercial property at Infocity in Vashi. However, Brahmankar failed to make required payments in due time following which the agreement was cancelled by Haware Builders.

Suresh Haware, Managing Director, Haware Engineers & Builders says, “Doma Bapu Brahmankar had paid us three cheques towards the purchase of property. The cheques were dishonoured and hence, we had to cancel the agreement.”

As per the complaint, Brahmankar allegedly started harassing the company by registering false complaints with the police and court. However, none of the complaints were admitted. Nonetheless, Brahmankar also started negative publicity of the Infotech Park hampering the image of the property and company.

When consumer activism against developers backfires-III

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Bombay High Court, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Ravi Sinha, Track2Media, Track2RealtyTrack2Realty Exclusive: When the issue of Maharashtra Government levying 5 per cent Value-Added Tax (VAT) surfaced and the MCHI-CREDAI and a couple of other developers’ and trade associations moved to the court, a consumer group called FORAM–Flat Owners’ Rights protection Action committee in Maharashtra – was formed with consumer interest groups coming together and seeking to fight the vexed VAT issue on flats in Maharashtra.

FORAM claimed to mobilise public opinion against the VAT on flats sold between 2006 and 2010 with the statement of Chandrashekhar Soman, Convener of FORAM,” We will mobilize public opinion against all over Maharashtra with district level committees VAT and appeal to the government to scrap the tax altogether for flat buyers. This is just the beginning and people across section will join in the movement.”

Businesses all over the world run on trust, and tweaking the rules of the game only leads to dilution of trust, a chance that no realtor would ideally like to take. For example, most of the developers have a clause in the agreement that all future taxes are to be borne by the customer as the developers are merely collecting the indirect tax from the customers and depositing the same with the government.

Developers assert they are rather forced to take up litigation for recovery of such amounts from customers. Any litigation by a handful of disgruntled buyers only delays the project and hence home buyers at large suffer the litigation cost by project delay.

Madhrendra Sharma, a Supreme Court lawyer categorically says that, the terms of agreement between the flat owner and the builder plays a key role. According to him, most of the houses financed by the banks already go through the due diligence by both the buyer and the lender, and to say that the developer has made it one-sided amounts to arm twisting by the buyers.

“If the developer has clearly stated in the agreement that any future tax implemented by the government has to be paid by the buyer, the flat owner is liable to this entire tax. However, if the agreement does not contain the clause, the onus is solely on the builder. Similarly, if the developer has stated in his sale agreement that in compliance to the law of the land, the project may add to the extra floors subject to the mandatory approval, then the law of the natural justice says that a buyer who has signed the agreement should not move to the court. The chances of his case being upheld are also very minimal,” says Sharma.

…..to be continued

Bombay HC allows Shapoorji Pallonji to sue Qatar Airways

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Bombay High Court, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Ravi Sinha, Track2Media, Track2RealtyTrack2Realty-Agencies: The Bombay High Court has cleared the way for construction major Shapoorji Pallonji and Co. to sue Qatar Airways for Rs 59 lakh with interest.

The airline had claimed it could not be sued without the permission of the Indian government as it has the status of a “foreign state”, being owned and controlled by the ruler of Qatar. However, the HC held the airline could not be said to be a “foreign state”, and the company’s claim is based on a commercial dealing.

In its order, a bench of Justice D Y Chandrachud and Justice A A Sayed said, “In the world today, corporate bodies, both Indian and foreign, carry on trade, commerce and business across geographical and national boundaries… In their commercial and business operations, such corporate entities cannot claim an immunity to civil actions.”

The firm has filed a suit against the airline based on a contract to do interior decoration of the offices of the airline.

The airline had questioned whether such a suit could have been filed, pointing to section 86 of the Civil Procedure Code. The section lays down that a foreign state cannot be sued in any court except with the written consent of the Central government.

The judgment said, “We need only to observe that the claim is founded on a purely contractual and commercial dealing between the appellant and the respondent. The appellant is not a foreign state within the meaning of sub- section (1) of section 86. It has a distinct legal personality of its own which finds recognition in the contractual relations into which it enters.”

The court noted that the company carries on commercial operations, operates offices, engages employees and solicits business in several countries across the world.

PAL-Peugeot land fetches 601 cr

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Citra Developers, PAL-Peugeot, Gammon India, ICICI Bank, Fiat India, Bombay High Court, Indiabulls real estate, BSE, Bombay Stock Exchange, Mumbai Real Estate, India Property, Track2Media, Track2Realty, ravi sinha, india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, KP Singh, DLF, Unitech, Emaar MGF, ndtv.com, ndtv, aajtak, zee news, india news, property news, real estate news, 99acres.com, 99 acres, indianrealtynews.com, indianrealestateforum.comIndiabulls real estate, BSE, Bombay Stock Exchange, Mumbai Real Estate, India Property, Track2Media, Track2Realty, ravi sinha, india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, KP Singh, DLF, Unitech, Emaar MGF, ndtv.com, ndtv, aajtak, zee news, india news, property news, real estate news, 99acres.com, 99 acres, indianrealtynews.com, indianrealestateforum.comIn what real estate experts see as a sign that land rates are becoming more realistic, a 135-acre plot that belonged to the defunct PAL-Peugeot auto company in Dombivli has been auctioned off to Metropolitan Infra Housing Pvt Ltd (a subsidiary of Gammon India) for Rs 601 crore.

Bombay high court Justice R Y Ganoo on Friday confirmed Gammon’s bid following a December 2010 auction. This is the latest development in a nearly 12-year saga to sell a total of 180 acres located 5 km from Dombivli station.

Gammon’s bid was merely a crore higher than its nearest competitor, Neptune Group. Oberoi Realty, the third bidder, offered Rs 300 crore.

Aside from rates dropping, experts said the deal is important considering the liquidity crunch in the market.

Dombivli land unlocked
May 12, 1999: ICICI Bank files suit for recovery of Rs 136 crore from PAL-Peugeot
May 12, 1999 to Jan 27, 2004: Four unsuccessful auctions for 180 acres
Sep 26, 2005: PAL-Peugeot winds up
Nov 27: State files notice seeking unearned income on 45 acres
Mar 4, 2008: HC splits land into 135 and 45 acres
Apr 22: Indiabulls wins auction with Rs 676-crore bid for 135 acres
Jun 27: Indiabulls withdraws offer as it can’t match Rs 1,650-crore reserve price
Jan 21, 2011: High court confirms Gammon India’s winning bid
Feb 1: High court to decide on remaining 45 acres ‘Land rates in tune with market conditions.

The court’s order is also significant for 1,712 displaced Pal-Peugeot workers,who will finally get dues that have been pending since the company shut down in September 2005.

“The order will especially benefit about 40 workers who were on the verge of losing their homes as they had defaulted on loans taken from HDFC Bank in 1995. The bank, thankfully, accepted our plea to delay sealing the flats, as we explained that the court’s order on the auction was due anytime. I pray now that we receive our dues before March 31 so we can repay the loans,” said Umesh Upadhyay, secretary of the Sakharam Seth Employees Union, the registered trade union of PAL-Peugeot. The union expects to get dues of Rs 125 crore for the period from June 1998 to September 2005.

In the earlier round of bidding-the sixth-in April 2008, the highest price offered was Rs 676 crore by Citra Developers, a subsidiary of Indiabulls Real Estate. Gammon then was no. 2 with a bid of Rs 675 crore. Indiabulls’ offer did not go through because the court receiver had fixed a reserve price of Rs 1,650 crore.

The high reserve price-Rs 2,855 per sq ft for undeveloped land-is a reflection of the staggering expectations that prevailed not long ago. The reserve price fixed in the latest round was a more realistic Rs 450 crore. Experts said this is more in tune with current market conditions.

Real estate experts said the substantially lower price offered in the recent bidding indicates that land rates that had shot up after the recession are starting to soften.

“The price in this auction seems reasonable, considering the liabilities on the land. Still, it will allow Gammon to make some margin of profit after development,” said Pranay Vakil, chairman of Knight Frank, global property consultants.

PAL-Peugeot’s original 180-acre plot was put up for auction in 1999. It was split into 135 and 45 acres in 2008 when the state claimed its share of unearned income. The high court has not confirmed the sale of the 45-acre plot as the bid amount was much lower than the reserve price fixed by the court receiver.

PAL-Peugeot’s land was put up for auction after the company failed to pay the interest and value of 3,41,98,066 non-convertible debentures to ICICI Bank, trustees for the debenture holders. ICICI Bank, which was represented by Maniklal Kher Ambalal and Co, filed suit in the high court for Rs 136.79 crore, the principal amount.

The high court then appointed a court receiver and asked for the sale of properties, including the land. The first four auctions failed as the highest bids did not match the reserve price.

The fifth auction was never held as the state intervened. The sixth auction involved the Citra bid, which the high court allowed Citra to withdraw and reclaim 25% of the amount deposited.

The workers’ union challenged the court’s decision and asked for a reduced reserve price. It wanted Citra’s offer accepted, as a sale would ensure reimbursement of dues.

The high court refused and the union moved the apex court. During the hearing, the court asked Citra to give a fresh bid considering a reserve price of Rs 550 crore in light of the economic slowdown. Citra declined. The SC told the high court to carry out a fresh valuation and hold another auction.