Sunday, October 27, 2013

Robert Vadra Land Deal – Damad 420 - Part 2

In the Part 1, we tried to sketch the character of Robert Vadra, highlighted need to understand his modus operandi, listed facts of the case, listed players involved in the case and lastly, ran through the list of charges Dr. Khemka has made on Robert Vadra's Land Deal.

Now, in Part 2, we will try to analyze the validity of charges made by Dr. Khemka and also list out aspects that need a thorough Judicial Investigation.

Why these charges miss the mark?

Dr. Khemka is a learned man with years of experience behind him, so I will give reasons for why I think his charges miss the mark. We shall go point by point of Dr. Khemka’s charges as listed above.

1. Non-payment of Sale Consideration of Rs.7.5cr as mentioned in the deed & payment of Stamp Duty by Onkareshwar Properties, contrary to claim in the Deed – In all probabilities, the Sale Deed between Onkareshwar & Skylight refers to receipt of a Cheque dated 9th February 2008 in the sale deed. This is a usual practice. This has never amounted to “encashment” of such a cheque. Payment committed in a Sale Deed can be paid at a later date, if the Buying & Selling parties have considerably close relations or confidence & trust on each other. For e.g. during sale of Residential Units, the Sale Agreement is registered any time after the Developer obtains Work Commencement Certificate. Since the construction is not complete, the payment has not been made in full. The remainder of the payment is received at a future date.

Moreover, in this specific case, if Skylight Hospitality fails to meet its financial obligation as per the Sale Deed, it is for Onkareshwar Properties to complain & file a case for cancellation of the Sale Deed due to non-compliance of the financial obligation. The Land Revenue Department has no role in this case.

As far as the matter of payment of Stamp Duty is concerned, Dr. Khemka already agrees that Stamp Duty was paid. His limited contention here is that it was not paid by Skylight Hospitality as declared in the deed, but by Onkareshwar Property. That is a non-issue. Land Revenue Dept has not lost any revenue by way of Stamp Duty. It is a fairly common practice that when in a certain deal sale price is considered high, the buyer passes the responsibility & liability of payment of Stamp Duty & Registration to the Seller. In other cases, where the Buyer & Seller have considerable personal comfort with each other, Seller may agree to receive the Sale Consideration at a future date as well as pay the Stamp Duty and later have it reimbursed by the Buyer at a future date.

We anyway find that by Dr. Khemka’s own admission on Page 54 of his response, the Sale Consideration was paid back & the amount paid for Stamp Duty was reimbursed to Onkareshwar Properties by Skylight Hospitality, by August 2008, after execution of Collaboration Agreement.

2. Since no Sale Consideration was paid, Sale Deed doesn’t confer ownership of Land on Skylight Hospitality, this was basis of his cancellation of Mutation Entry – no Registrar of Assurances or Land Revenue Record provides Guaranteed Title on the Land. They only provide Presumptive Title on the Land. For e.g. in case of a Dispute, like in double sale, etc, it is the Court that determines which title is correct. There is no role for Land Revenue Dept. to take any Suo Motu action on such matters.

3. Inability of Robert Vadra to pay for the Deal in 2008 – This is a very subjective remark and is directly against the spirit of entrepreneurship. In almost any industry, people fill tenders, without having a real wherewithal to pay the capital required to complete the order. People raise money by way of equity & debt etc. This is the very spirit of entrepreneurship.

Even otherwise, if our primary contention is that Robert Vadra is without doubt a Corrupt man, then we must remember that Congress was in Power at the Center since 2004. Looking at the sizes of the scams, are we saying that Robert Vadra wouldn’t have managed to raise Rs. 7.95crore for a deal in February 2008, 4yrs after his Wife’s Family took control of the Govt at the Center?

His other methods like books of accounts etc are childish. Unsecured Loan could have come from anywhere else, including his other group companies or his own personal bank accounts.

There is little to gain by way of pursuing this argument.

4. All these are misrepresentation of facts in front of Sub-Registrar of Assurances, hence cancellation of Mutation Entry – Almost none of the matters above fall in the category of misrepresentation of facts in any serious way. Moreover, these issues are purely bilateral between Buyer & Seller. Mistakes, if any, are allowed to be corrected by way of a Rectification Deed.

5. Acceptance on page 54 of his response that after Collaboration Agreement with DLF Retail, Skylight Hospitality received Rs.25cr & from this Rs.7.95 cr (sale consideration & Stamp Duty reimbursement) was made to Onkareshwar Properties – What can Dr. Khemka, possibly, object to in this part of transaction? Original seller has finally received the money, Skylight Hospitality has finally borne the Stamp Duty by reimbursing Onkareshwar Properties. Skylight has generated financial backing by tying up with a strong real estate developer. Which part is illegal or criminal or even immoral here?

6. DLF used Skylight for CLU to account for Black Money as White Money in its Books of Account – A very silly charge. We are talking about Robert Vadra here. He is not even frisked at the Airports. Are we saying he needed to pay the Personnel at DTCP to get the Letter of Intent within 18 days? Does he logically & practically need to do that? Especially, when he has just purchased the land from a company owned & run by close associates & relatives of Bhupinder Singh Hooda, CM of Haryana? And if Vadra doesn’t need to pay DTCP Staff for LoI, where is the question of Black & White money?

Moreover, Dr. Khemka should realize DLF’s total Book size? The black money generated & managed at DLF must be a very large sum.

7. Collaboration Agreement of Skylight & DLF was not Registered causing loss of Stamp Duty & DTCP Officials connived by entertaining DLF Officials over CLU License – There are hundreds of such documents that private parties execute. These are interim documents executed before the final document. This fact is evident in clause 8(e) of Collaboration Agreement as reproduced on Page 60 of Dr. Khemka’s response. The Builder Buyer Agreement was agreed upon as the final guiding document for the venture and was to be executed after approval of Building plans. The Stamp Duty would be paid & relationship “sealed” at that stage.

And Dr. Khemka is missing the point that DTCP Staff may have been entertaining DLF Staff for CLU License on the basis of the Power of Attorney issued by Skylight Hospitality in favor of DLF Staff, Devinder Singh & not Collaboration Agreement. This point is amply clear from his own submission as noted in the next accusation.

8. Power of Attorney in Favor of DLF Staff Devinder Singh – If DLF Retail & Skylight Hospitality were ready to collaborate with DLF Retail as the Developer, and CLU License after LoI as its responsibility, the Land Owner has to give Power of Attorney to the Developer or its appointee. This is simply for the ease of operations in a seamless manner. In Mumbai, when a Society executes a Redevelopment Agreement, it also executes Power of Attorney in favor Developer for a wide range of items including dealing with Municipality & other concerned Govt Bodies. Society is the Land Owner here. There is no cause of concern here.

9. Questions issuance of CLU License to Skylight Hospitality in spite of Possession of Land with DLF Retail – While the legwork for permission is done by the Developer, we should remember it is doing so on the basis of Power of Attorney obtained from Land Owner. PoA for specific task doesn’t mean change of Land Ownership. The Official communication is always addressed to the Owner. This is due process.

10. Equating Collaboration Agreement as Sale Deed – Dr. Khemka contradicts his own sequence of events. Not only that, he is ascribing a completely unrelated scope to a document that he has himself reproduced in fair detail in his response. Collaboration Agreement clearly mentions 50% stake to DLF & Skylight each. The deal seems valued at Rs.40cr and therefore, Rs.20cr is paid to Skylight Hospitality. Rs.5cr is only paid as a Refundable, non-Interest Bearing Security Deposit, which is to be refunded once 50% Built-up area committed to Skylight Hospitality is handed over. Refundable Deposits are always non-interest bearing. We don’t need to go far. When people take a house on rent, they pay Security Deposit to their Landlord. Do they charge interest for this Security Deposit? No. Its similar.

11. DLF has considerable clout in DTCP to obtain CLU License or get renewal – What is unsual about this? The size of business operation that DLF has in Haryana & the amount of time they have been running these business operations (since 1963 at least), their staff & owners must have been dealing with DTCP staff for years, would have considerable organizational experience in obtaining CLU Licenses. And why should it not have such an expertise or relationship (clout) with DTCP staff with whom they must be dealing on a daily basis? It is quite in line with Managerial Abilities, even shareholders expect from DLF & its staff. Why should we be alarmed about such a point?

12. Questions “permission” to transfer Commercial Use of Land to DLF Universal – Dr. Khemka should realize that the Land Use permission is on the Land not the Land Owner. DTCP has to communicate to someone, and that someone is Land Owner. It is only for this reason that it is addressed to Land Owner. Nor is CLU issued on the basis of Land Owner’s ability to execute a project as per CLU obtained. We are not dealing here with a Master Planner concept, like we have in, let us say, Dubai, where Emaar as a very large land owner cuts plots & sells to prospective Buyer, with certain conditions on nature of development of land & the timelines within which a Developer may complete a project.

To illustrate this more clearly, if a Land has Residential Use on it, if it was to the Owner alone, will it be transferred to any other land the Owner would come to use? Or if the Owner sells the land to someone else, does the new owner have to obtain new permission? No.

Another example, in case of CRZ (Coastal Regulation Zone) reservations, it doesn’t change with the change in ownership.

These are very basic & fundamental issues within real estate. I don’t know why this has even become an issue worth dwelling on for Dr. Khemka.

13. Sale Deed between Skylight Hospitality & DLF Universal Ltd. doesn’t detail Collaboration Agreement between Skylight Hospitality & DLF Retail Developers Ltd. – Why was this required? DLF Retail is essentially a separate entity from DLF Universal. In the recitals, it is the parties’ choice to decide how much details they provide. As long as Stamp Duty in DLF Universal- Skylight Hospitality deed was paid properly, why should Dr. Khemka have any objections?

14. Benefits to Onkareshwar Properties due to deal with Robert Vadra’s company – Complete conjecture. Especially when you look at relationship of those who own & run Onkareshwar Properties. They are Associates & Relatives of Bhupinder Singh Hooda, CM of Haryana. The Group Housing License issued by DTCP is not something that any other Developer cannot obtain, least of all someone who is personally well-known to CM of the State. Dr. Khemka is making too much out of obtaining CLU Licenses.

Then what should we focus on in this Deal that has been brought to light by Dr. Khemka?

Dr. Ashok Khemka has done a courageous job by pointing out to this issue. He may not be hitting the nail in his accusations, but with limited details available, alternative starting points & key areas of concern can be pointed out by various people.

Here is a list of what I think are key areas of concern for us:

1.   When & how did Onkareshwar Properties Pvt Ltd come to own this parcel of Land? What is the evolution of title? The owners & Directors of the company are close to CM of Haryana, Bhupinder Singh Hooda. Did the land belong previously to Panchayat, Govt, private Farmer? Was it purchased through coercion? What was the Sale Consideration when Onkareshwar Properties purchased the property? What was the source of their funds?

2.   If the owners & Directors of Onkareshwar Properties Pvt Ltd are such close associates & relatives of CM of Haryana, Bhupinder Singh Hooda, and have shown considerable comfort & trust with Robert Vadra, is there any role played by Bhupinder Singh Hooda? Is there a chance of Onkareshwar Properties being a Benaami Company of Bhupinder Singh Hooda? Is Onkareshwar Properties running its operations from funds that may have been generated from corruption in Haryana?

3.   As per my personal knowledge, the open market price of Land in Shikohpur in 2008, where the land under discussion was situated, was quoted anywhere between Rs.5cr/acre & Rs.10cr/acre, depending on various influencing aspects. So, ideally, this land of 3.53 acres should have been valued at anywhere between Rs.17.5cr to Rs. 35cr. Why did Onkareshwar sell it so cheap at Rs.7.5cr then? Was there any kind of coercion involved?

4.   Or, was there some cash transaction in this deal? Or was there any transfer of funds to any foreign accounts using foreign bank accounts of the Buyer & Seller? The matter must be referred to Income Tax Dept & Enforcement Directorate. This could be a valid area of concern.

5.   There is no great value added by Commercial Use of Land License. DLF by itself is fully capable of obtaining such permission. Robert Vadra added nothing new or rare value to this land with this permission. The only thing that stands out here is that LoI for CLU was obtained within 18 days of Application. It usually takes 5-6 months for an average applicant. Robert Vadra with his relationships & resulting influence only hastened this LoI. Land was also finally sold in September 2012. 4.5years after its purchase. I am not unduly worried about appreciation in sale price. DLF is not an organization that could come under pressure or be coerced to pay unduly high price.

Need for Judicial Investigation

The only logical way this matter can be understood in detail is through a Judicial Investigations. Such white collared scams are very intelligently executed and require every possible detail to understand Modus Operandi and with the knowledge of that Frame correct charges & ensure those guilty are punished.

This is as far as I could decipher from the available details in the response document by Dr. Ashok Khemka. This is a collaborative effort. If someone else has knowledge of additional angles, it will be good if they can shed light.

This blogpost was written for Niti Central originally. It can be accessed here -

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