MPHB wants 51% stake in Treasure Island

ADDING A fresh twist to the swirl of controversies surrounding Treasure Island, the Madhya Pradesh Housing Board (MPHB) has staked claim to 51 per cent ownership of the swanky multiplex.

ADDING A fresh twist to the swirl of controversies surrounding Treasure Island, the Madhya Pradesh Housing Board (MPHB) has staked claim to 51 per cent ownership of the swanky multiplex.

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In a notice to multiplex developers - Entertainment World Developers Private Limited (EWDPL) - the Board declared that the termination of the joint venture agreement by its former Chairman C P Shekhar had no locus standi, as the board of directors did not ratify it.

Therefore, the Board should be recognised as a majority partner in Treasure Island until repayment of loan as per the original memorandum of understanding (MoU). The MPHB missive is the latest bolt to hit the beleaguered multiplex that has been hit by allegations of building and municipal by-laws violations.

Spread over one-lakh square feet, Treasure Island was originally to be a three-way JV between MPHB and EWDPL - a firm jointly owned by Kalani Brothers (Indore) Pvt. Limited (KBIPL) and Padma Homes Pvt Limited (PHPL), owners of the land where the multiplex is located.

After the Department of Housing cleared the JV for constructing a multiplex at 11, Tukoganj, vide letter no F/23-39/2002/32-1 dated April 8, 2003, an MoU (a copy of which is available with the Hindustan Times) was signed between the three parties on May 21, 2003.

As per the agreement, the JV company was to begin with an authorised capital of Rs 10 crore consisting of 20,92,745 equity shares and 79,07,225 (non-voting) shares, each with a par value of Rs 10.

Of the voting shares 10,67,300 were to be held by the Board and the remaining 10,25,445 owned jointly by PHPL and EWDPL. The MoU further granted MPHB 51 per cent share capital. In return, the Board was to assist in land use conversion and procuring government loans for the project.

The agreement includes a buy-back clause allowing the EWDPL to purchase MPHB’s stake in the venture at a premium after a minimum of three years from the date of completion of project or repayment of governmental loans, whichever was later (emphasis added).

Among those who witnessed the MoU signing was Raghav Chandra, currently Managing Director of MPSIDC, which unsuccessfully attempted to stall the Rs 75 crore HUDCO loan to EWDPL by complaining to the RBI that Gilt Pack Ltd, a firm for which Manish Kalani was a guarantor, had defaulted on loan repayment.

In November, six months after the MoU was signed, the JV agreement was summarily cancelled by then MPHB Chairman Chandra Prabhash Shekhar. The cancellation was, however, not ratified by the directorial board, hich overturned the decision at a meeting in April 2004.

After overtures made to EWDPL failed to elicit any result, the MPHB sought advice from the Law Department and served a notice to the former demanding recognition as a majority shareholder in Treasure Island in December 2005.

Unanswered questions
1 Why did MPHB, a government agency, get involved in Treasure Island - a purely private project?

2 After agreeing to a JV with EWDPL and being assigned majority stake why did former MPHB Chairman CB Shekhar summarily terminate the agreement. Why did the board of directors not ratify the cancellation?

3 Why didn’t the Reserve Bank of India stop the HUDCO loan to EWDPL despite being informed by MPSIDC that Gilt Pack Ltd, of which Manish Kalani was a guarantor, had defaulted on loans amounting to several crores?

Versions
1 MPHB Commissioner J S Mathur: After the board of directors voted against the cancellation the Board wrote to EWDPL pointing out that it was still a shareholder in the multiplex. This was, however, repudiated by the developers on the basis of the former Chairman’s letter. We then served a notice to EWDPL a month ago after seeking the Law Department’s advice.

2 Former MPHB Chairman CP Shekhar: The original plan called for the multiplex to be a residential-cum-commercial venture. The agreement was cancelled after EWDPL decided against constructing apartments at the site. The Board’s basic brief is to provide funding for housing and if there were no residential apartments it could not be involved. If the BoD has revoked the cancellation then it is a dispute between them and EWDPL and has nothing to do with me.

3 Developer Manish Kalani: First of all, it is incorrect to term the letter as a notice, as the term implies a stipulated period for answer or action. As for agreement cancellation, the JV was terminated by the MPHB and we received an official letter from the Board to this effect. If due process was not followed in letter issuance, how can we be held responsible?