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MUMBAI: A slum redevelopment project at Tulsiwadi in south Mumbai with a free sale value estimated at Rs 10,000 crore is at the centre of a dispute between 3 top builders jointly redeveloping the property.
Construction giants DLF and Shapoorji Pallonji (Chinsha Property) have taken to court their third partner, Mumbai-based Hubtown (formerly Ackruti), and Punjab National Bank (PNB) after a default on a Rs 800-crore loan resulted in the sale of DLF and Chinsha’s stakes to a third party.
DLF said it offered to pay Rs 1,450 crore for the full join venture shareholding, including that of Chinsha and Hubtown, but got no response from PNB. “While the offer was pending, PNB assigned the loan in favour of Omkara Asset Reconstruction Company Ltd,” the petitioners told the Delhi HC.
Construction majors DLF and Shapoorji Pallonji controlled 37.5% each and their partner Hubtown had 25% shares in Joyous Housing LTD (JHL), which was redeveloping a 17-acre slum property at Tulsiwadi near Willingdon Club at Mahalaxmi. After providing homes free of cost to slum dwellers under the rehabilitation scheme, the three developers were entitled to about 12 lakh sq ft in the free sale component valued at Rs 10,000 crore in total.
A Rs 800-crore loan was secured to get on with construction and the stakes held by all three shareholders was pledged as additional security to PNB. When JHL failed to repay the loan, its account became a Non-Performing Asset in January 2022. The bank tried to auction the project but drew no bids. PNB then issued a Default Notice, indicating its intention to sell pledged shares at enterprise value. The bank also offered them to the existing shareholders of JHL, giving them the right of first refusal. The reserved price for sale was fixed at Rs 1,075 crore.
DLF said it offered to pay Rs 1,450 crore for the entire JHL shareholding, including those of Chinsha and Hubtown, but got no response from PNB. “While the offer remained pending, the PNB assigned the loan in favour of Omkara Asset Reconstruction Company Ltd,” the two petitioners, DLF and Chinsha, told the HC.
Omkara on September 6, 2023 informed DLF that it was selling the pledged shares held by DLF and Chinsha to an undisclosed third party for an undisclosed sum, thereby realising the entire outstanding loan amount. The petitioners questioned the assignment of shares in favour of Omkara and the sale of shares to an undisclosed third party. They alleged the sale was not bona fide and “was a collusive act between PNB, Omkara and Hubtown, whose pledged shares were conveniently left out from the sale, whereas the petitioners were made to cede their shareholding in the JHL,” they told the court.
PNB dismissed this claim and dubbed it as “another attempt by the borrowers to frustrate the recovery process pursued by the bank to recover public money.” The bank rejected the allegation that no opportunity was granted to the petitioners to redeem shares.
Omkara too dismissed the allegation of collusion as an attempt to frustrate the recovery process. It also denied that the sale of pledged shares was made to the nominees of Hubtown or that the third-party purchasers were affiliates of Omkara. Hubtown too refuted allegations of collusion.
Assignment of debt by banks is authorised by RBI. It does not allow for a legal challenge against assignment or the price at which debt has been assigned by PNB to Omkara. But DLF has the right to question assignment and sale of shares if it undermines its right of redemption.
In its order last month, the HC said, the “allegation of collusion between PNB and Omkara appears to be founded on the speed with which assignment and sale has been concluded”. It said DLF can question the deal “if it undermined its right of redemption under Section 177 of Contract Act.”
The court directed Omkara to disclose the identity of the transferees to whom it has sold the pledged shares.
Construction giants DLF and Shapoorji Pallonji (Chinsha Property) have taken to court their third partner, Mumbai-based Hubtown (formerly Ackruti), and Punjab National Bank (PNB) after a default on a Rs 800-crore loan resulted in the sale of DLF and Chinsha’s stakes to a third party.
DLF said it offered to pay Rs 1,450 crore for the full join venture shareholding, including that of Chinsha and Hubtown, but got no response from PNB. “While the offer was pending, PNB assigned the loan in favour of Omkara Asset Reconstruction Company Ltd,” the petitioners told the Delhi HC.
Construction majors DLF and Shapoorji Pallonji controlled 37.5% each and their partner Hubtown had 25% shares in Joyous Housing LTD (JHL), which was redeveloping a 17-acre slum property at Tulsiwadi near Willingdon Club at Mahalaxmi. After providing homes free of cost to slum dwellers under the rehabilitation scheme, the three developers were entitled to about 12 lakh sq ft in the free sale component valued at Rs 10,000 crore in total.
A Rs 800-crore loan was secured to get on with construction and the stakes held by all three shareholders was pledged as additional security to PNB. When JHL failed to repay the loan, its account became a Non-Performing Asset in January 2022. The bank tried to auction the project but drew no bids. PNB then issued a Default Notice, indicating its intention to sell pledged shares at enterprise value. The bank also offered them to the existing shareholders of JHL, giving them the right of first refusal. The reserved price for sale was fixed at Rs 1,075 crore.
DLF said it offered to pay Rs 1,450 crore for the entire JHL shareholding, including those of Chinsha and Hubtown, but got no response from PNB. “While the offer remained pending, the PNB assigned the loan in favour of Omkara Asset Reconstruction Company Ltd,” the two petitioners, DLF and Chinsha, told the HC.
Omkara on September 6, 2023 informed DLF that it was selling the pledged shares held by DLF and Chinsha to an undisclosed third party for an undisclosed sum, thereby realising the entire outstanding loan amount. The petitioners questioned the assignment of shares in favour of Omkara and the sale of shares to an undisclosed third party. They alleged the sale was not bona fide and “was a collusive act between PNB, Omkara and Hubtown, whose pledged shares were conveniently left out from the sale, whereas the petitioners were made to cede their shareholding in the JHL,” they told the court.
PNB dismissed this claim and dubbed it as “another attempt by the borrowers to frustrate the recovery process pursued by the bank to recover public money.” The bank rejected the allegation that no opportunity was granted to the petitioners to redeem shares.
Omkara too dismissed the allegation of collusion as an attempt to frustrate the recovery process. It also denied that the sale of pledged shares was made to the nominees of Hubtown or that the third-party purchasers were affiliates of Omkara. Hubtown too refuted allegations of collusion.
Assignment of debt by banks is authorised by RBI. It does not allow for a legal challenge against assignment or the price at which debt has been assigned by PNB to Omkara. But DLF has the right to question assignment and sale of shares if it undermines its right of redemption.
In its order last month, the HC said, the “allegation of collusion between PNB and Omkara appears to be founded on the speed with which assignment and sale has been concluded”. It said DLF can question the deal “if it undermined its right of redemption under Section 177 of Contract Act.”
The court directed Omkara to disclose the identity of the transferees to whom it has sold the pledged shares.
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