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A conflict has arisen between three prominent builders involved in a slum redevelopment initiative in Tulsiwadi, southern Mumbai, which is estimated to be valued at Rs 10,000 crore. DLF and Shapoorji Pallonji (Chinsha Property), two major construction companies, have filed a lawsuit against their third partner, Hubtown, and Punjab National Bank Housing Finance Limited following a default on an Rs 800-crore loan, leading to the sale of DLF and Chinsha's stakes to a third party.
Delhi Land & Finance (DLF Limited) is a commercial real estate development company. It was founded by Chaudhary Raghvendra Singh in 1946 and it is based in New Delhi, India. DLF has developed residential colonies in Delhi such as Model Town, Rajouri Garden, Krishna Nagar, South Extension, Greater Kailash, Kailash Colony, and Hauz Khas. DLF builds residential, office, and retail properties.
Shapoorji Pallonji & Company Private Limited, trading as Shapoorji Pallonji Group, it is an Indian conglomerate headquartered in Mumbai. It operates in construction, real estate, textiles, engineered goods, home appliances, shipping, publications, power, and biotechnology. The company was headed by a grandson of founder Pallonji Mistry, also named Pallonji Mistry, until 2012, when he announced his retirement and the succession of his son, Shapoor Mistry.
DLF proposed a payment of Rs 1,450 crore for the entire joint venture shareholding, encompassing both Chinsha and Hubtown, but received no response from Punjab National Bank Housing Finance Limited. While the offer was under consideration, Punjab National Bank Housing Finance Limited transferred the loan to Omkara Asset Reconstruction Company Ltd, as conveyed by the petitioners to the Delhi High Court.
DLF and Shapoorji Pallonji controlled 37.5% each, while their partner Hubtown owned 25% shares in Joyous Housing LTD (JHL), which was in the process of redeveloping a 17-acre slum property in Tulsiwadi near the Willingdon Club at Mahalaxmi. Following the free distribution of homes to slum residents as part of the rehabilitation plan, the three developers were entitled to approximately 12 lakh sq ft in the free sale component, valued at a total of Rs 10,000 crore.
A Rs 800-crore loan was secured for construction purposes, and the stakes held by all three shareholders were pledged as additional security to Punjab National Bank Housing Finance Limited. However, when JHL failed to repay the loan, the account was classified as a Non-Performing Asset in January 2022.
Subsequent attempts by the bank to auction the project did not yield any bids, prompting Punjab National Bank Housing Finance Limited to issue a Default Notice, expressing its intent to sell the pledged shares at the enterprise value. The bank also extended the offer to the existing JHL shareholders, granting them the right of first refusal, with the reserved sale price set at Rs 1,075 crore.
DLF stated that it proposed a payment of Rs 1,450 crore for the complete JHL shareholding, encompassing those belonging to Chinsha and Hubtown. However, there was no response from Punjab National Bank Housing Finance Limited.
On September 6, 2023, Omkara notified DLF that it was selling the pledged shares held by DLF and Chinsha to an undisclosed third party for an undisclosed sum, thus realizing the entire outstanding loan amount. The petitioners raised concerns about the allocation of shares to Omkara and the subsequent sale to an undisclosed third party. They alleged that the sale was not genuine and was a result of collusion between Punjab National Bank Housing Finance Limited, Omkara, and Hubtown, whose pledged shares were conveniently excluded from the sale, whereas the petitioners were compelled to relinquish their shareholding in JHL.
Punjab National Bank Housing Finance Limited dismissed these accusations, dismissing them as "another effort by the borrowers to impede the bank's recovery process in reclaiming public funds." The bank refuted the allegation that the petitioners were not given an opportunity to redeem their shares.
Omkara also dismissed the accusation of collusion as an effort to hinder the recovery process. Additionally, it refuted the claim that the sale of pledged shares was directed towards Hubtown's nominees or that the third-party purchasers had any association with Omkara. Similarly, Hubtown denied any involvement in collusive activities.
In conclusion, the ongoing conflict surrounding the slum redevelopment project in Tulsiwadi, South Mumbai, highlights the intricate dynamics within the real estate and financial sectors. The legal dispute between DLF, Shapoorji Pallonji, and PNB Housing Finance Limited has shed light on the challenges and complexities involved in managing large-scale development projects. With the court's involvement and the need for transparency and fairness, this case serves as a reminder of the importance of clear regulations and effective dispute resolution mechanisms in the realm of real estate and financial transactions.
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