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The Brihanmumbai Municipal Corporation (BMC) has terminated its contract with DBS Realty under the "credit note" policy for the construction of 4,000 tenements meant for project-affected people (PAPs) in Chandivali. This action was taken due to DBS Realty's failure to transfer the land titles to BMC, as required by the agreement.
The BMC had awarded the contract to DBS in March the previous year, and it included a payment of Rs 1,584 crore to DBS Realty, which amounted to Rs 39.6 lakh for each flat, along with land and construction transfer of Development Rights (TDR). Despite an ongoing Slum Rehabilitation Authority (SRA) project on the selected Chandivali plot, the BMC had issued a letter of acceptance to DBS Realty. This led to allegations of a fraudulent Letter of Acceptance (LOA). The failure to transfer land titles cemented the allegations and thus BMC took action against the builder.
Under the Project-Affected People (PAP) scheme, BMC's objective is to construct over 35,000 flats to rehabilitate individuals whose residences might be demolished for various civic infrastructure projects. To finance these developments, BMC introduced the credit note concept, which aimed to have developers acquire land, build houses, and then hand them over to BMC. In return, BMC would issue credit notes to the developer along with Transfer of Development Rights (TDR), which the developer could then sell in the open market to recover expenses and make a profit. These credit notes could also be used for settling BMC's tax and Floor Space Index (FSI) premium payments.
Initially, the implementation of this policy faced a legal hurdle as it lacked provisions in the Maharashtra Regional & Town Planning (MRTP) Act. However, the urban development department allowed BMC to proceed, citing an MMRDA precedent. Last year, under the PAP scheme, BMC had awarded contracts for constructing 15,000 tenements in various locations, including Mulund, Bhandup, Prabhadevi, and Chandivali.
Earlier in the year, BMC came under scrutiny when it was revealed that it had issued credit notes worth about Rs 350 crore to developers despite little progress in actual construction. A significant portion of these payments went to the developer handling the Mulund project.
This cancellation serves as a reminder of the importance of adherence to contractual obligations and legal requirements in major development projects. The allegations of fraudulent activity further underscore the need for transparency and accountability in such endeavours.
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