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Forget trade deal, ease of doing business, US can’t sell own property in Mumbai for 5 years

US Consulate auctioned its lease rights to Mumbai’s Lincoln House to businessman Adar Poonawalla, but the transfer wasn’t completed. Here’s why.

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New Delhi: “We’re not treated very well by India…,” US President Donald Trump said days before he is due to land in Ahmedabad for his maiden visit to the country Monday.

That remark was more to do with Washington’s problems with New Delhi over trade barriers and tariffs.

But the real estate tycoon-turned-politician, who’s not exactly known for diplomatic niceties, might just blow a fuse if he learns that a major real estate deal involving the US government — with Rs 750 crore riding on it — has been stuck for five years due to an apparent overreach by the Indian defence ministry and the Maharashtra government, and their bureaucratic wrangling.

The property in question is Lincoln House, a two-acre plot in Mumbai’s Breach Candy area, which had been occupied by the US Consulate since 1957. The US government had leased the property from the Maharaja of Wankaner for 999 years for the price of Rs 18 lakh.

However, facing a space crunch, the US Consulate auctioned its rights to the property in 2015 and moved to the Bandra-Kurla Complex. The property was bought for Rs 750 croreby Adar Poonawalla, son of billionaire businessman Cyrus Poonawalla and CEO of the Serum Institute of India, a Pune-based vaccine manufacturer. At the time, it was one of the costliest land deals in Mumbai. But Poonawalla, who has already made a part-payment to the US Consulate, is yet to get possession of the property as the lease transfer has not been completed.

Highly placed sources in the government told ThePrint that the US Consulate has sought the intervention of the Prime Minister’s Office to get the matter resolved at the earliest. Although the issue will not figure in official talks between Prime Minister Narendra Modi and Trump, the sources said the Consulate could be hoping for a breakthrough during Trump’s visit.

Also read: No trade deal with US during Trump visit as India doesn’t want to rush into one

Why the land deal is stuck

ThePrint has learnt that the deal is stuck because of a dispute between the Maharashtra government and the Union defence ministry’s Directorate General Defence Estates over the ownership of the land.

While the defence estates department claims the two-acre plot is defence land, the Maharashtra government says it is the original owner.

“While earlier, lease deeds were executed on behalf of the secretary of the Union of India, after the Government of India Act, 1935, came into force, the ownership of all leasehold land in a state vested with the state government,” said Shivajirao Jondhale, who was collector of Mumbai City until last month, before taking charge as secretary of the General Administration Department.

Rajeev D. Nivatkar, the new collector of Mumbai City, is currently in Mussoorie for official training, and was not available for comment.

Before demitting office, Jondhale had submitted a report to the state government, which said the ownership of the land in question vests with the Maharashtra government, and the US Consulate had violated the lease conditions by not seeking permission before the auction.

Several meetings involving officials from the Mumbai collectorate, the defence estates department and US Consulate over the last few years have failed to settle the ownership dispute.

A senior official in the Mumbai collector’s office, who did not want to be named, said the file is currently pending in their office.

“We have written to the defence ministry about two months back to submit papers related to the land, which they claim belongs to them. They have sought more time. Until they submit the land documents, no decision can be taken,” the official said.

The official added that since the case involves high-profile stakeholders, a decision on the matter will have to be taken at the level of Maharashtra CM Uddhav Thackeray.

Defence Secretary Ajay Kumar and ministry spokesperson Bharat Bhushan did not respond to queries mailed to them on Wednesday, 19 February.

Meanwhile, responding to ThePrint’s email sent on 13 February, Ravi Shankar, additional DG (Lands) in the Directorate General of Defence Estates said: “The mail has been forwarded to the Ministry of Defence for consideration.”

Ariel Howard Pollock, US Embassy spokesperson, declined to comment saying the US Embassy and the Mumbai Consulate are “very busy this week and the first part of next week”.

Also read: US holds all the cards in trade relationship with India, and Trump knows it well

‘US Consulate violated Maharashtra Land Revenue Code’

The state government has objected to the land transaction on the grounds that it violates the Maharashtra Land Revenue Code (MLRC), 1966.

The MLRC was amended in 2016 and a new proviso was added to Section 295, which deals with the disposal of land whose ownership vests with the state.

The amendments mandate that the state will recover 25 per cent of the money (called unearned income) that the lessor, in this case the US Consulate, earned by transferring the lease-holding rights of the property to another party.

Another provision in the amendments is that a lease-holder has to seek prior permission of the state before transferring the lease-holding rights to another party. For violating this provision, a lease-holder has to pay 25 per cent of the money earned by transferring the lease-holding rights.

The amendments were to be made applicable retrospectively, that is from 1 August 1967, when the MLRC came into force.

The US Consulate violated both the provisions, alleged the senior official in the Mumbai collectorate. So, in all, the US Consulate has to share 50 per cent of the money that it earns through the auction with the Maharashtra government, the official added.

Government sources said the US Consulate objected to this on the grounds that the land deal took place in 2015, a year before the amendment was passed.

However, Jondhale said the US Consulate’s contention is wrong. “The Mumbai High Court had on 31 May 2018, upheld that Section 295 was to be made effective with retrospective effect,” he said.

Also read: Ahead of Modi-Trump meet, a look at eight ongoing trade issues between US and India

Poonawalla clueless

Adar Poonawalla told ThePrint he does not know why the property for which he bid Rs 750 crore is not being cleared.

“We await the decision from the defence ministry clearing this property which they have stopped for five years without assigning any reason,” Poonawalla said.

“This is a very peculiar case and nobody knows why. It does not give the right signal to foreign investors if this is the way we are going to treat the US government and deny them a lease transfer on their own property.”

Sources said the Poonawalla family has met several officials in the defence ministry since 2015, including then defence ministers Arun Jaitley and Manohar Parrikar, but failed to get the dispute resolved.

Also read: On Melania Trump’s itinerary, a likely trip to AAP govt’s ‘happiness class’ in Delhi school


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  1. The MLRC is a real headache! To convert agricultural to non-agricultural, you need tons of documents and it takes more than a year!

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