Mumbai/Bangalore: The Bombay high court on Thursday allowed Gopal Raheja-owned Ferani Hotels Pvt. Ltd to continue to develop and sell 460 acres of land in Malad (West), a Mumbai suburb, marking a setback for the Wadia Group that had moved the court. The division bench, however, asked the Gopal Raheja Group to deposit 12% of the sales consideration in a designated bank account till the final disposal of the case.
Nusli Wadia
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The Bombay high court has allowed Gopal Raheja’s company Ferani Hotels to sell a 460 acre plot of land in Mumbai despite opposition from the Wadia Group. Mint’s P.R. Sanjai gives us the lowdown
“Ferani Hotels is directed to maintain (an) account of all the transactions falling under the agreement and should continue to deposit 12% shares of the administrator (Wadia’s) out of the gross consideration,” the court said in its order.
Kishore D. Abhichandani, a lawyer representing the Raheja Group, said, “The judgement is a victory for Ferani Hotels, which can now continue to develop land and sell it in Malad.”
“On a study of the final judgement when it is available to us, we will comment, if required. We will approach the Supreme Court in the matter,” a Wadia spokesperson said in an email.
“The court has also held that the preliminary issue in law has to be decided and has even set up a timeline to close the same within six months and has also provided liberty to us to apply immediately thereafter,” the email said. “This means that we can immediately on the point in law being decided apply for complete and broader reliefs such as court receiver to be appointed on the lands.”
Wadia’s senior counsel Fali Nariman had on Wednesday declined to accept the settlement terms offered by the Rahejas or to enlist the services of a court-appointed mediator to settle their dispute over the land.
“There can be no reciprocity between us. Our relationship with the Rahejas has completely broken down,” he told the court, and asked it to restrain the Raheja Group from selling any part of the developed land, alleging fraud on its part.
Abhishek Manu Singhvi, senior counsel for the Raheja Group, had proposed to settle the matter by offering the Wadias developed space equivalent to 12% of each project developed by the Rahejas in the future, instead of money.
He had also proposed the appointment of an independent chartered accountant to inspect past transactions involving individual sales executed by the Raheja Group to arrive at the correct market value of the transactions.
Nusli Wadia, chairman of the Wadia Group, and the Raheja Group have locked horns since 2008 over a contract signed in January 1995 for the 460 acres.
Wadia was at the time appointed administrator of the land by Bachoobai Dashkow, sister of Eduljee Framroze Dinshaw, who owned the land. Subsequently, Wadia entered into an agreement with Ferani Hotels for development of the land.
According to the agreement, Wadia would be entitled to 12% of the sale value of the individual parcels of developed land. Additionally, the Rahejas had to pay Wadia Rs 75 crore in the first 10 years of the agreement as a minimum guarantee.
However, in 2008, Wadia terminated the contract and filed a case in the Bombay high court alleging that the Gopal Raheja Group had committed fraud by selling developed portions of the land to associate groups at below market value, denying him of the right share from the sales.
According to Nariman, the actual market value of the land sold by the Raheja Group is Rs 10,264 crore. A 12% share on this works out to about Rs 1,231 crore, but the Wadia Group had received only Rs 156 crore as of 2008, he said. The Wadias have claimed Rs 1,370 crore as their rightful share, Nariman added.
According to the Rahejas, the money owed to Wadia is Rs 223 crore. So far, 60% of 350 acres—which is the area allowed for development—has been sold, for which the Rahejas have paid Rs 156 crore to the Wadia Group and deposited the remaining Rs 67 crore in an escrow account (money held by a third party on behalf of transacting parties) to be paid to the Wadias after the resolution of the court case, the Raheja Group told the court.
The total area already developed or being constructed on the land is 6.58 million sq. ft. “The extent of undervaluation in at least two sale transactions executed by Rahejas is Rs 149 crore,” Nariman told the court.
Singhvi, denying the allegation of fraud, said, “The Wadias have not submitted (a) single evidence or proof in the court suggesting that the price at which the sale was executed was lower than market price.”
Property analysts pegged the value per acre in the area at around Rs 50 crore.
Anuj Puri, chairman and country head of property advisory Jones Lang LaSalle Property Consultants (India) Pvt. Ltd, said a decision on the case has been long awaited because the location still has a lot of potential for development.
“The developers have done a good job on the land that has been developed because none of us really understood the great potential it had when it started,” said Puri, adding that residential rates would range from Rs 12,000-13,000 a sq. ft in the area, while lease rentals for office space are around Rs 75 a sq. ft.
The development in Malad started with retail and extended into commercial space and residences over the last few years.
Disputes over land titles and project approvals have delayed development at large, also restricting supply to the market, said Pranay Vakil, chairman of Knight Frank (India) Pvt. Ltd, a property consultancy.
“This area in Malad over the last 15 years has developed into a CBD (central business district) and has attracted not just IT (information technology) companies, but also people to come and live there,” Vakil said.
In a separate petition, the Rahejas have claimed that Wadia’s role as the estate agent had come to an end with the death of Dashkow in 2003.
Dinshaw, who died in the US in 1970, had willed his personal property to Dashkow. According to the will, following Dashkow’s death, the corpus was to be distributed to two trusts based in the US, namely the Salvation Army, New York, and the American Society for the Prevention of Cruelty to Animals, according to the Rahejas.
Hearing of that petition will begin on 1 August.
khushboo.n@livemint.com
