Why should DLF give unsecured interest free loans to Robert Vadra?

DLF’s reply:

We wish to categorically state that the DLF has given NO unsecured loans to Mr. Vadra or any of his companies.

An amount of Rs.65 crore was given as business advances for the purchase of land as per standard industry practice comprising the following two transactions.

M/s Skylight Hospitality Pvt. Ltd. approached us in FY 2008-09 to sell a piece of land measuring approximately 3.5 acres approximately just off NH 8 in Sikohpur village, district Gurgaon. This was licensable to develop a commercial complex and the LoI from the government of Haryana to develop it for a commercial complex had been received in March 2008 itself.

DLF agreed to buy the said plot, given its licensing status and its attractiveness as a business proposition for a total consideration of Rs.58 crore. As per normal commercial practice, the possession of the said plot was taken over by DLF in FY 2008-09 itself and a total sum of Rs.50 crore given as advance in instalments against the Purchase consideration. After receipt of all requisite approvals, the said property was conveyanced in favour of DLF. The average cost of the licensed property in the hands of DLF works out to approx Rs.2,800 psf of FSI, which was comparable with similar transactions in that area. The price of the said property has significantly appreciated today to the benefit of DLF and its shareholders.

M/s Skylight Group of companies also offered us in FY 2008-09 an opportunity to purchase a large land parcel in Faridabad and accordingly, DLF agreed to advance Rs.15 crore in instalments simultaneous to the commencement of due diligence of the said land parcel. After concluding that the said land had certain legal infirmities, we decided against its purchase. Accordingly on DLF’s request, the Skylight group refunded the advance of Rs.15 crore in totality.

To reiterate, at no stage was an interest free loan ever given to the Skylight group. There were two sets of Business Advances against purchase of property, one of which amounting to Rs.50 crore resulted in a satisfactory conclusion of purchase of commercial land and the second advance of Rs.15 crore was fully refunded.

IAC’s rebuttal

DLF has said that no unsecured loans were ever given. This is far from the truth for the following reasons:

a. If one looks at the 2009-10 balance sheet of Real Earth Estates Pvt. Ltd. (Robert Vadra (RV) group company), there is an entry called “Loan from DLF Ltd – Rs.5 crores”. This has been declared as an unsecured loan in the return filed by them in Registrar of Companies.

b. In the same year, Rs.50 crore has been given by DLF to Sky Light Hospitality Private Ltd (SLH), which is another RV group company. According to DLF, SLH sold its land at Manesar for Rs.58 crore to DLF and Rs.50 crore was an advance paid to SLH. Interestingly, this Manesar land was acquired by SLH just a year back for Rs.15.38 crore. How did the price of this land soar to Rs.58 crore? DLF claims that DLF made an advance payment of Rs.50 crore and took possession of this land in 2008-09 itself. This is completely incorrect. The balance sheet for the year ending March 31, 2011 shows that the advance made by DLF as well as the land at Manesar are both still in the possession of SLH. Is it a normal business practice to give an advance of 90 per cent of the amount of transaction and let it remain with the seller for more than two years without even bothering to take possession of land? Is it a normal business practice to let this advance remain interest free? DLF itself borrows money from several sources at quite high cost. Interestingly, SLH used this advance to purchase 50 per cent equity in DLF’s own hotel.

c. SLH received another Rs.10 crore from DLF as “Advance from DLF Ltd (Land account)”. This is also interest free. This money was received by SLH in 2008-09 and remained with them for more than 2 years.

d. DLF advanced another loan of Rs.15 crore in 2008-09 to SLH. DLF claims that this was meant as an advance for some property in Faridabad in which, some legal problems were discovered later. After using that money for about a year, SLH returned it to DLF. DLF did not charge any interest on that. Does that appear to be a normal business practice?

e. What is the difference between the unsecured loans received by Kanimozhi and Robert Vadra?

Why should DLF sell its properties to Vadra at throwaway prices and on the basis of funds obtained by Vadra from DLF itself?

DLF’s reply: ARALIAS

Mr. Vadra purchased one apartment for his personal use in Aralias in September 2008 at the then prevalent market price of Rs.12,000 psft. The total purchase consideration of Rs.11.90 crore was paid by Mr. Vadra, for which the apartment was conveyanced in his favour. We may also mention that while Aralias was initially launched at Rs.1,800 psft, Mr. Vadra’s purchase at Rs.12,000 psft is among the highest prices at which the company sold the apartments in Aralias. The alleged figure of Rs.89 lakh as total purchase consideration is completely incorrect.

IAC’s rebuttal

In the balance sheet of Sky Light realty (SLR) Pvt. Ltd. for the year 2009-10, the Aralias flat is shown to have been purchased for Rs.89.41 lakh. However, in the next year’s balance sheet, there is an increase of Rs.8.57 crore in the property at Aralias. Why did that happen? For how much was this property purchased and when was it purchased? A story appeared in the Economic Times in March 2011 raising questions about Mr. Robert Vadra’s properties. Was this amount increased immediately thereafter? DLF in its response has said that the flat was purchased by the Vadras in 2008 for their personal use and it was transferred to them in the same year. Then how is it that the value of the flat is shown at Rs.89.41 lakh in 2009-10 and suddenly it becomes Rs.10.4 crore (including furniture) in 2010-11.

DLF’s reply: MAGNOLIAS

As part of its real estate business, Skylight group had invested in Magnolias apartments at a price of Rs.10,000 psft in March 2008, which was the prevalent offer price of the company for all its customers. The initial launch price was only Rs.4,500 only at which price a large number of customers made their purchases from the company. The Skylight Group also booked some apartments in the company’s Capital Greens project at the then Company’s offer price of Rs.5,000/6,000 psft which was availed by more than a thousand other customers.

There is no question of offering, let alone selling, Mr. Vadra or his group companies any property at a throwaway price. The allegation that 7 apartments in Magnolias were sold for Rs.5.2 crore only is also completely baseless.

At NO stage was a property ever sold to the Skylight group below the then offered price to all customers. The gains, if any, made by Skylight group, by subsequent retrading would be similar to the gains made by those customers and in line with applicable market price appreciation experienced by all DLF customers in general.

IAC’s rebuttal DLF has said that the Magnolias flats were sold at Rs.10,000 psf to Sky Light Group. At that rate, the cost of each Magnolia flat comes to Rs.5 crore. But in the balance sheet for the year 2009-10 for SLR Pvt. Ltd., it is clearly mentioned in Current assets — “DLF Ltd 7 flats Magnolias – Rs.5.232 crore”. Did Vadra file a wrong balance sheet with the Registrar of Companies?

It is well known that DLF has been given 350 acres of land by Haryana Government for the development of Magnolias project in Gurgaon (where Vadra was allocated 7 apartments). Is that the quid pro quo for DLF giving Vadra the seed money for the purchase of these properties?

DLF’s reply:

An attempt is being made to confuse the Magnolias project with an independent project of 350 acres which was tendered by the Haryana State Industrial and Imports Development Corporation (HSIIDC) for a “Recreation and Leisure project” by a series of well advertised international tender processes in 2009. DLF emerged as the successful bidder after a thorough technical and commercial bidding process carried out in a highly transparent manner. The project is still at a nascent stage.

It may be clarified that DLF secured the project on its own merits by fulfilling the eligibility criteria through a competitive bidding process and NOT through a discretionary allotment by the Haryana government as alleged. We further state that DLF has not been allotted any lands by the State governments of Haryana, Rajasthan or Delhi.

IAC’s rebuttal

Some of the favours given by the Haryana government in this project:

1. International bids were invited for this project. Three parties applied — DLF, Country Heights and Unitech. Financial bids of Unitech and Country Heights were not even opened. They were rejected at the technical stage saying that they did not have experience in constructing and maintaining a golf course. This condition was introduced at the time of evaluating technical bids. Doesn’t it raise suspicion whether this was done to reject other parties and to grant this contract to DLF? From news reports, it is understood that the other two bids were much more than DLF’s bid. This means that the government suffered a loss by giving it to DLF.

2. Out of 350 acres, 75.98 acres of land was owned by the Haryana Urban Development Authority (HUDA) and 275 acres of land belonged to HSIIDC. HSIIDC’s mandate is to encourage industry in Haryana. It normally uses the land in its possession to carve out land plots for industrial use. HUDA uses its land for residential purposes. However, in this case, they were expected to simply transfer their land to DLF.

3. Out of 275 acres of land with HSIIDC, 91.97 acres of land is forest land covered under the Punjab Land Preservation Act (PLPA). SC has ordered that lands covered under PLPA should be treated as forest land and cannot be used for non-forest purposes. 161.03 acres of land is under Aravali plantation. This also cannot be used for any other purpose. The Haryana government has assumed the responsibility of seeking permissions from all Central and State government authorities to facilitate it for DLF. Interestingly, the Haryana government has given all this land to DLF without even getting these permissions.

4. No Environmental Impact Assessment was done. The process is believed to have been started but was cancelled midway.

5. As mentioned above, HUDA had to part with 75.98 acres of land for this project. HUDA’s job is to develop residential and commercial plots for the common people. They have done so in the past by developing various sectors in Gurgaon. HUDA had acquired this land a few years ago from the farmers of Gurgaon saying that this land would be used for “Public purpose” for various sectors in Gurgaon, constructing roads, etc. However, now this land was being transferred to DLF, not for “public purpose” but for private profit. This was a fraud on those farmers who had sacrificed their land earlier.

Source: Press Releases from India Against Corruption and DLF