THE BACK GROUNDFIR: The state government intended to establish an international Integrated Project at Manikonda comprising (1) a convention centre with 300 rooms, (2) an 18-hole golf course, and (3) a multi-use zone comprising villas. APIIC was designated as the nodal agency which selected Emaar Properties, Dubai as developer. It was approved by the state government envisaging creation of special purpose vehicles (SPVs) with 26 per cent equity for APIIC. An MoU was signed between the developer and APIIC on Nov 6, 2002.In 2005 (when a Congress government was in place and YSR was chief minister), the government revised the structure of the GOs facilitating creation of three SPVs.SPV I: Cyberabad Convention Centre Private Limited (CCCP) was to build a business hotel and a convention centre. For this, 15 acres were contributed by APIIC on a lease basis.SPV 2: Boulder Hills Leisure Private Ltd (BHLPL) to build a golf course and resort hotel. For this purpose APIIC transferred 235 acres to BHLPL on lease for the golf course and 17 acres for the resort hotel.SPV 3: Emaar Hills Township Private Limited (EHTPL) was to build Emaar Hills, a township project on 258 acres. APIIC contributed its equity in the form of land at the rate of Rs 29 lakh per acre.A supplemetnary agreement dated April 19, 2005 was executed between APIIC and Emaar Properties with a share of 26 per cent and 74 per cent respectively. Restrictions were placed on the parties from bringing any third party or from altering the share capital without the consent of the other.ACHARYA: The relevant GOs was issued by the I&C Department based on the recommendations of a Group of Ministers headed by the then Finance Minister, on Jan 11, 2005 and Jan 27, 2005 after cabinet approval.REDUCTION OF APIIC EQUITYFIR: EHTPL entered into a development agreement with Emaar MGF on Nov 3, 2006 bringing in Emaar MGF as co-developer. Later they executed a development-agreement-cum-GPA dated July 25, 2007, rescinding the agreement of Nov 3 without the consent of APIIC. In terms of the development-agreement-cum-GPA, the entire land stood transferred to Emaar MGF and the revenue sharing on sales of villas, operations and maintenance and advertisements in the common areas was fixed at 75 per cent for Emaar and 25 per cent for EHTPL. In respect of commercial/leases/hotels. EHTPL was to share 5 per cent cent and the balance 95 per cent by EMAAR MGF. Thus the equity shareholding of APIIC which was fixed at 26 per cent was reduced to 5 per cent.ACHARYA: As regards reduction of equity, the petition/affidavits filed by the government and APIIC are based on a factual inaccuracy as the equity holding of APIIC even after the development agreement with Emaar MGF continued to be 26 per cent. This fact can be verified based on the returns filed with the Registrar of Companies by the EHTPL and the books of account of EHTPL prepared by auditors Ernst & Young.The very basis of the petition thus is erroneous and is not supported by facts. The alleged figure of reduced equity of 6.5 per cent has been arrived at by a dubious calculation, based on figments of imagination.As regards the issue of projected or assumed revenue loss, the allegations are based on assumptions which are baseless and factually incorrect. Far from reducing the projected dividend revenue to APIIC, on account of the development agreement with EMAAR MGF, APIIC stands to gain an additional Rs 324 crore.In view of the guidelines stipulated vide GO MS 86 and MA&UD Department, dated March 3, 2006, which provided for unlimited FSI, it was considered prudent to modify the inter se allocation of area for villa plots vis a vis apartments, in order to maximise the revenue for EHTPL, thereby enhancing the dividend to APIIC. This was the real rationale for adopting the development agreement, based on the revised business plan presented to the board of EHTPL on Nov 3, 2006 and no ulterior motives can be attributed to it.It is pertinent to note that as per the revised business model, the total built up area of apartments increased from 26 lakh sft to 97 lakh sft which required substantial additional investment. However, it was imperative to work out a mechanism such as the development agreement with Emaar MGF as the collaboration agreement does not contemplate additional infusion of equity by Emaar without proportionate equity enhancement by APIIC so as to ensure the continuation of 26 per cent shareholding by APIIC. Similarly, without additional infusion of equity, loans from financial institutions to cover the additional requirement of funds were not feasible. Thus the only option open was to work out a mechanism as was done through the development agreement duly conforming to the principles of the MoA and the Collaboration Agreement.APIIC’s INTERESTS NOT PROTECTEDFIR: B P Acharya, as vice-chairman and managing director and later the chairman and managing director of APIIC, was responsible for protecting the interests of APIIC in the integrated project as the nominee director of APIIC on the board of EHTPL. Though he was aware of the dishonest intentions adopted by EHTPL and Emaar MGF for selling the villa plots/apartments and also the induction of Emaar MGF as co-developer without the in-principle approval of the APIIC, he did not wilfully bring these facts to the notice of board of APIIC and thereby made the APIIC and the government suffer huge financial losses.ACHARYA: In fact, the litigation on the land pertaining to EHTPL continued in the High Court and Supreme Court and in view of it, I had addressed a letter to Emaar not to take up the activities of the township project (EHTPL) and to complete the other component of the project - HICC and Novotel at the first instance.Due to my intensive monitoring, while the first component projects of HICC and Novotel could be completed promptly, the golf course and EHTPL project which is now in controversy, were delayed due to pending litigation. It is evident from the above that as VC and MD of APIIC and also as nominee on the board of EHTPL, I duly discharged my duties til the end of my tenure in December 2009 and I have taken care to protect public interest and revenues due to the APIIC and government and also to ensure proper execution of the projects. All my actions in the matter were done in good faith and there was no intention to show any undue favour to EMAAR or anyone else.As the EHTPL component of the project commenced only in the beginning of 2009, the SPFV did not generate any surplus till Dec 2009 (end of my tenure in APIIC) and hence, the question of loss of revenue to APIIC at that stage is only hypothetical and premature.THE VIGILANCE ENQUIRY FINDINGSFIR: The Vigilance department initiated an inquiry into allegations that the transfer of the entire project by developer EMAAR Properties to Emaar MGF with all rights, and the agreement between Emaar MGF and M/s Sylish Holmes Private Limited was never brought to the notice of the APIIC and thereby the transfer was without the consent of the APIIC.As many as 18 plots were allotted to various beneficiary companies and individuals by Emaar MGF on June 16, but those companies never existed. The allotment to companies was made on a single day -- on Feb 23, 2010 -- whereas, even for allotment made on June 16, 2006, payments were shown to have been received on Feb 23, 2010 without any explanation. The allottee companies appeared to have come into existence only in Feb, 2010 and the individuals to whom plots were allotted were all employees of Emaar MGF even before Emaar MGF was inducted in the project. The companies to whom the plots were sold have neither done any business nor have financial capacity and no records of the transactions are available whether with EHTPL or with Sylish Holmes Private Limited.Out of the sales, huge revenue was earned by Emaar MGF by showing the sales at Rs 5,000 per sq yard as against the prevailing market value of Rs 14,000 per sq yard. A major part of the cash transaction was taken by EMAAR MGF possibly to Dubai but not a single paisa was credited to APIIC.Emaar MGF obtained loan of Rs 150 crore from Axis Bank to which EHTPL stood guarantee. In view of the transfer of all rights of EHTPL to Emaar MGF, EHTPL remained only a shelll company without any assets. The top management of EHTPL and Emaar MGF is the same person who is the chief executive officer of both companies and the finance head (south) in both the companies is common.ACHARYA: It is important to note that while the development agreement with Emaar MGF mainly pertains to the construction of apartments which commenced only in 2009 the sale of villa plots which is as per the marketing arrangement agreement signed with Stylish Homes in January 2005, was much before my joining APIIC on May 19, 2005.The marketing arrangement was never placed in the board of EHTPL for approval nor was it informed to the board of EHTPL till I was on the board of EHTPL. The agreement with Stylish Homes (entered into in Jan 2005) as stated in the affidavit of the APIIC was prior to entering into a shareholder agreement and before transfer of land by APIIC to EHTPL and also prior to my joining APIIC. All their transactions in collecting advances for the villa plots were made behind my back and I was not aware of any of their activities.Similarly, the direct sale of villa plots by Emaar-MGF to certain bogus companies which has been revealed in the V&E report was actually done in Feb/March 2010 after I left APIIC in December 2009. Perhaps, the records about initial transactions made in this regard have been fabricated post facto. In any case, this was never brought to my notice and I had no role whatsoever in this matter. I cannot be held liable for actions by others without my knowledge and I wish to reiterate that all my actions were done in good faith and without any ulterior motive. It is important to note that in none of these cases of sale of plots, sale deeds have been registered and the agreements for sale can be cancelled at any time, thereby undoing the damage if any in this regard.GOVT KEPT IN THE DARKFIR: The High Court has taken note of the Vigilance report that the development agreement was entered into by EHTPL with Emaar MGF on July 25, 2007 by which the earlier assignment deed/development agreement dated Nov 3, 2006 was cancelled but this document was not brought to the notice of either the board of EHTPL or other joint venture companies as well as APIIC. Officers of the state government connected with the affairs of APIIC appear to have withheld information from the government as a result of which the development agreement with Emaar MGF became effective, giving absolute rights to Emaar MGF and almost exclusive rights in profit sharing. EHTPL merely remained a shell company without any assets and without any tangible rights whereas Emaar MGF through its agent Sylish Home Real Estate Private Limited is shown to have sold villa plots and flats regarding which several transactions on preliminary scrutiny were found to be doubtful by the Vigilance department.ACHARYA: It is pertinent to note that the interim report of the director general of Vigilance and Enforcement submitted to the High Court in this regard is an ex parte report and no opportunity was give to the officers concerned to explain their stand. Hence there are many glaring factual errors in the report. This is in gross violation of principles of natural justice as no opportunity was given to the public servants concerned to defend themselves.
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