 "IL&FS crisis: Gujarat should take over Gift City, says former director")
A former independent director of Gujarat-based GIFT City, a 50:50 joint venture between Infrastructure Leasing & Financial Services (IL&FS) and the Gujarat government’s Gujarat Urban Development Company (GUDCL), wants the government to take over the GIFT City management and ask the Serious Fraud Investigation Office (SFIO) to investigate it.
The civil petition filed by D C Anjaria, former independent director of Gujarat International Finance Tec-City, or GIFT City, stated that since the SFIO was investigating IL&FS, it should also probe its group company in which it has a 50 per cent stake.
IL&FS’ nominee directors on the GIFT City board, who have been removed from the IL&FS board and have a lookout notice against them, have no right to be on the board, he said.
However, sources close to the development said that GIFT City had written to the government-constituted IL&FS board to replace its nominees.
Anjaria, the first independent director of GIFT Company since 2007, had pointed out irregularities in the petition he filed in the Gujarat High Court in 2015.
Anjaria, whose term ended in 2012, had filed a writ petition in the Gujarat High Court, highlighting several financial irregularities by IL&FS in the GIFT City venture, including giving contracts to companies such as project management consultancy firm Fairwood (for architectural and engineering services) before the GIFT City company was formed. He said in several cases no proper procedure was followed before giving the contract for consultancy.
A total of Rs 4 billion was paid to various consultants, many of whom were appointed prior to the formation of the company and in a week after formation of the GIFT Company in 2007, IL&FS without giving full details asked the board for approval, Anjaria alleged.
Later, however, GIFT Company had to file an arbitration suit to recover Rs 1.8 billion from Fairwood as it failed to deliver the promised consultancy and the case is still pending.
Anjaria’s other argument was that the Gujarat government gave land to the GIFT City company for free while IL&FS as an equity stakeholder had not invested money. Rather, by obtaining permission from Gujarat government to mortgage the land given to GIFT Company, IL&FS became a beneficiary of the land without paying the price for it as the land was on lease to the GIFT Company.
A public interest litigation in 2013 had alleged that the Gujarat government had given 662 acres free of cost to GIFT City, and had termed it as arbitrary and discriminatory. However, the Gujarat HC had found everything in order and the Supreme Court also endorsed it later, said a source.
It will be interesting to see how the court looks at similar cases of the same company when they are against a public private joint venture unlike the state government, as in the previous case.
On its part, the IL&FS was supposed to bring management expertise in the partnership against land leased by the other equity partner but it appointed outside consultants and also charged fees as out-of-pocket expenses from the company.
In a writ petition filed by Anjaria, several other irregularities have been mentioned. While emails sent to GIFT City for comments remained unanswered, GIFT CITY COMPANY said the case was sub judice and it was not prudent for them to discuss and comment.
However, in an advertorial published in August, Ajay Pandey, MD and CEO, GIFT City, said that Anjaria’s term ended in 2012 but he waited for three years to file the writ, which is a surprise and that he too wanted a consultancy contract from IL&FS but didn’t get it. This may be the reason for him to file a writ so late, GIFT City had alleged.
However, Anjaria says that, after his term ended, he had submitted a special report on the irregularities at GIFT City to the Gujarat government and was waiting for it to address his issues before moving court.
Anjaria said that the Gujarat government should have received its share from sale of development rights of GIFT City to private players but so far it has not received any payment. As a supporter of GIFT City and the state government, which has been deprived of income, he preferred to file the writ.
However, officials from Gandhinagar said that post development of GIFT City, valuations of the land and projects surrounding the GIFT City have increased substantially, which was a wasteland prior to the development of GIFT City.
An official also said that in 2011 when the GIFT project was not getting adequate response from the market after the global financial crisis, IL&FS group developed two towers at GIFT City which helped attract more investments subsequently.
