Punjab National Bank, DLF, Shapoorji Pallonji slum redevelopment controversy of Rs.10,000 crore

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A high-stakes dispute has erupted between three top builders involved in the redevelopment of a prime slum property in south Mumbai. The project, with a free sale value estimated at Rs 10,000 crore, has become the focal point of a legal battle between DLF, Shapoorji Pallonji, and Hubtown.

Background

DLF, Shapoorji Pallonji, and Hubtown formed a joint venture company called Joyous Housing LTD (JHL) to redevelop a 17-acre slum property at Tulsiwadi near Willingdon Club at Mahalaxmi. The project involved providing homes free of cost to slum dwellers under the rehabilitation scheme. The three developers were entitled to about 12 lakh sq ft in the free sale component valued at Rs 10,000 crore in total.

To finance the construction, JHL took a loan of Rs 800 crore from Punjab National Bank (PNB). The stakes held by all three shareholders were pledged as additional security to PNB.

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Dispute

In January 2022, JHL failed to repay the loan, and its account became a Non-Performing Asset (NPA). PNB tried to auction the project but drew no bids. The bank then issued a Default Notice, indicating its intention to sell the pledged shares.

PNB offered the pledged shares to the existing shareholders of JHL, giving them the right of first refusal. The reserved price for sale was fixed at Rs 1,075 crore.

DLF offered to pay Rs 1,450 crore for the entire JHL shareholding, including those of Chinsha and Hubtown, but got no response from PNB.

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While DLF’s offer was pending, PNB assigned the loan in favour of Omkara Asset Reconstruction Company Ltd.

Omkara then sold the pledged shares held by DLF and Shapoorji Pallonji to an undisclosed third party for an undisclosed sum.

Allegations

DLF and Shapoorji Pallonji have alleged that the sale of their pledged shares was a collusive act between PNB, Omkara, and Hubtown. They claim that Hubtown’s pledged shares were conveniently left out of the sale, while they were forced to cede their shareholding in the project.

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DLF and Shapoorji Pallonji have also questioned the assignment of the loan by PNB to Omkara. They argue that the assignment was not done in a transparent manner.

Legal battle

DLF and Shapoorji Pallonji have taken to court PNB, Omkara, and Hubtown. They are seeking to have the sale of their pledged shares declared null and void.

The Delhi High Court has directed Omkara to disclose the identity of the transferees to whom it has sold the pledged shares. The court has also observed that the sale of the pledged shares may have undermined DLF’s right of redemption under the Contract Act.

The outcome of this legal battle will have far-reaching implications for the future of the slum redevelopment project.

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