UP govt revised the norms for allotment of commercial plots in the city that make it a must for individual bidders, and not just their holding companies, to independently meet all technical criteria, such as net worth, solvency and turnover.
While the new guidelines are expected to enhance transparency in the commercial land allocation process, they also seek to eliminate procedural irregularities that sparked a controversy over the allotment of prime plots allotted to two subsidiaries of the Gurgaon-based real estate company M3M earlier this year.
In May, the state govt cancelled the allotment of plots to Lavish Buildmart and Skyline Propcon for violating eligibility terms outlined in the Authority’s e-brochure for the scheme. Lavish Buildmart was allotted a plot in Sector 94 worth Rs 827.4 crore through a commercial plot scheme in Nov 2022, while Skyline Propcon was allotted a Rs 176.5-crore worth plot at Sector 72 in Feb last year.A complaint filed on Feb 28 said the companies were allotted the land at a non-competitive rate.
The cancellation order, which was issued by UP industrial development department principal secretary Anil Kumar Sagar, stated, “In both cases, the bid quotes were increased by only Rs 5 lakh over the reserve price. Although there is a provision to consider a single bid after extending the tender date twice by the Authority, the aim of any tender is to get a competitive rate, which was not the case here.”
On June 12, UP govt, however, repealed the order cancelling the allotments after considering reports from the Noida Authority and an appeal from the two companies.
In its 2021 performance audit report, the Comptroller and Auditor General (CAG) too flagged eligibility conditions that allowed holding companies to rely on their qualifications even when their subsidiaries, which were bidding for plots, failed to meet basic requirements.
The CAG report said the commercial plot allotment scheme’s brochure allowed a company to apply through its subsidiary, provided the parent company held at least 51% shares in the subsidiary. The brochure also stated the subsidiary company must independently meet minimum net worth, solvency and turnover criteria. It also said that the qualifications of the holding company or its subsidiaries could also be considered. The CAG highlighted that this clause created ambiguity in determining which company’s qualifications would be used for evaluation.
The lack of clarity could lead to procedural irregularities and misinterpretation during the evaluation of bids.
The revised guidelines, issued by the principal secretary on Tuesday, stated that in cases of consortiums, involving holding and subsidiary companies, the technical qualifications of the holding company can be considered, provided it owns 100% equity in the subsidiary and retains it throughout the project. For consortiums of unrelated companies, only the qualifications of those holding at least 26% equity will be considered.
Noida Authority has been asked to implement the changes in all future land allotments. Sources in the Authority said though the proposed changes had been incorporated into the Authority’s terms and conditions for commercial allotment already, these would make the govt’s decision to revoke the land allotment cancellation to the M3M subsidiaries stronger.
