Commonwealth Games Village

COMMONWEALTH GAMES VILLAGE

2/11/2011

Second Report of

Second Report of HLC

Vigyan Bhawan Annexe, New Delhi

HIGH LEVEL COMMITTEE

2011

Commonwealth Games

Village Second Report of HLC

V I G Y A N B H A W A N A N N E X E , N E W D E L H I

Commonwealth Games Village

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Contents Chapter Particulars Page No.

Acronyms 2

Executive Summary 3

1 Introduction 9

2 Location of Games Village 14

3 Planning and Bidding 21

4 Project Development Agreement and Execution 31

5 Bailout Package and Release of Funds 41

6 Completion and Handover 69

7 Main Findings 75

8 Recommendations 81

Appendix 1: List of Documents Reviewed 82

Appendix 2: List of persons interviewed 85

Annexures


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Acronyms AGL Above Ground Level

ACIL M/s Ahluwalia Contracts (India) Ltd.

BSES Bombay Sub-urban Electric Supply

CGV Commonwealth Games Village

CGF Commonwealth Games Federation

CFO Chief Financial Officer.

CPWD Central Public Works Department

COS Committee of Secretaries

CW&PRS Central Water and Power Research Station

DDA Delhi Development Authority

DJB Delhi Jal Board

DPCC Delhi Pollution Control Committee

DUAC Delhi Urban Art Commission

Emaar MGF M/s Emaar MGF Construction Private Limited

FM Finance Member

FAR Floor Area Ratio

GoM Group of Ministers

GoI Government of India

HLC High Level Committee

HIG High Income group

ITDC Indian Tourism Development Corporation

LIG Lower Income Group

LG Lieutenant Governor of Delhi

MCD Municipal Corporation of Delhi

MIG Middle Income Group

MoYAS Ministry of Youth Affairs and Sports

MoUD Ministry of Urban Development

MoEF Ministry of Environment and Forests

NDMC New Delhi Municipal Council

NEERI National Environmental Engineering Research Institute

NOC No Objection Certificate

OC Organizing Committee

PIL Public Interest Litigation

PPP Public Private Partnership

PDA Project Development Agreement

PD Project Developer

PWD Public Works Department

RFP Request For Proposal

RFQ Request For Qualification

SBI State Bank of India

SC Supreme Court of India

YJA Yamuna Jiye Abhiyaan


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Executive Summary

Nodal Agency for Games Village 1. Delhi Development Authority (DDA) is the nodal agency for urban planning and its implementation

in Delhi. It has been the primary organization for undertaking urban development projects in Delhi

since 1957.

2. DDA was assigned the responsibility for development of the Games Village, arguably the most

important infrastructure necessary for holding the Commonwealth Games, 2010. It was designed

to accommodate about 8000 athletes and Team officials during the Games.

3. The Games Village’s residential zone was developed by M/s Emaar MGF Construction Private

Limited (Emaar MGF). The residential zone consisted of 34 residential towers and 1168 apartments.

The unit mix of the total apartments constructed was as under:

Particulars 2 Bedroom 3 bedroom 4 Bedroom 5 Bedroom Total

Number of

apartments

31 765 209 163 1168*

*Source – Data submitted by Emaar MGF to DDA (March-April 2009)

Loss of Precious Time 4. While the Games were awarded to India on 13th November, 2003, by when the site for Games

Village had also been frozen, the decision on the mode of development of the Games village was

finally taken and agreed to by all stakeholders only by January 2006. This delay of over two years in

finalizing the development strategy proved costly to DDA in so far as it prevented DDA from

considering an alternative in the situation which emerged in 2008-09.

Development Costs associated with Site 5. The site selected for the development of the Games Village suffered from several shortcomings,

which got highlighted with the passage of time. Due to this particular location, the site necessitated

an expenditure of about 633.06 crore on construction of an elevated road over Barapullah Nullah

(linking CGV to JLN Sports complex), Flyover on NH 24 near the Games Village (to provide


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uninterrupted ingress and egress into and from CGV) and noise barriers along NH24 and adjacent

railway track. The details of the cost are in Chapter 2 of the Report.

Project Execution in Public Private Partnership mode 6. According to DDA documents, the decision to adopt the PPP mode for developing the

Commonwealth Games Village was taken keeping in view constraints of scale, time, quality,

specifications and the need for 4000 rooms during the Games period. Based on their

recommendation, Government approval for implementation of the project on a Public Private

Partnership mode (PPP) was granted. However, the PPP mode of execution, little understood by

DDA, was distorted to such an extent by the Project Developer and DDA that it virtually ceased to

be a PPP project. Instead it became a project implemented by DDA and constructed by the

Developer through a sub-contractor.

Deviations from Model Concession Agreement in PDA

7. DDA did not include certain key provisions of the Model Concession Agreement, in particular, those

relating to (a) establishing an escrow account and, (b) audit in the Project Development Agreement

(PDA) signed with the selected Project Developer. This significantly diluted the ability of DDA to

monitor the implementation of the CGV project and make a proper assessment of the ‘fund

requirement’ of the Project Developer in 2009.

Failure to meet Contractual Obligations 8. Emaar MGF sought concessions / relaxations not contained in the PDA. These included, inter- alia,

extension on milestones and financial assistance. Emaar MGF contrived an ‘emergency’ situation;

DDA chose neither to enforce contractual rights nor to resist Emaar MGF demands.

9. DDA spent substantial amount on items which were to be taken up by Emaar MGF and has to

recover the amount from the Project Developer. The total amount due from Emaar MGF on

account of quality issues and non-performance aggregates to 96.33 crore. However, this amount

is under dispute. Details are in Chapter 6 of the Report.


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Fallout of ‘emergency’ situation

10. According to the Project Development Agreement signed on 14th September, 2007, DDA and

Emaar MGF were to share the residential apartments in the ratio of 1:2. This was effectively

changed to 1:0.63 with the decision to bail out the Project Developer through purchase of 333

apartments from Emaar MGF’s share of the apartments. It should be noted that the Project

Developer had asked for 321 crore as loan at normal rate of interest or purchase of 250

apartments. It was DDA’s decision to purchase 333 apartments.

11. The ‘Bailout package’ was premeditated, suggestive of the outcome preceding the process. DDA

formed a Valuation Committee which, in turn, appointed two Independent Consultants to

determine fund requirement of Emaar MGF and the value of apartments (in March 2009) for

arriving at the number of additional apartments to be purchased by DDA. A Negotiation

Committee, which was set up with the approval of LG, was unable to reach a mutually acceptable

sale price with Emaar MGF. Emaar MGF, then addressed a letter to LG dated 22.04.2009 stating

their readiness to accept a rate of 11,000 per sft which was endorsed with alacrity on 24.04.2009

at a meeting chaired by LG, attended by Secretary and Joint Secretary, Ministry of Urban

Development, Vice Chairman, DDA and Finance Member and Engineer Member, DDA. The locus

standii of this Group to take such an important decision is not known. It is surprising that such a

decision was not taken by the competent Authority: DDA. Such a major decision with large financial

implications, not being taken by the competent authority, renders it suspect. It was referred to the

Authority only in June 2009 after the Bailout Agreement had been signed in May, 2009.

12. The Technical consultants, based on the project specifications, estimated the cost price of the

project at 934.49 crore (excluding the land cost). This estimation was later ignored. In the process

of finalizing a sale price, which was also agreeable to Emaar MGF, the sale price recommended by

the Financial Consultants was revised several times to finally accommodate 10% cost of capital and

15% Developer’s margin. It may be noted that as per industry norms, cost of capital is borne by the

Developer. In the calculations, the sub-contract price of 1168.21 crore was accepted at face value

even though no signed contract was shown to the Financial consultant.

13. A copy of the sub contract between Emaar MGF and M/s Ahluwalia Contracts (India) Ltd., which

was apparently not earlier available to the DDA, was obtained and referred to a Consultant of the


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HLC. Based on this document, the TDS returns filed by Emaar MGF and the Project Report

submitted to SBI by the PD, the Consultant has calculated that the total estimated Project Cost was

1368.42 crore and the per sft. Cost, inclusive of Developer’s margin, should not have been more

than 7829 per sft.

14. Expert analysis of the cash flow statements of Emaar MGF Constructions Pvt. Ltd., Emaar MGF Land

Ltd. and the Group for the years 2007-08, 2008-09 and 2009-10 reveal that the Project Developer

did not ‘really’ require the fund infusion from DDA for completion of the project and it was just a

‘ruse’ for selling off a huge chunk of its share of unsold flats to a bulk buyer at a price that was

‘acceptable’ to them and at a time when the real estate market was sluggish!

Undue Favours to Project Developer 15. Some of the ‘undue favours’ that were bestowed on the Project Developer by DDA are as under:

(a) Purchase of apartments

DDA purchased the apartments from Emaar MGF at the rate of 11,000 per sft, which was way

higher than the rate of 7829 per sft. arrived at by the Consultant of HLC based on ‘assessed

cost’ of the Project or the ‘market price’ of 9068 per sft arrived at by HLC. The sale price paid

by DDA was also much higher than what had been recommended by the experts of DDA and

the highest price initially recommended by the Valuation Committee, which was 9,720 per sft.

Whether based on the ‘assessed cost’ of the Project or the ‘market price’ determined by HLC,

the purchase of 333 apartments by DDA @ 11,000 per sft. caused undue financial gain for

the Project Developer of an amount ranging between 134 crore to 220 crore.

(b) Recovery from Customers

The Valuation Committee based on the advice of the experts recommended to the Negotiation

Committee that the funding by DDA to the Developer under the ‘Bailout package’ should be net

of the funds received by Emaar MGF from the sale of apartments. While this advice was noted,

the Negotiation Committee failed to include any definitive clause in the Bailout package to

ensure that cognizance of this stream of funds was taken while deciding the installment

amount to be released by DDA to the PD.


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(c ) Unauthorized payments

The Bailout Agreement specified the expenditure which could be met through the funds

received from the bailout package aggregating to 766.89 crore. Emaar MGF made payments

to other Group companies, incurred marketing expenditure etc. (as indicated in their utilization

certificate) which was not authorized and hence has been termed ‘unauthorized expenditure’

by the Financial Consultant. As per the utilization certificate for the period ending 3rd March

2010, such payments aggregated to 64 crore. Further, excess funds aggregating to 192.71

crore from the Bailout package with Emaar MGF as on 31st March, 2010 were parked by the

Developer in a short term investment fund.

16. The summary of the financial favours/ loss to DDA by a series of decisions taken to support Emaar

MGF are set out in the following Table:

S.NO. Particulars Claim ( Crore) Reference

I Non levy of Liquidated Damages on the Emaar MGF as per the Agreement terms – DDA waived the damages

81.45 Chapter 4

II Bailout Package

A Purchase of apartments at a very high rate of 11,000 per sft

134.00 – 220.00 Chapter 5

B Recovery from customers and sale of new apartments not reduced from the fund requirement for the project (as recommended by the Financial consultants to the Valuation Committee)

686.34 Chapter 5

C Unauthorized payments contrary to the Agreement 64.00 Chapter 5

D Investments (as on 31st March, 2010) 192.71 Chapter 5

Poor Monitoring 17. Although DDA had an oversight and monitoring responsibility, it failed to detect contract violations

/ other problems. Records reveal that on several occasions the Monitoring Committee discussed

the significant delays and other related issues but the same were documented in a very

perfunctory manner.


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Box: 1 Games Village Saga

DDA was the chosen agency for development of the Games Village for CWG, 2010. The Village was ‘over-

designed’ to accommodate 8000 athletes and officials while provision for 6000 would have been

adequate. This was mentioned in the Report of the Evaluation Commission set up by CGF in October 2003

itself.

Over two years were frittered away in deciding the development strategy. Ultimately, it was decided to

adopt the ‘Public Private Partnership’ model for development of Games Village in January 2006 and the

Project Development Agreement could be signed only in September, 2007.

Trouble began to brew by early 2008 and in February, 2009, the Project Developer (Emaar MGF) formally

sought financial assistance from DDA/Government. Bailout package was given to the Developer on his

terms and conditions as by then DDA had concluded that it had no other ‘viable’ option left if the Games

Village was to be ready in time. So, as with other CWG projects, in the “national interest” DDA decided to

forego terms and conditions of a valid legal document – the Project Development Agreement – and

sacrifice its own interests.

DDA’s decision to purchase 333 apartments from Emaar MGF’s share in 2009 only helped the Project

Developer to offload his share of ‘unsold’ flats in bulk at a price that was acceptable to him and was way

above the prevailing market price. Funds made available by DDA in 2009-10 enabled the Project

Developer to divert funds to various applications other than the CGV Project such as repayment of interest

bearing loans, investment of surplus funds into mutual funds and transferring funds to other Group

companies.

Finally the Games Village was ready but at a huge cost. Key principles of PPP model were ignored and the

only principle that remained was that ‘risk and loss would be borne by DDA while profit would be of

Emaar MGF’.


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Chapter 1: Introduction Bidding for the Games

1.1 In May 2003 Government of India gave its nod to the Indian Olympic Association (IOA) to bid for

the Commonwealth Games 2010 (CWG) at an estimated expenditure of 296 crore towards sports

infrastructure and conduct of games, with expenditure on security and Games Village to be incurred by

the Government and Delhi Development Authority (DDA)

1.2 India was awarded the rights to host the Commonwealth Games (CWG) for 2010 by the

Commonwealth Games Federation in November 2003.

1.3 Indian Olympic Association/ Organizing Committee together with the Government of National

Capital Territory of Delhi and Government of India entered into the Host City Contract with the

Commonwealth Games Federation on 13th November, 2003 for holding of XIX Commonwealth Games

in Delhi during 03-14 October 2010.

1.4 The major responsibilities regarding the successful delivery of the XIX Commonwealth Games

were of the OC, GNCTD and GOI. The major responsibilities of the stakeholders were as follows:

Key Activities Stakeholders

Sports Infrastructure Ministry of Youth Affairs & Sports; Govt. Of Delhi; Delhi

Development Authority (DDA) and New Delhi Municipal

Council (NDMC)

City Infrastructure City Government; Municipal Council of Delhi (MCD) and

NDMC

Games Village Delhi Development Authority (DDA)

Conduct and Delivery of Games Organizing Committee (OC)

Host Broadcasting and Media Press

Centre

Prasar Bharati and Ministry of Information &

Broadcasting

Tourism and Accommodation for

Tourists

Ministry of Tourism

Security Ministry of Home Affairs


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Role of DDA

1.5 DDA was created in 1957 under the provisions of the Delhi Development Act, 1957 to promote

and secure the planned development of Delhi. The charter lists the following objectives as incidental

and ancillary to the working and functioning of DDA:

To formulate a Master Plan for covering the present and future growth of Delhi and to

promote and secure the development of Delhi according to the plan covering all possible

activities.

To acquire, hold, manage and dispose of land and other property.

To carry out building, engineering, mining and other operations.

To provide services and amenities incidental to the above

1.6 DDA was given the following mandate with respect to the XIX Commonwealth Games:

Development of the Games Village for the accommodation of the participants during the

Games;

Development of the Yamuna Sports Complex;

Development (including up-gradation) of the Siri Fort Sports Complex;

Development of Vasant Kunj flats to accommodate tourists during the Games; and

Development of 33 hotels to accommodate the projected tourists during the Games.

Organizational Structure

1.7 The present organization structure of DDA is illustrated in the following chart:


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1.8 To ensure timely completion of the CWG projects, various divisions were created by DDA under

the supervision of Director (Sports) and entrusted with the responsibility of construction of the same.

Under this format, 13 divisions were formed.

a. Division 1 - 9 : Responsible for civil work at various projects

b. Division 10 - 13: Responsible for electrical work at various projects

Governance Structure for CWG projects - DDA

1.9 Various committees were constituted by DDA to monitor the progress and provide constant

quality assurance with regards to the CWG project. Four major committees were constituted for this

purpose, namely:

Monitoring Committee (CGV)

The Monitoring Committee was formed under the chairmanship of an Independent engineer,

(who was unanimously elected by the two parties to the Agreement) and had Chief Engineer,

SEZ, DDA and a representative of the Project Developer for the Games Village project, as

members. The committee was mandated to meet every month to review the progress of work

at the Commonwealth Games Village

Chairman, DDA (LG of

Delhi)

Vice Chairman

FinanceMember

Engineer Member

Principal Commissioner


Principal Commissioner cum Secretary

Chief Officers, Engineers ,

Commissioners, & Directors

Chief Legal Advisor


(CWG)

Commissioner Planning

Chief Vigilance Officer


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Stadia Committee

The mandate prescribed for the Stadia Committee was to conduct regular meetings to address

all issues relating to the development of the Games Village site. Weekly meetings were to be

held to assess the progress of the project and resolve all project related issues relating to

flyover, residential facility, temporary overlays, practice venues etc.

Weekly Site Coordination Committee

This committee was formed on 27th May 2009 by the Principal Commissioner (CWG) to facilitate

internal co-ordination amongst the contractors, consultants and the DDA engineers and

resolution of issues of mutual interest.

High Powered Committee (HPC)

The Vice Chairman, DDA constituted a HPC to monitor the progress regarding preparation for

the Commonwealth Games. The committee was empowered to monitor and ensure early

solutions of all issues relating to the Commonwealth Games. Following were the committee

members:

Finance Member, DDA - Chairman

Engineer Member, DDA

Pr. Commissioner (CWG), DDA

Director Sports (Member Secretary), DDA

Representative of Delhi Govt. (GNCTD)

Representative of Organizing Committee, Commonwealth Games 2010

Copies of orders constituting the above mentioned Committees are at Relevant Document 1.

Scope of Report

1.10 This Report reflects the findings and conclusions of the High Level Committee (HLC) on various

aspects relating to the development of the Commonwealth Games Village for providing

accommodation to the participating athletes and Team officials.

1.11 The HLC through its team of officers / experts examined the performance of the DDA against

the Terms of Reference of the Committee, with special focus on:


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• Planning and execution of development of Games Village – execution and delivery with

reference to time, cost and quality

• The effectiveness of the organizational structure and governance, in particular, within DDA

• Weakness in management, alleged irregularities, wasteful expenditure and wrongdoing in

performance of the tasks assigned to DDA

Criteria

1.12 The HLC evaluated the management and performance of the key functions carried out by DDA

in the background of reasonable timelines for initiating and completing the projects in accordance with

established standards, generally accepted best practices and conformity to good governance.

Methodology

1.13 The key procedures carried out for the purpose of review were:

a. Identification and examination of relevant file notes of DDA, Ministry of Urban

Development, extracts of the Notes for Cabinet, records of the meetings of GoM, and

correspondence on the subject matter. The list of documents reviewed is at Appendix 1.

b. Interview with officers and functionaries responsible for planning, execution and

monitoring of the CGV project. The list is placed at Appendix 2.


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Chapter 2: Location of the Commonwealth Games Village

2.1 The Games Village is located in Pocket III of Sub-Zone 6 of the River Yamuna, developed on an

area of 59.28 hectare between river Yamuna and the flood protection bund on the eastern side.

2.2 The HLC has been informed by DDA that the location of the Games Village was identified by the

Planning Department of DDA in consultation with the then LG, Shri Vijai Kapoor, in the year 2003.

However, there is no documentary evidence to suggest the type of inputs that were taken into account

before it was concluded that the present location of the Games Village is the ‘best’ available site.

2.3 On 14th May, 2003, the LG in his letter addressed to the Chairman, Commonwealth Games

Federation (CGF) mentioned that ‘we have set aside land for building a brand new Games Village.’ A

copy of the letter is at Annexure 1.

2.4 Further, in his letter dated 22nd August 2003 to the Secretary, Department of Youth Affairs and

Sports, Government of India (GOI), the LG stated that the site was showcased to the Evaluation

Commission of the Commonwealth Games Federation (CGF) that had visited New Delhi in August 2003

to evaluate the city’s bid for Commonwealth Games 2010. There is a mention in the said letter that the

site was liked immensely keeping in view its ‘salubrious environs’, its location vis-a-vis the competition

sites and its location on the transportation map which will include metro line from NOIDA to the

centre of the city by the year 2010. A copy of the letter is at Relevant Document 2.

Box: 2 Excerpts from the Report of the CGF Evaluation Commission (October 2003)

“The DDA (Government) is constructing the Village on a pleasant and high quality site. No

detailed architectural planning has been undertaken to date. A design competition will be

conducted. 40 hectares of land has been reserved in the heart of Delhi.”

“The proposed Village site adjoins the National Highway-24 and will be connected with the

Mass Rapid Transit System (MRTS) and Electric Magnetic Unit (EMU) Trains.”

“The estimated cost of construction of the Commonwealth Games Village will be Rs.185.8 crore

(USD 38.8 million).”


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2.5 Subsequently, on 11th September 2003, Union Cabinet approved the site of the Games Village

at the current location based on the proposal of LG.

2.6 The HLC, based on the records made available to it, finds that the Union Cabinet was not

provided with all the information regarding the pros and cons of the location of the Games Village. The

Cabinet approval, therefore, seems to be based solely on the assertions made by the LG. Moreover,

the Group of Ministers (GoM) merely acknowledged the decision of the Cabinet and asked DDA to

make available strategy options for development of the Games Village in its 4th meeting held on 17th

March, 2005.

2.7 Once the site had the seal of approval of various authorities, what followed was a series of

steps undertaken by DDA to regularize the decision.

Change in Land Use

2.8 The first step towards regularization of the site for development of the Games Village was in

the form of ‘change of land use’ of the earmarked area. Vide notification dated 2nd March, 20061, the

land use of area measuring 42.5 hectares (105.0 acres) was sought to be changed from ‘agricultural

and water body’ to ‘public and semi-public facilities’. Further, vide notification dated 18th August,

20062 (a modification of the earlier notification), the land use of an area of 16.5 hectares was changed

to ‘Residential’ for 11 hectares and 5.5 hectares to ‘Commercial/ Hotel’.

2.9 Initially, DDA had proposed that hotels would also come up at the same site. However, this was

opposed by Chairman, OC on the ground that it would be discriminatory to put up some athletes and

Team officials in hotels and others in Games Village. On 19.11.2006 GoM “agreed, in principle with the

model where the residential accommodation for the athletes may be developed on a PPP model in the

form of a residential complex with additional hotel accommodation being provided in close proximity

to the Games Village which would assist OC officials in making arrangements for technical officials.”

1 See Relevant Document 3 2 See Relevant Document 4


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2.10 Through February-August 2007, a NGO named Yamuna Jiye Abhiyaan (YJA) in its

communication to several GOI ministries including MoUD, MoEF, and MYA&S had raised many

pertinent issues relating to the location of the Games Village. YJA sought an appointment with these

agencies, including the GoM, to discuss their submission of the issues highlighted; however, they were

only given an audience by GoM during the 12th meeting held on 12th November 2007. By this time the

GoM had taken all major decisions relating to the development of the Games Village at the site

selected and the PDA had also been signed by DDA and Emaar MGF. Thereafter, any appeal to change

the location of the Games Village could be brushed aside stating that the current time frame to

develop the Games Village did not permit any deliberation on the matter.

Alternative Sites

2.11 Perusal of the presentation made by YJA to the GoM, indicates that it had suggested certain

alternative sites, which included

(a) Safdarjung airport

(b) Jasola Sports complex and

(c) Dwarka - Sector 20.

While the HLC has not examined the suitability of such sites vis a vis the current site, it may be stated

that the Government and DDA ought to have examined various options before zeroing in on the

location of the Games Village. It may be pertinent to note that the Asian Games Village in 1982 was

located within two kms. of the Jawahar Lal Nehru Stadium and hence faced minimal transportation

problems. HLC has been informed that during the run up to the CWG 2010, there were suggestions for

an alternative location close to Jawahar Lal Nehru Sports complex which, unfortunately, was never

considered.

Environmental Clearance

2.12 At the first instance, MoEF granted conditional clearances vide its letter dated 14th December,

20063. MoEF insisted that a study needs to be conducted to assess the impact of Akshardham bund on

3 See Relevant Document 5


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the area of flood plain in the upstream reaches of river Yamuna. Accordingly Central Water Power

Research Station (CW&PRS) was entrusted with the study. CW&PRS submitted its report to MoEF in

March 20074. The report indicated that the bund would cause ‘insignificant flood problem’ upstream as

well as in the region of the bund. Accordingly, MoEF amended its environmental clearance of 14th

December 2006 and issued an amended letter on 29th March 20075.

2.13 In January 2008, DDA made a reference to National Environmental Engineering Research

Institute (NEERI) seeking their opinion on whether the proposed site for Games Village was part of the

Yamuna Flood Plain and whether having complied with the MoEF conditions for environmental

clearance, there would be any further threat of environmental degradation / loss of ground water

recharge and /or if there are any additional abatement / measures required to be undertaken. The

opinion indicated that the project posed ‘insignificant risk’6.

2.14 Environmental clearances /reports, in particular NEERI Report, ought to be viewed in context of

what happened during August – September, 2010. It rained as it should; unfortunately for these

agencies, more heavily than usual. Yamuna water including seepage compromised the site to a point

where its use was in question unless the monsoon abated. Vestiges remain; the jury is still out on

remedial measures, costs, responsibility et al.

2.15 While the process of compliance with environmental issues may appear transparent at first

glance, the HLC noted that DDA did not inform the following agencies / statutory authorities, which

have regulatory role vis-à-vis the river Yamuna. These include:

Yamuna Standing Committee (YSC) of Central Water Commission – No approval

accorded by the concerned authority with respect to the development of the Games

Village as this project was never referred to it.7

4 See Relevant Document 29 5 See Relevant Document 6 6 See Relevant Document 7 7 It may be noted that since October 2003, 19 projects had been cleared by the Yamuna Standing Committee including construction of elevated road over Barapullah Nallah but the Games Village Project was never referred to YSC of Central Water Commission for their approval. See Relevant Document 8.


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Central Ground Water Authority (CGWA)

Yamuna – Removal of Encroachments Monitoring Committee

Public Interest Litigation 2.16 Thereafter, a plethora of objections were raised and a Public Interest Litigation (PIL) was also

filed. The issues addressed in the PIL were finally dismissed by the Supreme Court judgment dated 30th

July 20098. The judgment was largely based on expert opinion. However, this case took considerable

time of the various government authorities including MoEF, Ministry of Youth Affairs and Sports,

Ministry of Urban Development and Poverty Alleviation, Government of Delhi and DDA as all had to file

separate counter affidavits dealing with all the subjects including the apprehensions about the alleged

damage to the ecology of the Yamuna riverbed, floodplain and other environmental hazards.

Avoidable Development Cost

2.17 As brought out in the preceding paragraphs, the process of ‘regularization’ of the current site

for development of the Games Village took considerable time and Government also had to bear

possibly avoidable development cost of about 633.06 crore towards removing/mitigating inter alia

transportation bottlenecks and ‘noise pollution’, which was highlighted by Mr. Mark Fennel, President,

CGF. Details of such expenditure are as under:

Particulars Expenditure

( in crore)

Comments

Additional Land requirement 21.34 DDA/ Ministry of Urban Development negotiated

with the Government of Uttar Pradesh the purchase

of land measuring 31.542 acres

Bund Road 13.39 Widening and strengthening of the bund road

between NH-24, Railway line near Akshardham

temple

Construction of flyover on the

intersection of NH-24 and

bund road near the Games

Village

90.77 The proposal for construction of the flyover was

rejected by DUAC vide their letter dated 29th

October, 2007 stating that ‘keeping in view the short

duration of the games with the volume of traffic and

also with the Noida mode interchange which was



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approved and likely to be commissioned by 2010, the

traffic during the games could be managed with

suitable traffic management interventions’. A copy of the Letter from DUAC is at Relevant Document 10.

Noise Barrier 4.84 The CGF COCOM raised issue related to noise

management at the selected site on account of

railway line running close to the proposed village and

the construction of flyover at the proposed

intersection. OC had raised this issue in the 8th

GOM

meeting and recommended change of Games Village

location. LG indicated that the change of site would

not be possible. However, it was agreed that the

issue of noise pollution would be taken care of. In order to mitigate the issue of noise, noise barriers

were constructed on the side of the flyover and

‘temporary’ noise barrier was constructed along the

railway line.

A copy of the relevant minutes of the GoM meeting is

at Relevant Document 11.

Elevated road over Barapulla

Nullah

440.00 As per the Chief Minister, Delhi’s submission to the

GOM, the said flyover did not have any legacy value

after it ceased to achieve its objective of connectivity

of the Games Village to the Jawaharlal Nehru

Stadium. However, the same was constructed as the

decision for locating the Games Village was cited as

an irreversible decision on account of limited time

available before the commencement of the Games.

A Copy of the letter from the Chief Minister is at

Relevant Document 12.

Extra Piles driven

(proportionate cost)

62.72 This expenditure relates to the extra piling work done

by the project developer (M/s Emaar MGF

Construction Pvt. Ltd.) due to soil conditions of the

selected site. As against an approximate figure of

2850 piles, approximately 14060 piles were driven for

the structure of the residential complex.

A copy of the letter from Emaar MGF giving the piles

actually driven as against the estimates is at Relevant

Document 13.

TOTAL 633.06

2.17 Based on the review of the documents and discussions with the DDA officials, the HLC is of the

view that various options regarding suitable site for Games Village were not adequately examined and


Page 20

documented, which indicates lack of informed decision making process. The site recommended by the

then LG was accepted by OC, CGF, Cabinet and GoM at its face value. In fact, several steps had to be

taken later to regularize the site for the purpose of development of the Games Village.

2.18 The site, inter alia, had a number of constraints with respect to zoning, land ownership,

Akshardham temple interface and transportation / access issues apart from the fact that it was located

close to the Yamuna river. The flooding of the basements of the newly constructed residential towers

in August – September 2010, following heavy rainfall in Delhi served to highlight the potential danger

that could be posed by Nature’s fury to buildings constructed in this fragile and vulnerable location.


Page 21

Chapter 3: Planning and Bidding Planning

3.1 It is evident from records that the site for the Games Village had been identified in May 2003

itself and had been favourably commented upon by the Evaluation Commission of the CGF in its Report

forwarded to all Commonwealth Games Associations in October 2003 ahead of the crucial vote for

selection of Host City for CWG 2010 in November 2003. However, there is nothing on record to suggest

that DDA undertook any activity relating to the development of Games Village at the identified site

during the entire year 2004.

Box: 3 Conclusions of Evaluation Commission regarding Games Village

Based on the information provided by Delhi and independent expert analysis the Evaluation

Commission has concluded the following in relation to the Village Plans.

i. More detailed planning is required. However, the undertakings of Delhi provide sufficient

comfort at this stage that a suitable Village will be developed.

ii. When constructing a new site to act as a Village the planning for Games Operations Overlay is

a major undertaking and is a significant financial commitment. The Village will require a large

amount of physical space to support the operations of offices, logistical, and athlete service

areas. The supply and fitout of these spaces will be additional to the cost of constructing the

actual housing stock. The Commission, while provided comfort by the role of the DDA,

stressed the need for Delhi to ensure that there is sufficient clarity as between the DDA and

the future Organising Committee (and now the Bid Committee) to ensure that the Games

times Operations Overlay is adequately financed.

iii. Having an extra capacity of upto 2,500 bed spaces does not adversely affect the operation of

the Village providing it does not cause excessive operational expenditure. It may be possible

to use some of the surplus spaces for supporting CGA offices and other Village operational

functions.

iv. Some services (dining facility/capacity) may be over-scoped however this can be adjusted

during more detailed planning.

v. The configuration of bedrooms will be critical to determining if these housing requirements

can be met in an operationally sound manner and needs to be contemplated in the planning

process.

vi. The proximity of the Village to the airport, city and the venues is excellent and will allow all

athletes to live in one Village.


Page 22

Delay in finalizing Development Strategy 3.2 GOM in its 4th meeting held on 17th March, 2005 instructed DDA to make available two or three

strategy options to develop the Games Village for the consideration of the GOM. Accordingly, DDA on

19th April, 2005 submitted the concept paper which provided for the accommodation for 7000 athletes

and officials in the residential zone which could be utilized post Games as hotels, hostels / apartments.

A copy of the concept paper is set out as Relevant Document 14.

3.3 It has been stated that DDA held detailed deliberations with almost all major real estate

developers, NHAI, Ministry of Urban Development and Planning Commission before they finalized the

PPP structure of the project. According to DDA officials, ‘the decision to adopt the PPP mode for

developing the Commonwealth Games Village was taken keeping in view constraints of scale, time,

quality, specifications and availability of 4000 rooms during the Games period’. DDA was of the view

that ‘it was not possible to develop the residential facility through other options such as auction of land

or self development.’

3.4 Subsequently, GOM in its 6th meeting held on 8th September, 2005 directed DDA to prepare

three options for the Games Village including the option relating to its possible use as Games Village

for Asian Games 2014, in consultation with Organizing Committee (OC). Vice Chairman, DDA made a

presentation to the GOM in its 7th meeting held on 27th September, 2005 wherein it was proposed that

the facilities would be developed under the Public-Private-Partnership framework to ensure

commercial viability. Further, the OC was asked to complete the consultation process with regard to

the Games Village and venues by 15th October 2005, after discussion with the stakeholders and submit

their views to the Ministry for placing them before the GOM for consideration.

3.5 GOM finally decided in the 9th meeting held on 4th January, 2006 that the Games Village would

be developed on the Public Private Partnership (PPP) model. A copy of the GoM decision is at

Annexure 2.

3.6 Thereafter, DDA engaged M/s. Pricewaterhouse Coopers Pvt. Ltd. (PwC) on 16th June 2006 to

provide expert advice and consultation services with respect to the development of the Games Village

under the PPP model. The report was submitted by the consultants in August 2006.


Page 23

3.7 Thus, it is clear that there was unacceptable delay in formulating a strategy to develop the

Games Village and almost three years were lost even after the site had been finalized in the year 2003

itself.

3.8 This delay in planning for the Games Village did not leave any room for addressing

contingencies in an effective manner. As the subsequent events revealed, grave consequence of poor

planning was witnessed in more areas than one. Some instances are -

Even when there was extremely poor response to the RFP from reputed developers who

felt that the time period for project completion was too tight, DDA could not explore

alternatives;

DDA had to be content with selection of a project developer even when there was only

a single ‘successful’ bidder who had no past record of actual completion of any

residential project in India.

DDA had to succumb to the demands of the Project Developer for funding the project.

3.9 Based on the planned timeline, the total time available for the project development from the

date of signing of the Agreement was 30 months (September 2007 – March 2010).

Box: 4 Why PPP?

The reasons for taking the decision to develop Commonwealth Games Village in Public Private Partnership

mode by DDA are unclear.

DDA was and is the premier agency undertaking Housing schemes in Delhi and reportedly has a 2/3rd market

share. Its specialization lies in design, development and construction of housing projects for all sections of

society. It had developed the Asian Games Village for accommodating athletes and officials during 1982 Asian

Games.

DDA reportedly had huge cash reserves. Thus, it had the expertise and the funds to develop the

Commonwealth Games Village. It had zeroed in on the site and had also been identified as the Nodal Agency

for developing the Games Village by the Union Cabinet in September 2003 itself.

Thus, it defies logic why it did not initiate action in this regard in early 2004 and decided to adopt PPP mode

when there was no precedent in the real estate sector and wherein DDA had no expertise.


Page 24

An Artist’s impression of the Residential Towers in Commonwealth Games Village, Delhi

Bidding Process for selection of the Project Developer

3.11 The selection of the Project Developer (PD) under the PPP model was based on a two-stage

tendering process.

(1) Short-listing of the qualified developers through inviting expression of interest from

interested parties

(2) Inviting detailed proposal from shortlisted developers

3.12 The timelines for the bidding process and selection of the project developer is set out below:

Particulars Date Comments

Request for Qualification (RFQ) 4th Dec., 2006 During the process a pre-bid meeting was

conducted by DDA to clarify any doubts of

developers and invite suggestions – Over 30

developers participated.

Last Date for submission of RFQ 12th January,

2007

15 bidders submitted their response by the


Page 25

Particulars Date Comments

last date and time.

Short listing of Bidders 19th January,

2007

After evaluation by the committee formed

for this purpose, 11 parties were qualified

and notified by DDA.

Request for Proposal (RFP)

24th April, 2007 RFP issued. A Copy of the RFP is at Relevant

Document 15.

Pre Bid Meeting 15th May, 2007 Pre Bid meeting with Qualified Parties.

Last Date for receiving Bids 25th May, 2007 No bid was submitted by the submission date. Last date extended to 15th June, 2007

Relaxation of terms of RFP 7th June, 2007 Relaxation of some of the terms of the RFP by the High Powered Committee

Addendum to RFP document 8th June, 2007 Addendum to RFP document issued by DDA incorporating the relaxations agreed to in the meeting of HPC on 7th June.

Revised Last Date for submission

of Bids

15th June, 2007 Two bids submitted post the relaxation – M/s DLF Ltd. And M/s Emaar MGF Construction Pvt. Ltd.;

Opening of Bids & Report of

Technical Evaluation Committee

15th June, 2007 Bid of M/s DLF Ltd. Bid was found ‘non-responsive’ and hence disqualified. Only ONE developer qualified – Consortium of Emaar MGF

Issue of LOI 5th July, 2007 DDA issued LOI to Emaar MGF.

Signing of PDA 14th September,

2007

DDA signed the PDA with Emaar MGF

The above stated sequence of events highlights the poor response to the proposed project by

experienced Developers and, finally, there was only a ‘single valid bid’ for the project.

3.13 During the Pre Bid Meeting held on 15th May, 2007, several queries were raised by the

prospective Bidders and the clarifications issued by DDA on the same during the Pre-Bid Meeting along

with concessions announced in the Addendum are represented in the Table below and in Para 3.13:


Page 26

S.No. Question Raised Clarifications

provided

Subsequent changes

incorporated in

Addendum to RFP/

concession provided to

Emaar MGF

1 Compensation for delay in

milestone completion should

be based on fair assessment

of delay & causes &

Developer alone should not

be held liable

Specific reference

made to Annexure - 3

Compensation for delay

was lowered and was

refundable to the PD after

completion of the

milestone.

2 Suggestion to lower the

penalty amounts as per

suggestions

No specific reply given

by DDA, only

reference is made to

the concerned

Annexure & Clauses

Lowered thereafter vide

Addendum to RFP issued

by DDA on 8.6.2007.

3 Request to extend the first

milestone considering the

extensive work involved &

the delay that could occur

due to the monsoon season.

Further the request clearly

laid out that such extension

may not delay any further

milestones.

DDA extended the

time for completion of

first milestone from

D+120 days to D+150

days.

Timelines were extended

further after starting the

construction of the

Project.

4 Request for extension of

time limit of the milestone

for construction &

completion of the Mock-up

Unit.

DDA extended the

time for completion of

first milestone from

D+120 days to D+150

days.

The level of achievement

of first 2 Milestones was

relaxed by the Addendum

to RFP.

5 Clarifications regarding

layout and construction work

w.r.t filling of earth &

conceptual clarity

DDA specified no

earth filling is required

& referred to

structural drawings

and other

architectural material.

-


Page 27

S.No. Question Raised Clarifications

provided

Subsequent changes

incorporated in

Addendum to RFP/

concession provided to

Emaar MGF

6 Number of returning

performance security

payments may be increased

in terms of achieving every 2

milestones, so that it reduces

the burden on the PD in

terms of paying interest to

the banks.

Please refer to Section

II, Instructions to

Bidders, Clause E

Approved thereafter vide

Addendum to RFP issued

by DDA.

It will be noticed from the Table above that several critical suggestions made at the time of the Pre-Bid

meeting with 11 selected / qualified bidders were later relaxed and the Addendum was issued on 8th

June, 2007, which was just seven days prior to the revised last date for submission of bid. The period

provided for submission of bids, after the Addendum had been issued, appears to be inadequate.

Changes in Request for Proposal (RFP)

3.14 In its meeting dated 7 thJune, 2007, following important relaxations were made

by the High Powered Committee (HPC) and major modifications were made in the RFP

document, which are as under :

Percentage share of DDA in the total number of apartments was reduced from 50% to

33.3%

Sharing methodology – block by block

Bank guarantee for performance security reduced to 400 crore from 500 crore

Upfront amount remained at minimum of 300 crore but payment schedule relaxed.

First two Milestones relaxed.

Penalty for delay in achievement of Milestones was relaxed from 25 lakh to 20 lakh

per day after first 15 days of delay.

Deletion of third penalty slab of 50 lakh per day after 30 days of delay


Page 28

A copy of the minutes of the HPC is set out as Annexure 3.

3.15 It may be noted that even the modified provisions in the RFP did not lead to active participation

and only two bids were received. One of the two bids received from M/s DLF Ltd. (DLF) was found to

be ‘non-responsive’ on grounds of it being ‘conditional’ and, hence, rejected by the Evaluation

committee. A copy of the bid (letter) submitted by DLF is set out as Annexure 4. It is pertinent to note

that against the reserve price of 300 crore for the land in the RFP, the amount quoted by the single

bidder was only 321 crore. It is very likely that in case competitive bidding had taken place, this

amount would have been substantially higher. To that extent, DDA has been a loser.

3.16 At this stage there was no serious deliberation in the DDA for evaluating the capability of the

project developer to deliver on the contractual obligations considering the fact that Emaar MGF had no

past record to demonstrate the delivery of any ‘successful’ residential project in India. Based on the

‘Draft Red Herring prospectus’ issued by Emaar MGF Land Pvt. Ltd. (Parent company) on 30th

September, 20109, the company was at that time yet to complete any residential project in India.

3.17 A due diligence exercise based on common sense and financial prudence was of prime

importance as the timely completion of this project was critical to the organization of the

Commonwealth Games. The HLC was informed by the Finance Member, DDA that most developers

having extensive experience in the Indian market were of the opinion that the timelines were very

tight and the financial terms were not attractive, the penalty clauses were very severe and not in line

with market practice.

3.18 Given the circumstances described above, it was imperative that DDA should have put in place

a contingency plan to mitigate the risk of the developer failing to deliver on the Agreement.

3.19 The HLC, based on the sequence of events, finds that while the entire ‘competitive’ bidding

process evoked poor response, no other option for the development of Games Village was seriously

explored before 2006. Even within the selected solution, further options to attract a larger base of

experienced developers were not explored. The HLC also finds it intriguing that DDA did not deliberate

9 Extracts are at Relevant Document 16.


Page 29

or seriously consider the option of developing the Games village by itself, one of the two options

recommended by its consultants.

3.20 If the objective was not to take on the financial burden or financial risk of the project, then DDA

failed to achieve its objectives as they ended up doing both – infusing funds to complete the project

and carrying the financial risks of the project as explained in subsequent chapters.


Page 30


Page 31

Chapter 4: Project Development Agreement and Execution Public Private Partnership (PPP)

4.1 The Report of the PPP Sub-Group on Social Sector by Planning Commission states that a “Public-

Private-Partnership (PPP) provides an opportunity for private sector participation in financing,

designing, construction and operation & maintenance of public sector programmes and projects”.

4.2 Public-Private-Partnership or PPP is a mode of implementing government programmes /

schemes in partnership with the private sector. The term private in PPP encompasses all non-

government agencies such as the corporate sector, voluntary organizations, self-help groups,

partnership firms, individuals and community based organizations. PPP, moreover, subsumes all the

objectives of the service being provided earlier by the Government, and is not intended to compromise

on them10.

4.3 PPP is an approach, under which services are delivered by the private sector (non-profit / for-

profit organizations) while the responsibility for providing the service rests with the Government11.

4.4 To sum up, for this project the defining element of a PPP model is that the private party would

bring in technical, financial and project management skills and the public agency would monitor,

ensure accountability and timely completion of the project. The financial risk was to be carried by the

private party.

Project Development Agreement (PDA)

4.5 The PDA, which was said to have been modeled on the approved PPP concession agreement,

was signed on 14th September, 200712 between DDA and M/s Emaar MGF Construction Private

Limited.

10 Report of the PPP Sub-Group on Social Sector by Planning Commission, GoI; published in 2004 11 Report of the PPP Sub-Group on Social Sector by Planning Commission, GoI; published in 2004


Page 32

4.6 The HLC’s review of the PDA showed that several key clauses related to accountability of the

private developer and subsequent monitoring mechanisms were not included in the PDA. Such clauses

form a part of the standard Model Concession Agreement as prescribed by the Planning Commission

and are extensively used in most infrastructure projects (port, railways etc.) executed on the PPP

model. Considering the fact that this project was the first of its kind in the real estate sector and

especially for DDA, prudence demanded inclusion of risk mitigation norms in the Agreement. The

exclusion of such clauses provided little or no recourse to DDA to detect early signals of problems in

the development of Games Village. Ironically, the PDA included a non-intrusion clause that prevented

the DDA from effectively monitoring this ‘critical’ project for the Commonwealth Games 2010.

Deviations from Model Concession Agreement

4.7 The key clauses in accordance with the Model Concession Agreement which were not included

in the PDA and its implications are set out below:

Escrow account – The clause for maintaining an Escrow account is understood to be

critical for all PPP agreements. An escrow account plays a critical role to ring fence the

funds for the project. This was particularly important in this project as the PDA allowed

the sale of apartments during the period of construction, the proceeds of which were to

be used to fund the project. Therefore, a sound monitoring system should have been

provided to ensure that all revenues accruing from the sale of apartments were

available for completion of the project.

Absence of an escrow account effectively restricted the ability of the DDA to monitor

financial parameters and periodic transfers of funds by PD to Emaar MGF Land, the

parent company.

Audit and Accounts - The importance of the Audit and Accounts clause is that it enables

the public party to have access to the books of accounts of the project and if required to

12 A copy of PDA is at Relevant Document 17


Page 33

audit the accounts of the project. This is a tool used for effective monitoring and control

over the project executed under the PPP model. Also, in the CGV project this would

have enabled DDA to get the actual cost of construction when fixing the price for

purchase of apartments.

A copy of the Model Concession Agreement recommended by the Planning Commission with respect

to the two clauses is at Relevant Document 18.

Risk Assessment & Mitigation

4.8 Risk assessment and mitigation measures are standard pre-requisites in Project Management

especially where outputs have to be delivered within a prescribed time frame.

4.9 DDA failed to undertake risk assessment exercise at several stages of decision making related to

the development of the Games Village including evaluation of options, selection of a credible

Developer and ensuring accountability of the Developer.

4.10 The execution of a PPP contract does not reduce the responsibility and accountability of the

public agency and public servants concerned. On the other hand, it places substantial responsibility on

them to see that the arrangement succeeds in safeguarding public interest by managing the PPP

economically, efficiently and effectively. The absence of the monitoring provisions in the PDA reflects

Box: 5 ‘Public Private Partnership’ in Commonwealth Games Village Project?

DDA decided to develop the Commonwealth Games Village Project in the PPP mode. The Project

Development Agreement was signed with the selected Project Developer, Emaar MGF on 14th

September, 2007.

The way this PDA was executed by DDA accorded a new meaning to Public Private Partnership

altogether. Here, finally

all risk was borne by DDA;

all comforts, legal and financial, were provided to Project Developer by DDA;

the Developer was able to recoup his investment even before completion of the project;

defects had to be rectified by the DDA;

DDA had to bear the cost of ‘blocked capital’.


Page 34

the lack of understanding of the risks involved as evidenced by inadequate risk management process

on the part of DDA. It may be noted that the occurrence of certain future events, primarily the ‘Bailout

package’ to the PD, could have been anticipated and pre-empted. To illustrate, the Project

Development Agreement could have included the clause regarding escrow account. Such an account

normally requires maintaining of a defined ‘average fund’ over a period of time. Absence of this

account resulted in DDA not detecting early signs of possible financial crisis faced by the PD and

thereby afforded inadequate time for a more deliberated option under the situation. Further, the

escrow account would have ensured transparency in the project financing as all project related

revenue and expenditures could have been properly monitored.

4.11 In the absence of risk assessment and mitigation strategy, DDA could not take remedial steps

for any potential or actual failure of the developer. Instead, at every instance, the Developer stage

managed situations exerting pressure on DDA to take decisions that eventually turned out to be

weighed in favor of the PD.

Execution of the PDA

4.12 The PDA recognized 9 milestones in the execution of the Project. Various committees were

constituted to monitor the progress and provide constant quality assurance with regards to the

project. Three major committees were constituted by DDA namely:

Monitoring Committee

Stadia Committee

High Powered Committee

Third Party Quality Assurance by CBRI, Roorkee was also put in place.

Monitoring Committee

4.13 The Monitoring Committee formed by DDA included representatives of Emaar MGF and DDA as

members and was chaired by an Independent Engineer who was unanimously elected by the two

members.


Page 35

4.14 The committee held 32 meetings over a span of 29 months from its inception on 30th January,

2008 till the last meeting held on 31st July 2010. The committee was mandated to meet every month to

review the progress of the project, resolve any issues, and facilitate work on the project and record

completion of milestones.

Stadia Committee

4.15 The mandate prescribed for the Stadia Committee was to conduct regular meetings to address

all issues relating to the development of the Games Village site. The meetings were held weekly to

assess the progress of the project and to resolve issues relating to the project site and flyover,

residential facility, temporary overlays, practice venues etc.

4.16 These meetings were held on a weekly basis till August 2010, after which daily meetings were

held in view of the directive given by DDA.

High Powered Committee

4.17 The committee was constituted by the VC, DDA and was empowered to find and ensure rapid

resolution of all issues relating to the Commonwealth Games.

Third Party Quality Assurance by CBRI, Roorkee

4.18 The PDA also prescribed regular inspection and supervision of the project by a Third Party

Quality Assurer (QA) to verify the quality of construction and carry out regular supervision of

construction work carried out by the PD independently of both parties to the Agreement. The PDA

required that such appointment be within 6 months of entering into the Agreement, and accordingly

CBRI, Roorkee were appointed.

4.19 As per contract, the QA was required to inspect the site on a monthly basis and thereafter

provide Monthly Quality Assurance Reports to DDA and the PD. These reports served as a benchmark

for DDA engineers and were forwarded to the PD, who was required to comply with the specific issues

raised therein. In response, the PD was required to furnish ‘Action-Taken’ reports on such issues and

to rectify the structural & quality lapses. The reports were supported by photographs & other

technical data.


Page 36

Ineffective Monitoring

4.20 Based on the documentation available it has been noted that there was a delay of 2 months

from the date of signing of PDA and the actual date of appointment of the QA. Further, the frequency

of the reports was reduced from monthly to quarterly effective January 2009 without any formal

communication to this effect from DDA.

4.21 Review of the Minutes of the Meetings held reveal that the issues and concerns regarding the

development of the Games Village were documented in a perfunctory manner. The first meeting of the

Monitoring Committee took place on 5th April 2008, after the Project Developer had missed his first

milestone and sought revisions13.

4.22 The oversight and monitoring functions by the committees set up by DDA were ineffective as

several defects and quality issues relating to the construction of the residential zone by the Project

Developer continued to persist.

Milestones

4.23 The Project Milestones were laid down in the RFP issued for the project. It was stipulated that

these timelines need to be adhered to and severe liability/ penalty shall be levied in case of default or

deviation from such dates. However, as the project execution progressed, the project timelines were

regularly revised at the behest of the PD and these were approved by DDA without documentary

support or evidentiary proof necessitating such revisions.

Non Levy of Liquidated Damages

4.24 Although PDA did not provide for extension of milestones, DDA extended timelines for

achievement of milestones and did not impose penalty as per the PDA. On account of such decisions,

DDA has foregone 81.45 crore in favor of Emaar MGF. Details are set out in the Table below:

13 See Minutes of the First Meeting of Monitoring Committee placed at Relevant Document 19.


Page 37

S.No. Milestone Original Date

of

completion

Actual Date of

completion

Delay

(Number

of days)

Liquidated

damages

foregone ( in

crore)

1 Foundation work (including

Plinth Level) up to Plinth

level for 33% of blocks

11th Feb,

2008

11th May,

2008

90 17.25

2 Structure work up to G+2

level

11th May,

2008

10th Aug,2008 91 17.40

3 Structure work up to terrace

level, with associated

electrical works & B.W. up to

G+4 level

07th Nov,

2008

29th Jan.,

2009

83 15.85

4 Completion of brick work up

to terrace level & internal

plaster, flooring, etc. for 5

levels, with associated

electrical works

06th May,

2009

15th Sept,

2009

132 25.65

5 Completion of flooring &

furnishing, with associated

electrical works of all blocks

all levels upto terrace level

02nd Nov,

2009

02nd Dec, 2009 30 5.25

6 External finish of all blocks &

all levels

01st Jan,

2010

01st Jan, 2010 0 0

7 Completion of all electric

work including lifts, ESS etc.

& completion of UGR/ Pump

Rooms/ Lifts/ Pump sets etc.

31st Jan, 2010 31st Jan, 2010 0 0

8 Completion of all

development work including

landscaping

02nd Mar,

2010

13th Dec, 2010 286 DDA has filed

for recovery as

the extension

was not

approved

9 Project Completion Date 01st April,

2010

13th Dec 2010 254 DDA has filed

for recovery as

the extension

was not

approved

TOTAL 81.45


Page 38

4.25 It is evident from above that nearly all achievement dates were delayed barring Milestones 6 &

7. It is pertinent to note that all delays, except Milestones 8 & 9, were permitted by DDA without

levying liquidated damages as provided in the PDA. DDA has issued a claim letter to Emaar MGF in

October 2010 setting out the recovery of liquidated damages on account of delays related to

milestones 8 and 9 alone as per the PDA14.

Construction of excess FAR

4.26 The site selected for the CWG Village had an approved FAR of 1.67 initially, which was increased

to an FAR of 2.00 by the Delhi City Master Plan 2021 which came into force effective 07th February,

2007. The Project was thus approved with a built up FAR of 2,05,140 square meters by the Building

Section of DDA on 18th March, 200815.

4.27 However, an actual FAR of 2,30,689.33 square meters was built as per the plan submitted by

Emaar MGF for obtaining Completion certificate from DDA. The Developer, therefore, constructed an

FAR of 25,549.33 square meters in excess of the approved plans. This was almost 12.5% more than the

approved FAR. This was in the knowledge of the Monitoring Committee of DDA at least from January

2009 (See item 3 in Table above) and also the ‘top’ officers of DDA including Vice Chairman and LG

from April, 2009 when the Bailout Package was being finalized.

4.28 Again, belatedly DDA took a stand on this matter by issuing a Sealing - cum- Demolition notice

only on 20th August, 2010 in respect of the excess constructed area. Reacting to this notice, the PD had

filed a case with the Appellate Tribunal of MCD (Order dated 26th October, 2010 of Appeal No. 549 &

550/ATMCD/2010) which ruled in favour of the PD and advised them to file for a new completion

certificate. The Tribunal also stated that such lapse is compoundable by DDA within a limit of 5% of the

permissible FAR on payment of prescribed charges by the PD. A copy of the judgment is at Relevant

14 See Annexure 5. 15 See Relevant Document 20.


Page 39

Document 21. DDA has filed an appeal against the Order of the Tribunal in the Court of LG and the case

is still pending.

4.29 The issue of delayed milestones, approvals to waive liquidated damages without justification on

record and construction of excess FAR point to the ineffectiveness of the monitoring regime set up by

the DDA and complicity of DDA officials. These issues incidentally were NEVER placed on the agenda of

any of the meetings of the Monitoring Committee by any of the several officers specifically stationed at

the project site by DDA.

Box: 6 Actual Ground Coverage & Floor Area of Commonwealth Games Village

(in sq. m.)

A. Total (Residential Towers + Club /Community Centre

i. Permitted Ground Coverage (as per PDA) = 36,663.89

ii. Sanctioned Ground Coverage (27,664.19 + 1438.13) = 29,102.32

iii. Sanctioned Floor Area (203087.25 + 2052.75) = 2,05,140.00

iv. Existing Ground Coverage (225900.70 + 3032.06) = 2,28,932.76

v. Extra Floor Area constructed beyond sanction limit = 23,792.76

B. Residential Towers:

i. Existing Floor Area (considered in FAR calculation) at site = 2,25,900.70

ii. Sanctioned Floor Area (FAR) = 2,03,087.25

iii. Constructed Floor Area (FAR) under DDA’s possession = 1,34,819.48

Constructed FAR in respect of 11 Towers (1/3rd ) as per PDA = 73,771.90

Constructed FAR in respect of 333 flats purchased by DDA subsequently =61,047.53

iv. Total Floor Area in possession of Developer:

Balance sanctioned FAR under Developer’s possession (ii – iii) = 68,267.77

v. Extra Floor Area = 22,813.45

C. Club / Community Area

i. Existing Floor Area of the Club = 3032.06

ii. Sanctioned Floor Area = 2052.75

iii. Extra Floor Area = 979.31

(Source: Data provided by DDA)


Page 40

Box: 7 Salient Features of the Games Village at a Glance

No. of residential towers - 34

No. of 2/3/4/5 bedroom apartments – 1168

Date of signing Project Development Agreement – 14.09.2007

Scheduled Date for Completion – 31st March, 2010

Actual Date of Completion –13th December, 2010

No. of residential apartments to be shared between DDA and Emaar

MGF as per PDA in the ratio – 1:2

Ratio of flats to be shared between DDA & Emaar MGF after Bailout

Package – 1:0.63

No. of apartments finally allocated to DDA after Bailout Package – 715

No. of apartments finally remained with Emaar MGF – 453

Total cash infusion by DDA in Games Village Project – 728.89 crore

Total cash infusion by Emaar MGF in Games Village Project – 595

crore

No. of apartments sold by Emaar MGF till 28th December, 2010 - 426

Money raised through sale of 426 apartments by Emaar MGF – 1354

crore


Page 41

Chapter 5: Bailout Package and Release of Funds Background

5.1 The PDA did not provide for any financial assistance to the PD. However, on the persistent pleas

of the PD and in order to ensure that the Games Village project could be completed within the planned

timeframe, DDA entered into a separate Agreement with Emaar MGF to provide financial assistance.

Brewing Trouble

5.2 The signs of inability of Emaar MGF to complete the Games Village surfaced as early as January

2008. These included:

a. According to the PDA the lead partner of the consortium (Emaar PJSC) was required to

bring in the equity (26%) within six months from the date of issue of Letter of Intent

(LOI); while the LOI is dated 4th July 200716, the equity was brought in only on 8th

February 2008, a delay of 31 days from the agreed deadline date.

b. According to the PDA, the date for achievement of first milestone was 11th February

2008. Emaar MGF sought extension till 11th May, 08 and the same was granted by the

HPC on 21st April 2008. The first milestone was achieved on 11th May 2008. This

situation was more worrisome considering DDA had extended a relaxation to the

Developer in the form of permission to begin the construction work at the site while the

PDA was not executed. Even though the PDA was signed only on 14.09.2007, DDA

handed over the site to Emaar MGF on 20th August 2007. A copy of the minutes of HPC

meeting dated 21st April, 2008 is set out as Annexure 6.

16 See Relevant Document 22.


Page 42

c. In April 2008, Emaar MGF indicated financial problems to DDA and requested pre-

ponement of allocation of flats. The key premise of Emaar MGF for assistance at this

stage was its inability to raise funds via advances from the sale of apartments to

customers, due to non-allotment of the flats. It may be highlighted that the allotment of

apartments between DDA and Emaar MGF based on the apportionment formula as per

the PDA was scheduled for 14th June 2008 and such a demand for early allotment was

therefore not warranted.

Chronology of Events leading to Bailout Package

5.3 A chronology of events leading to the signing of the Bailout Agreement between DDA and the

Project Developer, Emaar MGF, is as under:

S. No. Date Event

1 3 r d November, 2008 Decision of Delhi High Court 17

2 5 th December, 2008 Letter of Emaar MGF to DDA seeking f inancial

assistance 18

3 8 th December, 2008 Meeting of Emaar MGF with Secretary, MoUD

4 9 th December, 2008 Shri Sanjay Malhotra, on behalf of Emaar MGF addressed a letter 19 to Secretary, MoUD wherein they, inter alia, mentioned that due to the recent directions given by the Hon’ble High Court of Delhi in the matter of the CGV project, there has been an adverse fallout on the project in terms of banks/lenders to the projects and the customers (present and potential) raising concerns on the further development of the project…. DDA was requested to assist the project by provid ing funding support, which is most crit ical for further

17 See extracts at Annexure 7 18 See Annexure 8 19 See Annexure 9


Page 43

progress.

4 10 th December, 2008

Shri Sanjay Malhotra, on behalf of Emaar MGF addressed another letter 20 to Secretary, MoUD enclosing requests made to DDA “as requested by your office”


Secretary, MoUD forwarded details of assistance sought by Emaar MGF group to Shri Arun Ramanathan, Finance Secretary, GoI for appropriate facil itation. 21


Director (DD), MoUD sought comments of DDA on issues raised in letters of Sanjay Malhotra, Chief Operating Officer, Emaar MGF. 22


Pr. Comm.(CWG) informed COO, Emaar MGF that in the l ight of Clause 8.8 of the Project Development Agreement, their request for f inancial assistance cannot be accepted.23

8 10 th February, 2009 Emaar MGF in its letter to DDA sought return of 321 crore as loan

at nominal rate of interest or suggested that DDA buy 250

apartments keeping in view the requirement of funds at that

stage24.

9 17 th February, 2009 Issue discussed in Meeting of COS.

10 12 th March, 2009 LG provided in principle approval for 25

Outright purchase of apartments by DDA from PD

Constitution of Committee with experts from NBCC, CPWD,

SBI Capital and DDA to determine the total funding

requirement and the purchase price of the apartments.

In response to the PD’s request, vide letter dated February 27,

20 See Annexure 10 21 See Annexure 11 22 See Annexure 12 23 See Annexure 13 24 See Relevant Document 30 25 See Annexure 14


Page 44

2009 of advance of Rs.150 crore, a part payment of Rs.100

crore may be made under a MoU, which would be adjusted at

a later stage once the cost of the apartments to be bought as

determined.

11 16 th March, 2009 PC (CWG) wrote a letter to Secretary, MoUD on the issue of f inancial assistance to the Project Developer. 26 Reference is made to ‘economic slowdown’.

12 18 th March, 2009 Constitution of Valuation Committee

13 19 th March, 2009 Valuation Committee briefed by PC (CWG), DDA

14 25 th March, 2009 LG ordered that in providing the advance of Rs.100 crore, f inancial interest of DDA should be fully secured

15 26 th March, 2009 DDA asked the PD to provide a Bank Guarantee of Rs.100 crore valid t i l l the date of f inal ization of the purchase agreement, in addit ion to providing an unconditional corporate guarantee, encumberance certif icate from ROC for 75 apartments proposed to be kept at the disposal of DDA and action plan for util iz ing the advance amount.

16 26 th March, 2009 PD expressed its inabil ity to provide a BG of Rs.100 crore and offer unconditional corporate guarantee to DDA

17 30 th March, 2009 Shri Mukesh Dham, wrote to Secretary, MoUD wherein he referred to their previous discussions and the funding challenges being faced by the CGV Project due to the l it igation on the project as well as economic slowdown. He also complained that”A committee was formed on 21 s t March 2009 to submit its report within 7 days. We have been providing al l the information required by them, but to date report has not been submitted by the Committee.” 27

26 See Annexure 15 27 See Annexure 16


Page 45

18 30 th March 2009 Note sent by Secretary, MoUD to VC, DDA seeking details of resolution worked out so that t imely implementation of project does not suffer. 28

19 6 th April , 2009 VC, DDA sent a detai led Note to Secretary, MoUD. 29

20 9 th April , 2009 Recommendation of Valuation Committee received.

21 15 th April , 2009 Constitution of Negotiation Committee

22 22n d Apri l , 2009 Emaar MGF wrote to LG 30

23 23 r d Apri l , 2009 Meeting held in chamber of VC where Financial experts were cal led and asked to provide for 15% Developer’s margin on total Project Cost and 10% as cost of capital towards the funds invested by Emaar MGF and finally arrived at a rate of Rs.11,055.64/ - per sft .31

24 24 th April , 2009 Meeting held under chairmanship of LG which is attended by Secretary and Joint Secretary, MoUD and VC, Finance Member & Engineer Member, DDA which decided the purchase price of f lats under Bailout Package.

25 5 th May, 2009 Bai lout Agreement signed.

No CWG Village Bogey

5.4 In November - December 2008 and January – February 2009, Emaar MGF made repeated

requests to DDA as well as Ministry of Urban Development to provide financial assistance for

completion of the project. Such requests were rejected by DDA as the PDA did not provide for financial

assistance. However, in February 2009 Emaar MGF exerted pressure on DDA and cited consequence of

non-completion of the Games Village within the stipulated time period i.e. 31st March 2010. This led to

28 See Annexure 17 29 See Annexure 18 30 See Annexure 19 31 See Detailed Background Note at Annexure 20


Page 46

a situation termed by DDA as ‘critical’ which, according to the LG and Cabinet Secretary, required an

‘out of box’ solution.

5.5 In its submission to DDA and MoUD in December 2008, Emaar MGF referred to the PIL filed in

the court against the location of the Games Village stating that the litigation had caused negative

impact on the project and thereby affected its ability to raise funds for the project.

5.6 A PIL had been filed and the High Court had issued a notice on 17th July, 2007. The case came

up for hearing in the High Court only on 9th June, 2008. The High Court passed its judgment on

3.11.2008. The Court observed that “any construction made or third party rights created are at the

peril and risk of the organizers / Government”. DDA filed a SLP in the Supreme Court against this order.

The interim stay of the Supreme Court was dated 5th December, 2008 which was finally disposed off on

30th July, 2009. However, at no stage did the High Court or the Supreme Court order suspension of

the work at the project site.

5.7 While HLC took note of this submission, it is of the opinion that the entire risk of execution of

the project was on the Developer and transferring the onus to DDA merely exhibited its inability to

manage the project.

5.8 In February 2009, DDA finally took ‘serious’ note of the developers financial situation and its

inability to complete the project within the stipulated time. At this stage DDA, in consultation with LG

and COS, agreed to explore the possibility of financing the project. The COS in its meeting on 17th

February, 2009 agreed that DDA could explore the option of purchase of flats with due approvals from

the competent authority.

Box: 8 Meeting of COS held on 17.02.2009

At the COS meeting held on 17th February, 2009 to review arrangements related to CWG 2010, it was noted by the

COS that the LG, Delhi had already given approval to DDA for making purchase of flats out of its own funds. Cabinet

Secretary observed that an ‘out of box’ solution may have to be resorted to. It was inter alia decided that

“Option of purchase of flats in the Games Village by DDA may be explored with due approvals duly obtained

from competent authorities, to help the private developer in overcoming working capital shortfall, as the

ongoing economic slowdown warrants unconventional options to be given consideration on merits. However,

proper valuation of flats should be arranged through an independent agency in a transparent manner”.

It is worthwhile noting that the COS considered a decision already taken by the LG and correctly pointed out that in

such a transaction the proper valuation of flats in a transparent manner would be extremely important.

Unfortunately, this operational portion of COS decision was not ensured by DDA.


Page 47

5.9 Based on the decision taken by LG on 12th March, 2009, a Valuation Committee comprising of

representatives from HUDCO, NBCC, CPWD and DDA was formed on 18th March, 200932 to recommend

within 7 days the rate at which the flats could be purchased and the funding requirement of the

project. The Valuation Committee, in turn, engaged a Technical consultant (M/s Garg & Associates) and

a Financial consultant (M/s K N Goyal & Associates) to give expert advice on these matters. It is

observed that the Financial Consultant engaged by DDA was also the Taxation Consultant of DDA.

Hence, M/s K N Goyal & Associates cannot be regarded as ‘independent’ valuer and there appears to

be a conflict of interest.

5.10 Reviewing the mandate given to the two firms appointed as the Technical and Financial

consultants, HLC is of the view that time made available was inadequate to carry out a meaningful

exercise. The Technical consultant stated to the HLC that they had to compromise on key procedures

to achieve the results within the prescribed time frame. This included independent verification of the

data provided by Emaar MGF. According to the consultants, an exercise with such a mandate would

have required a minimum time frame of two weeks.

Quantum of Bailout Package

5.11 It has been noted that the total project cost stated by the two consultants vary substantially.

The Technical expert had estimated the total construction cost at 934 crore. The rates

used were on the basis of CPWD plinth area rates which include the contractor’s profit and

overhead costing.

# Expenditure on in crore

1 Piling 66.25

2 Basement 315.00

3 Towers 389.00

4 Elevators/ Lifts 16.683

32 See Annexure 21


Page 48


5 Air Conditioning 27.65

6 Fire Fighting 12.74

7 Others 16.66

8 Cost Escalation 63.29

9 Consultancy and Miscellaneous expenses 27.22

10 Total Cost of Construction 934.49

11 Development Rights to DDA 321.00

12 Total Project cost (excluding finance cost) 1255.49

The Financial consultant stated that their estimate of the total construction cost at 1266 crore was

based on the documentation made available by Emaar MGF.


1 Cost of Designs, Drawings, Quality etc. 31.70

2 Construction Contract (*) 1168.21

3 Land Rental to DDA 3.03

4 Project Overheads 34.07

5 Other Expenditure – contribution to Resident Welfare

Association, Composition Fee for increased FAR, Post

Games repairs & maintenance etc.

24.28

6 Pre-construction, Project Infra, Models, Mock Unit, etc. 4.64

7 Total Construction Cost 1265.93

8 Development Rights to DDA 321.00

9 Total Project Cost (excluding financing cost) 1586.93

10 Financial cost 52.93

11 Total Project Cost (including financing cost) 1639.86


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(*)The Financial consultant had stated during interview with experts of HLC that the “contract of ACIL” verified by them was unsigned.

5.12 The HLC is of the opinion that project cost estimated by the two experts varied substantially;

actual cost submitted by Emaar MGF was approximately 35% higher than the valuation of the

Technical expert. This is especially important since the financial consultants submitted their project

cost based on the ‘estimated’ rates as per the civil construction contract, which constituted

approximately 74% of the total project cost (excluding financial charges). The contents of the signed

copy of sub contract dated 10th July, 2008 executed by the PD with ACIL and supplied by DDA to HLC

negate the veracity /authenticity of the documentation provided to the financial consultants by

Emaar MGF to arrive at the fund requirement of the project. It is also strange that DDA did not ask

the Project Developer to provide signed copies of contracts to the Financial Consultant or to

themselves!

5.13 The summary of the Technical and Financial expert is set out below:

Particulars Technical Expert Financial Expert

Market Rate per sft (Average

selling price adjusted for 35%

increase on account of

‘better specifications’)

9,720 -

Cost per square feet 9,382

It is interesting to note on the above summation that the cost of construction of the project is in close

proximity of the market rate duly supported by the micro market analysis and post 35% increase on

account of better specifications as available in the market!

Recommendation of Valuation Committee 5.14 The Valuation Committee, based on the reports of the consultants, recommended in their

report submitted on 9th April, 2009 that:

The apartments should be purchased at a rate within the range of 9,382 – 9,720 per

square feet (psf)

The total funding requirement to complete the project would be 762.26 crore


Page 50

Due cognizance should be taken of the future receipt from Emaar MGF customers.

DDA may consider providing financial assistance to Emaar MGF by way of loan which

form of funding has been requested by them.

A copy of the main report of the Valuation Committee is at Annexure 22. The Annexures and

remaining part of the report is at Relevant Document 23.

Negotiation Committee 5.15 Following the recommendations of the consultants, a Negotiation Committee comprising of

Member Finance, Chief Engineer (CWG) and Chief Accounts Officer, DDA was formed with the approval

of LG on 15.4.09 to negotiate the recommended terms of the Valuation Committee with Emaar MGF33.

5.16 The purchase rate recommended by the Valuation Committee was offered to the Developer by

the Negotiation Committee which was rejected by them. This was followed by a series of revised

rate(s) being offered to the Developer and his rejection of the same. Apparently, the Negotiation

Committee failed to achieve its objectives.

Intervention by LG 5.17 The developer, at this stage, approached the LG. Shri Shravan Gupta, Vice Chairman, Emaar

MGF, vide his letter dated 22nd April, 2009 addressed to the LG, suggested an acceptable rate of

11,000 per sft even while they rejected the rate of 10,100 per sft offered by the Negotiation

Committee. To quote:

“We had a meeting with DDA today wherein they have offered a price of Rs.10,100/- per sq.ft. against our current selling average price of Rs.13,500/- per sq.ft.

We again reiterate our request that DDA should consider a fair and reasonable margin of overheads and profit, as is allowed to any other project developer by government agencies like the CPWD, DDA etc. The current price of Rs.10,100/- suggests a very nominal margin of overheads and profits being offered to us as a project developer.

Considering the critical stage of the project and our ultimate objective of ensuring timely completion of the project in national interest, we would request for a price of Rs.11,000/- per sq.ft. We have also submitted a staggered payment plan over the project period to the DDA.”



Page 51

This was 1,280 higher than the rate (maximum of the range) initially recommended by the Valuation

Committee.

5.18 The HLC observed that Emaar MGF had conceded in their letter quoted above that the rate of

Rs.10,100/- per sft offered by the Negotiation Committee had a very nominal margin of overheads and

profits for them as a project developer. They indicated that a rate of Rs.11000/- per sft would be

acceptable to them. In order to accommodate the demands of Emaar MGF, Vice Chairman, DDA held a

meeting on 23.04.2009 wherein the Financial experts were also called. It was decided in the meeting

that it would be appropriate to provide for 15% Developer’s margin as per the industry practice on the

total project cost as had also been indicated by the Financial experts and also allow 10% return on the

cost of capital deployed. The Financial experts, furnished a revised working of Recommended Plinth

Area Rate after allowing Developer’s Margin @15% on total project cost and 10% towards the cost of

capital deployed.

S.No. Particulars

1 Total Project Cost 1639.86 crore

2 Project Overheads 34.07 crore

3 Sub Total (1 - 2) 1605.79 crore

4 Allowance towards Developer’s margin, overheads and

Project Management Charges -15%

240.87 crore

5 Total (3 + 4) 1846.66 crore

6 Cost of capital invested by Emaar @10% 85.78 crore

7 Total estimated Project Cost 1932.44 crore

8 Total Plinth Area 1747919.07 sft

9 PAR Rs.11055.64 per sft

Source: Document from MoUD File No.3388/DDR/2007-DD VI (Vol. V)


Page 52

5.19 In the meeting held under the chairmanship of LG on 24th April, 2009, which was attended by

the Secretary and Joint Secretary, Ministry of Urban Development among others, the following

decisions were taken:

i. DDA may go ahead with the purchase of flats at the rate of 11,000/- per sft.

ii. The number of flats to be purchased may accordingly be worked out keeping in view the

cash flow requirement of the project developer, so that timely completion of the entire

work as per schedule is facilitated.

iii. Release of funds should be made on staggered monthly basis depending upon the

progress of work and actual requirement of funds.

iv. A suitable agreement may be entered into within the project development by the DDA

to ensure that the funds released are utilized only for this project.

v. The release of first installment to the Project Developer be done at the earliest so that

the pace of work is expedited for timely completion.

vi. All requirements such as quality, specifications, adhering to timelines etc. will continue

to be met.

The Minutes of the Meeting are placed at Annexure 23.

5.20 The rationale for assembling selected officers and securing their endorsement to what Emaar

MGF wanted has no basis in law or administration. LG ought to have taken this matter to a meeting of

the Authority instead of securing the endorsement of his subordinates to a foregone conclusion.

Bailout Agreement 5.21 This Bailout Agreement was executed on 5th May 2009. The key covenants of the Agreement

are set out below:

DDA to purchase 333 apartments from Emaar MGF at the purchase rate of 11,000 per sft

Total consideration = 766.89 crore

Area = 697,174.55 square feet

Funds to be given in 5 installments on or before the dates agreed

Funds to be deposited in an Escrow account opened for monitoring of these funds


Page 53

Funds to be released only after certification from a financial consultant and an Independent

engineer.

A copy of the Agreement is set out as Annexure 24.

Release of Bailout Funds 5.22 The status of release of Bailout funds to Emaar MGF upto 31st May, 2010, as mentioned in their

letter of 4th June, 2010 addressed to PC (CWG), DDA34, is as under:

Installment Due Date Installment

Amount ( in

crore)

Payment Received

Date

Payment Received

( in crore)

First 5 May, 2009 200 6 May, 2009 200

Second 15 June, 2009 150 10 July, 2009

2 Sept., 2009

100

50

Third 31 July, 2009 150 19 Nov., 2009

5 Jan., 2010

50

100

Fourth 30 Sept.,2009 150 27 March, 2010 150

Fifth 30 Nov., 2009 116.89 27 March, 2010 78.89

Total 766.89 728.89

In this letter, Emaar MGF have mentioned that they were yet to receive the balance amount of 38

crore and even sought interest payment from DDA of 43.35 crore @21% p.a. due to delay in payment

on part of DDA!



Page 54

Project Cost calculation

5.23 HLC was of the view that considerable light on the whole project cost would be thrown by the

sub-contract between Emaar MGF and M/s Ahluwalia Construction (India) Ltd.(Henceforth referred to

as ACIL). DDA was requested to obtain a copy from the Project Developer and this was examined by a

Consultant of HLC. The TDS returns and the Project Report submitted by the Developer to SBI while

seeking loans were also examined. The following important facts have emerged from this study:

i. The entire construction and development work was assigned to ACIL on a Cost price basis with

a Target Price cap of 2875 per sft.

ii. If Emaar MGF supplied certain materials, the per sft rate would get proportionately reduced.

iii. At this rate and for a total plinth area of 26,16,878 sft , the total construction cost would work

out to 752.35 crore and with other costs like land, overheads, interest etc. the total project

cost would be 1224 crore.

iv. The per sft cost of 2875 corresponds favourably with the rate of 2600 per sft cited by the

Project Developer in the Project Report submitted to the Bank. The amount paid to the ACIL as

reflected in the TDS returns corresponds to a construction cost of 752 crore as against 1168

crore taken into consideration by the Financial Consultant of DDA to determine the fund

requirement for completion of the CGV.

A copy of the HLC consultant’s report is at Annexure 25.

5.24 The following conclusions can be drawn from a review of the events leading to the DDA’s

decision to purchase the apartments at the rate of 11,000 per sft. :-

Bailout Package decision not of ‘Authority’ 5.25 From a perusal of the chronology of events set out above it is evident that the Bailout package

was taken to the Authority only in June 2009 after the Bailout Agreement had been signed on 5th May,

2009 and the first tranche of 200 crore had been released. Perusal of the Agenda Notes and Minutes

of the meeting of the Authority held on 3rd June, 2009 reveals that the Authority, which includes non-

official members and is the competent body to take such decisions, was informed that “an Agreement

has been drawn between Delhi Development Authority and Emaar MGF Construction Pvt. Ltd…. under


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which the Agency has agreed to yield and give up its marketing rights in respect of 333 unbooked

apartments at CWG Village (2010) in favour of DDA absolutely and unconditionally forever in

consideration of Rs.7,66,89,25,000/-“ The Authority was informed that ‘as there is no budget provision

in compiled budget estimate for the year 2009-10 appropriation of funds of Rs.256.94 crs. has been

approved by VC, DDA in terms of provisions contained in Rule 17 of DDA Budget and Account Rules..’.

The case was submitted before the Authority for approval of appropriation of funds to the tune of

Rs.256.94 crs. and payment of Rs.200 crores made for purchase of apartments at CWG Village.

Approval of Authority for payment of remaining four installments to Project Developer was also

obtained35. HLC is of the view that since the meetings of Authority were being organized on a regular

basis, it would have been appropriate if the matter had been placed before the Authority for decision

rather than presenting it with a fait accompli. It may be noted that while this matter was taken to the

COS by MoUD way back in February 2009, DDA did not care to take the matter before the Authority till

the whole deal had been sealed.

Full Government approval 5.26 It is also clear that the contour of the Bailout Package was finalized by DDA in consultation with

MoUD and the LG and the decision had full support of the Ministry. The decisions taken in the meeting

held on 24th April, 2009 were also communicated to the Cabinet Secretary vide Secretary’s D.O. letter

dated 6th May, 200936 and Minister, Urban Development was also apprised of the position on file in

June 200937.

Lack of Due Diligence by DDA 5.27 Emaar MGF made assertions and aggressively supported their submission that no project was

available to make a direct comparison with the Games Village project. This was not challenged by DDA.

The Technical consultants, while reviewing the market price for the Games Village, cited ‘DLF property

– Shivaji Marg’ (near Karol Bagh) as direct comparable property with similar (if not superior)

35 Documents placed before Authority in its meeting of 3rd June, 2009 are at Relevant Document 26 36 A copy of the letter is placed at Annexure 26. 37 See File notings at Annexure 27


Page 56

specifications on many grounds. A copy of the letter from the Technical consultant drawing the

comparison between the two properties is set out as Annexure 28.

5.28 It is relevant to note that at about the same time, DLF was offering similarly placed property

(Shivaji Marg) with similar specifications at a price of 6,000 per sft with a further launch discount of

1000 per sft. DDA apparently did not conduct due diligence exercise while making the purchase

decision.

Summary of comparison between the DLF Property – Shivaji Park and CGV developed by Emaar MGF

S.No. Particulars Comparison Comments –

Technical Experts

CVG (Emaar MGF) Shivaji Park (DLF)

1 Location Next to

Akshardham

temple, near

Yamuna river

In the heart of the city,

on main Shivaji Marg,

surrounded by 181 acres

of green area, 34 acres of

commercial

establishment, school

and other facilities

DLF Better

2 Land Cost At Concession At Market Rate DLF Better

3 Structure RCC Framework RCC Framework Similar

4 Piling Yes Yes Similar

5 Flooring Imported marble in

Drawing cum

dining, Lobby

Vitrified Tiles in Drawing

cum dining, Lobby

Emaar MGF Better

Flooring in other

areas similar

6 Walls POP with Acrylic

Emulsion

Acrylic Emulsion Emaar MGF Better

7 Living/ Bedroom –

Fixtures

VRV Air-

conditioning

None Emaar MGF Better

8 Kitchen Modular Kitchen,

with HOB and

Chimney

None Emaar MGF Better

Other aspects similar


Page 57

specifications

including Granite

counter top, stainless

steel sink etc.

9 Electric backup 100% 7 KVA Emmar MGF better

10 Exterior Powder coated,

double glass

Powder coated, single

glass

DLF Better

11 Security CCTV in basement,

entrance lobby,

boom barriers at

exit and entry

Proximity Access control.

CCTV in basement,

entrance lobby, boom

barriers at exit and entry

DLF Better

12 Club house Swimming, pool ,

gymnasium and

shopping centre

Air conditioned club

house with party room,

gymnasium, swimming

pool, card room, reading

room, shopping centre

etc

DLF better

13 Terms of payment Time linked Construction linked DLF better

14 Basic rate – per sft 9,720 6,000-7,000 DLF better

Myth of inability to ‘sell’ apartments 5.29 Emaar MGF approached DDA for financial assistance as it ostensibly could not sell any of its

share of flats in the market! This does not appear to be true. Data made available by Emaar MGF to

HLC giving names and address of the customers, date of purchase and the value of transaction of CGV

apartments reveal the following:

S. No. Year No. of Apartments sold*

Total Value of Sold Apartments ( in crore)

1 2008 231 719.87

2 2009 74 218.90

3 2010 121 415.53

4 Total 426 1354.30

*Note: These apartments have been sold till 28th December, 2010 & does not include 333 apartments sold to DDA for 766.89 crore in 2009.


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Thus, it is not true that Emaar MGF could not sell any apartments in the market due to the

recessionary trend in the real estate sector and, hence, required Bailout Package from DDA! In any

case PDA was not predicated on advance sale of apartments by PD.

Analysis of sales

5.30 The HLC has also done a month wise analysis of sales by Emaar MGF.

The aforesaid chart clearly shows that Emaar MGF made brisk sales in June 2008 when booking of flats

was opened. There was a brief lull between December 2008 and April 2009. In May 2009, Emaar MGF

made a ‘bulk sale’ of 333 ‘unsold’ apartments to DDA and received 728.89 crore from DDA upto

March 2010 which is about 95% of the total cost. Even from retail customers, Emaar MGF received 95%

of the payment within 120 days of booking of flats. Balance 5% is to be paid at the time of handing

over / possession.

5.31 HLC has also noted that Emaar MGF had informed the Financial Consultant that 263 flats had

been sold till April 2009 while data made available by them to HLC shows that only 236 flats had been

0

20

40

60

80

100

120

140

Series1


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sold. If their contention in April 2009 is correct, then by December 2010 Emaar MGF have completed

sale of all 786 apartments allotted to them in June 2008 as part of PDA.

Utilization of Bailout Package Funds

5.32 In light of the above premise, the HLC reviewed the funds utilizations by Emaar MGF out of the

bailout funds provided by DDA.

S .No. Date of

Release of

Funds by DDA

Amount

Released

( Crs.)

Cumulative

Funds

Released

Date of

Utilization

Certificate

Certified Till

Date

Cumulative

amt. Utilized

as per

Utilization

Certificate (

Crs.)

Cumulative

Funds

Unutilized (

Crs.)

Cumulative

Un-

authorized

Payments

1 6-May-09 200 200.00 02 Jul-09 30-Jun-09 155.13 44.87 -

2 10-Jul-09 100 300.00 14-Aug-

09

31-Jul-09 216.06 83.94 20.72

3 2-Sep-09 50 350.00 03-Oct-

09

30-Sep-09 277.16 72.84 38.67

4 19-Nov-09 50 400.00 05-Dec-

09

30-Nov-09 358.88 41.12 52.17

5 5-Jan-10 100 500.00 03-Mar-

10

14-Feb-10 466.23 33.77 63.80

6 29-Mar-10 228.89 728.89 Not

Issued

Not

Available

Not

Available

- -

5.33 Movement of funds (first tranche of 200 crore)

On 6th May, 2009 DDA remitted 200 crore to the Emaar MGF’s SBI account (a/c –

30304457459)

On 8th May, 2009, Emaar MGF transferred 200 crore to another SBI account of Emaar

MGF (a/c number – 30219496586)

On 14th May, 2009 only 165 crore of the above funds were transferred to the

monitoring account opened (SBI a/c number – 30761365338). The remaining amount of

35 crore was not transferred to the account under monitoring.

On the same day, i.e., 14th May 2009, Emaar MGF invested 165 crore in short-term

mutual fund.


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Copy of the bank statements are set out as Relevant Document 27.

5.34 Based on the schedule 2 of the agreement, out of the first installment of 200 crore of the

Bailout package, a sum of 165 crore was to go to various parties to settle “overdue and immediate”

payments which included 110 crore towards the civil and other structure works. Balance 35 crore

was towards project related payments due between 15th May and 31st May, 2009.

Fund Diversion

5.35 The first utilization certificate issued by the Financial consultant states that Emaar MGF paid

only 65.48 crore to the civil contractor against the bills. Additionally, it paid 22 crore as ad-hoc

advance to the contractor. In short, the amount utilized for civil and structure works totalled 87.48

crore only. A copy of the first fund utilization statement is at Annexure 29.

5.36 On further analysis it has been observed that even 55 days after receipt of the first tranche,

substantial funds were lying unutilized in the bank account and mutual funds. Hence, the “overdue and

immediate” payments aggregating to 165 crore as stated by Emaar MGF in its submission to get the

funds released in an accelerated manner from DDA appear to be largely overstated.

5.37 It has also been noticed that as a part of the ‘urgency’ situation created by the Developer, the

first and third installment was transferred into an existing bank account of Emaar MGF and not into the

‘monitoring bank account’ as per the Agreement.

5.38 The Financial consultant stated that for the purpose of issuing the fund utilization certificate,

Emaar MGF presented the project related invoices/ bills aggregating to 35 crore; however need of

the payments and their subsequent realization /clearance was not sought to be established by them.

5.39 The payment of 35 crore outside the ‘Monitoring Bank Account’ raises questions regarding the

end-use of funds released by DDA as part of the ‘Bailout package’.

No need for Bailout Package

5.40 Further analysis of the fund utilization reports and the bank statement of Emaar MGF (the

account set up to monitor the utilization of funds under the bailout package) shows that Emaar MGF


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did not need the bailout funds, their assertions of imminent financial constraints were not correct and

they used the ‘emergency situation’ to get DDA to purchase the apartments in bulk.

5.41 The entire process of funding including action by DDA to obtain opinion of Technical and

Financial consultants within one week and ignoring the same seems staged.

Undue Revenue Stream

5.42 The following table lists out undue revenue streams for Emaar MGF with the release of first

tranche under the Bailout package. :

S.No. Particulars Amount ( crore)

Comments

1 Purchase of apartments at a

rate higher than the rate

recommended by Valuation

Committee

89.00* Rate of purchase of apartment above the

recommended price (differential of

11,000 per sft and 9720 per sft)

2 Sale proceeds due from sales

made in the year 2008 -2010

(after reducing the proceeds

received - 348 crore- from

customers prior to the

Bailout package – invested in

the project)

686.34 Based on the Financial consultants report

3 Unauthorized Payments as

per the Agreement terms

As per the utilization certificate issued by

the Financial consultant (**refer note

below)

Expenditure 64.00

Investments (As on 31st

March 2010)

192.71

Note: * This amount ranges between 134 to 220 crore if the sale price of 11,000 per sft is

compared to price determined by Consultant of HLC.

**A copy of the fund utilization statement is at Relevant Document 28.

Improper use of Funds received under Bailout Package 5.43 The HLC, based on the analysis of Balance sheets of the Project Developer, finds that the total

funds infused into the project as on 31st March 2010 were 2,358.23 crore as against the cost of the

project stated by the financial consultant at 1,639.86 crore. From the funds received under the


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Bailout package substantial amounts were transferred to Group Company as profits, used for

repayment of interest bearing loans and investment of ‘surplus’ funds in short-term mutual funds.

S.No. Particulars Amount

( crore)

Amount

( crore)

A Total Project Cost (as per Emaar MGF

certified by financial consultants)

1,639.86

B Project Funding

(i) Funds by way of capital and loans from

parent company + Funds from Banks

595.00

(ii) Sale of Apartments (proceeds from sale of

336 apartments out of the total share of

453)

1,034.34

(iii) Release of funds by DDA under the Bailout

package

728.89

TOTAL FUNDS (As of 31st March, 2010) 2,358.23

Examination of Balance Sheets

5.44 Summary of fund movement of the project is set out below:

Particulars 2007-08 2008-0938 2009-1039

Funds invested (Capital + Borrowings)

529 66

Repayment of Holding Company Loan

- - (73)

Additional Bank loan/ (Repayment of

- - (111)




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Particulars 2007-08 2008-0938 2009-1039

Bank loan)

Mutual Fund Investment

- - (193)

Payment to EMLL under terms of collaboration Agreement

(298)

Comments No revenue sharing with

Holding Company (Emaar

MGF entered into

revenue sharing

agreement dated 8th May

2008 with Emaar MGF

Land)

1. Emaar MGF Land did

not infuse any

additional funds

during this year. Only

their loan was

converted into equity

and, thus, remained

almost cash neutral.

2. Entire funding and money circulation happened out of the realizations from the sale of project. Even inventory was built out of this money only.

3. 106 crore of revenue from sale of project was passed on to the MGF Land and not recorded by MGF Construction. However, at the year end this remained unpaid and, thus, no cash outflow.

1. Invested around

193 crore in mutual

funds (based on year

end position). During

the year, the

Company kept on

investing cash

aggregating 880

crore in short term

mutual funds and

redeemed to the

extent of 690 crore

depending, probably,

on operation needs.

5.45 On the scrutiny of the audited accounts of Emaar MGF as on 31st March, 2010, it is apparent

that substantial sale proceeds were received by Emaar MGF which primarily funded the project during

the financial year 2009-10. During the period May 2009 to March 2010 substantial funds were invested

in short-term mutual funds. The investments held at year ended 31st March 2010 were 192.71 crore,

which is the holding of the equity from the parent company. Further, the profits of Emaar MGF,


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equivalent to 210 crore (paid 73 crore) during the year 2009-2010, were transferred to holding

company and they ceased to invest the funds in the project after receipt of Bailout Package. The low

outstanding of the debtors reflect that the primary source of funding was customer advances

(including DDA as customer for the 333 apartments).

5.46 Based on the above information it can be stated that Investment by the Developer in the

project was primarily in the first year of operations; the subsequent years were funded out of the

customer advances with DDA being the bulk purchaser of 333 apartments in an all cash deal. Receipt of

funds by DDA significantly increased the project liquidity which was largely parked in mutual funds and

utilized to repay the funds of other stakeholders thereby significantly de-risking their position in the

CGV.

Raison d’etre?

5.47 From the chain of events described above, a question which emerges is whether there was any

need to bail out Emaar MGF Construction Pvt. Ltd., the Project Developer. Their case was that as in

December 2008 they required 1067 crore to complete the project, the sale of flats had stopped and

therefore they needed cash injection to complete the project. It is accepted that sale of apartments

had fallen steeply in November –December 2008 as illustrated in the chart at Para 5.30 above.

5.48 However, from this it does not necessarily follow that Emaar MGF needed cash; more

particularly, that Emaar MGF Land needed cash because Emaar MGF Construction was described as

one of the entities of Emaar MGF Land in the application to State Bank of India for credit sanction to

finance the project. Examination of relevant documents shows that Emaar MGF Land and Emaar MGF

Construction are two sides of the same coin and therefore, in trying to establish the need, cash flows

of both companies need to be considered. At the behest of HLC, KPMG have prepared the cash flow

statements of these two companies separately and together based on their Balance Sheets for 2009-

10. Their opinion is at Annexure 30.

No cash flow problem

5.49 It clearly shows that during 2009-10 these entities did not need cash to complete the project.

The funding from DDA enabled them to repay bank loans, to meet other liabilities not connected with


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the project and finally to build up considerable cash balances which were invested in mutual funds. It is

pertinent to note that investment in mutual funds was a regular phenomena and not a year-end

consequence. Even when the first installment of 200 crore was released in May 2009, this was

credited to general bank account of Emaar MGF Construction and of this only 165 crore was

transferred to the ‘Monitoring Account’. The usage of the balance 35 crore remains blurred. It would

be clear from Annexure 30 and from what has been stated above that Emaar MGF did not need money

to complete the project.

5.50 The question then is why did they ask DDA for assistance? The analysis of sales shows that

there had been a decline in monthly sales of apartments and there were ‘uncertainties’ regarding

future sales. Hence, Emaar MGF perhaps wanted to dispose off built up inventory of apartments as

quickly as possible but without resorting to any discount sales! The Bailout Agreement was really

intended to reduce Emaar MGF’s inventory of unsold flats to less than 5% of the total project. This

would enable Emaar MGF (this refers to the joint interests of both entities) to inform SEBI in

September 2009 that their Games Village project had been sold. In fact, what had taken place was that

the unsold inventory of the Project Developer had been transferred at one go to DDA at terms highly

advantageous to the Project Developer.

5.51 HLC, therefore, cannot but conclude that the demand for funds for project completion was a

charade enacted by Emaar MGF; they misrepresented facts in terms of non-disclosure of their true

cash flow, made out a case for infusion of funds and persuaded the DDA to buy bulk of their unsold

inventory, in a depressed market. DDA and MoUD “failed” to see through this subterfuge and DDA

ended up with two thirds of the unsold apartments with all attendant risks. The financial and technical

expertise secured by DDA was of little consequence; the Project Developer was the unqualified

beneficiary of this transaction.

5.52 Based on these facts and analysis, the HLC is of the view that Emaar MGF did not require the

funds ( 766.89) under the Bailout package as a substantial part of these funds remained invested and

the receipt of sale proceeds from the customers would have met the project cost. Ways and means

accommodation from Banks was also an option as and when required.


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Governance Issues

5.53 While the PDA did not provide for any financial assistance to the Developer and the entire

‘financial risk’ associated with the project was to be borne by the Developer; Emaar MGF successfully

coerced DDA to fund the project. As a consequence, the condition of the PPP that 100% financial risk

would vest with the Developer ceased to exist and a major part of the financial risk related to the 333

flats was transferred from Emaar MGF to DDA.

5.54 DDA in its submission stated that its sole objective was to ensure timely completion of the

project as failure to develop the Games Village could have led to cancellation of the CWG 2010.

5.55 DDA in their Bailout Agreement with the PD dated 5th May, 2009 stipulated the setting up of an

“escrow account” with State Bank of India to monitor the end use of the funds provided under the

bailout package. The funds, to be released at fixed intervals, were subject to verification by an

independent Chartered Accountant and an Independent Engineer.

5.56 Yet once again DDA did not set up an escrow account to monitor the funds provided under the

Bailout package; only a separate bank account, without any control of DDA, was opened.

5.57 It was recommended to DDA by the Financial consultant that the funds should be successively

released to Emaar MGF on the basis of the detailed payment schedule drawn up by them till November

2010 and upon verification of the work done. However, the HLC finds that the DDA did not take any

cognizance of the said recommendation.

5.58 The Financial consultants had clearly stated that in the calculation of the fund requirement for

the project completion, they had not included the balance receipts of funds from the existing

customers or the future sale of apartments by Emaar MGF. They had recommended that DDA should

consider such cash inflows and the same should be reduced from the funds provided. They had

reported that while the future sales by the Developer cannot be predicted, however, the pending

receipt of 472.26 crore from the existing customers should be adjusted while arriving at the future

fund requirements. But this was totally ignored by the DDA for reasons best known to them!


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5.59 The reply of the Member Finance on the above governance issues is set out as Relevant

Document 33. It is not being commented upon as it does not address the issues described above.

5.60 DDA officials have stated that the Authority had evaluated various options available to it under

PDA, viz.

a. To file a legal suit for specific performance against the Project Developer;

b. To revoke the PDA, forfeit the upfront fee of 321 crore given by the Project Developer

and invoke the Performance Guarantee of 300 crore and find a new Developer to

complete the Project;

c. To revoke the PDA and find alternate venues for accommodating the participants;

d. Terminate the agreement and develop the Project by itself;

e. To provide financial support to the Project Developer to help complete the Project.

After deliberations, DDA came to the conclusion that the only option left with DDA was to support the

Project by putting in its financial resources. DDA reportedly examined two options of providing an

interest bearing loan to the Project Developer or to purchase the Apartments from the PD at an agreed

price. The option of providing loan to the PD was discarded on the grounds that the PD could provide

no security as the Project land and ownership in the Apartments rested with DDA until the conveyance

of the Apartments by DDA post Games; repayment of loan being doubtful and chances of the PD not

pushing the sales of the Apartments. Purchase of Apartments from the PD at an agreed price was

expected to safeguard DDA’s interests. However, as has been explained in the preceding paragraphs,

the justification offered by DDA appears to be convoluted and lacking in conviction. DDA could well

have funded PD by agreeing to advance a loan for 321 crore on the security of the land, ownership of

which, remained to be transferred to Emaar MGF. This could have been a less expensive “out of box”

solution.

5.61 From the aforesaid analysis it is clear that:

i. The Project Developer did not require any financial assistance for completion of the CGV.


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ii. Even if there was temporary requirement of fund infusion, the project work could have

continued uninterrupted if DDA had provided a loan of 321 crore on normal interest rates

to the PD.

iii. The sale price determined by DDA was neither based on ‘assessed cost’ of the project nor

on ‘market price’.

iv. The Project Development Agreement, which was a legally binding document, was virtually

discarded when the Bailout Agreement was signed.

v. The interests of DDA were compromised in favour of those of the Project Developer.

vi. DDA may well dispose off these apartments at a price significantly higher than paid to

Emaar MGF, but that would not detract from the fact that by paying a higher rate to Emaar

MGF they thereby reduced their own profitability to that extent.

Box 9: How Emaar MGF virtually rescinded key provisions of Project Development

Agreement?

Para 8.8 of the Project Development Agreement reads as under:

“The Project Developer shall be solely responsible for arranging all the funds for the construction

and development of the Project in accordance with the provisions of this Agreement and in

accordance with the Good Industry Practice. DDA confirms that the Project Developer has the full

right and authority, without requiring any further consent, authorization or no-objection from

DDA, to enter into Financing Agreements.”

Para 1.1.19 of the PDA defines “Project” thus:

“’Project’ means complete construction and development of the ready-to-use Residential Facility at

the Project Site under a public private partnership model wherein the Project Developer pays an

upfront bid amount to DDA and DDA transfers the two-third (2/3rd) of the Residential Apartments

along with the rights in the undivided underlying land for onward transfer to the individual buyers

by the Project Developer.”

The Project Developer very cleverly, in order to avoid the borrowing costs, repaid interest bearing

borrowings and invested cash surplus in market securities and transferred funds to other Group

companies out of the funds received from DDA and thus violated key provisions of the Project

Development Agreement.


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Chapter 6: Completion and Handover

6.1 The stipulated completion date of the Games Village project as per the PDA was 31st March

2010. According to the provisions of the PDA, the project was deemed to be complete when the

Residential facility is completely developed in all respects (including landscaping), technically fit to be

occupied and ready-to-use/ livable, with no pending construction, unfinished work, construction

equipments, debris, construction material etc. on the project site and certified as complete in writing

by DDA.

6.2 This date of completion of project has been a topic of debate between the PD and DDA. Emaar

MGF vide various letters to DDA insists that the project was completed well within the stipulated

timeline of the PDA. Emaar MGF submitted that the project was complete as on 29th March, 2010

except for ‘minor’ work of landscaping and construction of certain roads that was delayed because of

work carried out by other agencies employed by DDA. It was insisted by Emaar MGF that the work

being executed by various agencies such as BSES, DJB, sewerage, storm water drains and construction

of boundary wall, delayed the project and therefore they were not responsible for consequent delays.

6.3 Emaar MGF, in this regard, filed its application for the completion certificate with the Building

Department of DDA on 29th March, 201040.

Handing Over of residential towers

6.4 While the assertions have been made as regards the timely completion of the Games Village,

the handing over of building towers to DDA started only from 21st June, 2010, a delay of nearly 3

months in comparison with the initial stipulated date of completion of 31st March, 2010.

6.5 Simultaneously by 15thMay, 2010, ITDC started the process of supply of hard and soft

furnishings for the residential apartments. The documentation of handing over of the residential

40 See Relevant Document 34.


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towers was not done by DDA while the work of furnishing was initiated by ITDC. The furnishing of the

apartments was completed by ITDC on 30th August, 2010.

6.6 The furnished apartments were in-turn handed over to OC by DDA over a period of one and half

months starting 24th July, 2010 till the final handover on 30th August, 2010.

A furnished Model Apartment in Games Village in October 2009

Temporary Occupancy Certificate 6.7 Only after the towers were furnished and handed over to OC, DDA issued a ‘Temporary

Occupancy Certificate’ to Emaar MGF on 30th August, 2010; while the completion certificate was at

that time withheld on account of violations of Building bye-laws.

6.8 These events are a clear indication of mis-management on the part of DDA. The independent

activities which were planned to be carried out in a sequential manner were undertaken

simultaneously and overlapped. Such a situation facilitated assertions by agencies to pass the blame to

others thereby severely diluting accountability of each in meeting their respective contractual

obligations.


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6.9 It has been noted that by 29th March, 2010, DDA was in the process of preparing a list of defects

in terms of quality of construction. Given the urgency, several stop-gap arrangements were put in

place to make the village ready for the athletes in time. As such Emaar MGF’s filing of an application

for issue of completion certificate with the statutory authorities, at best could be termed ‘premature’

given the level of physical progress of the project.

Quality Issues

6.10 It has been widely published in the media and there exists a strong public perception that the

quality of the Games Village was sub-standard. On this issue, Minister, Urban Development also sent a

Note to the Secretary, MoUD on 7th October, 2010 wherein he mentioned that

“It has been widely reported that Emaar MGF Construction Pvt. Ltd, the project developer entrusted with the project, has not executed the Commonwealth Games Residential Project near Akshardham Temple diligently and efficiently. There are serious complaints against the Project Developer including complaints of construction against the provisions of sanctioned plan as well as not adhering to the obligations as the Project Development Agreement. There have also been reports of delay as well as deficiency in the execution of the project not only adversely affecting the image of DDA but also the Commonwealth Games 2010 as a whole.”

6.11 DDA issued a letter to Emaar MGF regarding the non completion of the project and list of

defects and quality issues noted by DDA. The defects included:

a. No flooring done in the basement for some sections

b. Water treatment has not been done in the lift pits as there are leakages from the

ground water

c. Rain water is penetrating from the shafts as they have not been covered.

6.12 The letter dated 18th October, 2010 from DDA to MoUD41, mentions that there are a number of

defects and delays in the execution of the project by Emaar MGF which attracts penalties as per the

PDA and it was proposed that immediate action is required against Emaar MGF for non execution of

the project in accordance with the agreed terms and conditions.



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6.13 Officials of HLC during their visit to the project site on 16th November, 2010 also noticed severe

seepage in the basement of the residential building which is fallout of the above mentioned defects.

The photographs taken during the visit support the observations.

A view of seepage water in the Basement of Residential Towers of CGV

6.14 HLC was also informed that the lower basement of the buildings is 10 meters below the river

bed and seepage in the basement was due to the poor quality of water-proofing done by the

Developer.

6.15 Emaar MGF’s assertion that the contract was completed within the stipulated time is

substantiated neither by documentary nor evidentiary proof that the project was completed within the

prescribed timelines. Mere filing for completion certificate with the statutory authorities does not

tantamount to meeting the contractual obligations even while the list of defects and quality issues are

being drawn and resolved.


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Additional Expenditure by DDA

6.16 Apart from the above defects, DDA also completed a number of unfinished works inside the

Games Village after handover of apartments from the Emaar MGF related to the cleanliness/

maintenance of the Games Village.

6.17 The claim of DDA on Emaar MGF on account of quality defects aggregates to 30.43 crore as

indicated below:

Particulars Claim ( in crore)

Expenditure incurred for cleaning/ maintenance of CWG Village 2010 0.21

Rectification of water proofing treatment in the basement 30.00

Cost of raising the boundary wall 0.22

TOTAL 30.43

6.18 Other claims made by DDA on Emaar MGF on account of various costs incurred on their behalf

and damages pending levy aggregates to 65.90 crore. A summary of the same is described as below:

Particulars Claim ( in crore)

Outstanding Land Rental – DDA 0.38

Cost of Signages 0.11

Non-payment of dues related to the Games Village residential project -

including statutory dues to various Government/ Civic Agencies which were

paid by DDA on behalf of the developer (BSES, DJB etc.)

48.51

Liquidated Damages – For milestones 8 & 9 per the PDA 16.90

TOTAL 65.90

6.19 While the above costs are self explanatory; it is pertinent to note that the above amount

aggregating to a claim of 96.33 ( 30.43 + 65.90 crore) is after adjustment of the Bank Guarantee

forfeited by DDA to the tune of 90 crore. The balance Bank Guarantee of 93 crore is the subject

matter of litigation between the PD and DDA pending in the Hon’ble High Court of Delhi. Hence, while


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the DDA released the bank guarantee as per the Agreement, it failed to enforce its due on the

Developer.

6.20 The HLC is of the view that Emaar MGF did not complete the project in time before handing it

over to DDA. DDA and Delhi Government had to deploy considerable resources and funds to get the

Games village ready and inhabitable for hosting the athletes.


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Chapter 7: Main Findings Games Village site

7.1 The selection of site for the Games Village in 2003 was a priori and no exercise was undertaken

to compare the selected site with alternate sites available with DDA. HLC was also informed of the

possibility of constructing the Games Village in close proximity to Jawahar Lal Nehru Sports Complex on

land belonging to L&DO, which remained unexplored because of an implicit desire to construct next to

Akshardham and at no other site.

7.2 The selected site had several drawbacks in terms of uncertainties including securing from Uttar

Pradesh Government a portion of the land owned by them, obtaining environmental clearances,

change in land use, pressure from Akshardham as to the height of the buildings and litigation because

of the decision to construct in the flood plain of Yamuna River.

7.3 This decision entailed auxiliary cost of about 633.06 crore on infrastructure i.e. the Flyover on

NH 24 near the Games Village (to provide uninterrupted ingress and egress into and from CGV),

construction of an elevated road over Barapulla Nallah (linking CGV to JLN Sports complex), and noise

suppression measures along NH24 and adjacent railway track.

Delay in commencing work

7.4 Even though the site for the Commonwealth Games Village had been frozen as early as

September, 2003 and DDA had been named the Nodal Agency for development of Games Village, it

took DDA nearly 27 months to secure GOM approval for the manner of its development. This delay

had serious consequences in 2009 when progress was stalled with the ‘paucity of time’ and spectre of

‘no Games Village’ becoming the main plea for ruling out all other options for DDA other than agreeing

to a Bailout package.

7.5 Even after the approval by GOM in January, 2006, DDA took 19 months to sign the Project

Development Agreement with the Project Developer in September, 2007.


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PPP mode 7.6 The construction of the Games Village was envisaged as a DDA project in the year 2003. DDA

staff believed it was capable of doing so, DDA had more than sufficient funds to do so and yet, by

sometime in 2005, there seemed to be a strong desire in the top echelons of DDA to follow the PPP

mode.

7.7 DDA did not understand PPP, never understood PPP and ended up virtually getting the Village

constructed through a contractor with the additional complication of a Project Developer in between.

7.8 The decision of the GOM taken on 4th January, 2006 cannot be construed as a direction of

Government. The DDA also did not follow the statutory process of securing the approval of the

Authority. A Status Note on Commonwealth Games Projects to be developed by DDA was presented

before the Authority on 3rd June, 2006 wherein it was resolved that “Information given in the agenda

was noted by the Authority.”

Selection of Project Developer

7.9 A review of the selection process reveals that, for what should have been a prestigious and

profitable project, the response was unusually poor. A large number of bidders, who had evinced

interest at the EOI stage and were pre-qualified, were reduced to two at the stage of submission of

Bids. By the time queries raised by potential bidders in the Pre-Bid meeting were clarified and

Addendum to RFP issued, there was very little time (7 days) left for submission of bids even on revised

last date. Disqualification of one bidder during technical evaluation left only one valid bid for the

project.

7.10 As against the reserve price of 300 crore for the land in the RFP, the sole bidder quoted just

321 crore. If truly participative bidding had taken place, DDA would have definitely obtained a higher

bid.

No need for financial assistance

7.11 There was no accurate assessment of the financial assistance demanded by the Project

Developer. Examination of the cash flow statements of Emaar MGF Constructions Pvt. Ltd. and Emaar


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MGF Land Ltd. reveal that, both on ‘stand alone basis’ as well as on ‘consolidated Group basis’, they

had sufficient funds available for completion of the project and there was no need for DDA funds in

2009-10.

Bulk Purchase by DDA

7.12 Bulk purchase of additional 333 apartments by DDA at the rate of 11,000 per sft under

‘depressed market conditions’ was only intended to provide undue benefit to the Project Developer.

Cash infusion of 728.89 crore into the Project by DDA in 2009-10 was unnecessary.

Loan to PD

7.13 Project Developer had sought a sum of 321 crore and that too as a loan from the DDA. The

Project Developer had also expressed his willingness to pay interest as admissible on this amount. DDA

took the stand that the PDA had no provision for advancing such a loan and on this ground itself this

proposal was rejected. The same DDA, however, agreed to purchase 333 apartments at a very high

price from the Project Developer. The PDA had no provision for such a purchase as well. HLC is of the

Box 10: Complicity

At Annexure25 a comparison has been made between the per sft rate of various

items as given in the sub contract signed between Emaar MGF and ACIL and the

rates given in the BOQ prepared in March 2009. These BOQ figures were also

presented to the Financial Consultant appointed by DDA.

In the BOQ, the earlier rate of 2875 per sft has been hiked to 4478.27 per sft. This

is the basis for estimating total construction cost at about 1175 crore. This entire

exercise was undertaken to artificially jack up the construction cost to enable the

Project Developer to demand a higher rate from DDA for sale of 333 apartments. It

must be remembered that the sub contract between Emaar MGF and ACIL put a cap

of 2875 on the per sft construction cost. This target price, determined in July 2007

and referred to in the LOI (see Relevant Document 36) as well as the sub contract,

was sacrosanct.

These facts point towards complicity of the Financial Consultant with Emaar MGF to

engender a price which was ‘acceptable’ to both DDA as well as the Project

Developer.


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view that if at all any financial assistance was required by the Project Developer, a loan would have

been a much ‘neater’ ‘out of box’ solution.

Undue gain from Bailout Package

7.14 HLC is of the view that if DDA had done due diligence, it would have come to the conclusion

that the PD did not need any financial assistance. Even if some help was required, advancing an

interest bearing loan would have been more appropriate. The HLC is also of the considered opinion

that the amount of 11,000 per sft. approved by a group of officers chaired by LG is unjustified. If the

‘assessed cost’ of the project were to be considered, a rate of 7829 per sft. would have been fair.

Even if the ‘market price’ option was favoured, DDA should have demanded and got the following

discounts:

a) 2% discount which Emaar paid to all agents as commission;

b) 8% discount towards ‘down payment’ – this was actually given to retail purchasers;

c) 10% discount for ‘bulk purchase’ is a normal practice and should have been applicable to the

purchase of 333 apartments in one go

A selling price of 11335 per sft was taken into consideration by the Technical Consultant while

determining his recommendation to the Valuation Committee. A 20% discount on that price would give

a figure of 9068 per sft. Therefore, the purchase price should have ranged between 7829 to 9068

per sft. The HLC has no hesitation in recording that the actual price of 11,000 per sft paid by DDA

resulted in an undue gain ranging between 134 to 220 crore to the Project Developer.

Inappropriate Decision making body

7.15 The participants in the Meeting convened by the LG on 24th April, 2009, in which major

decisions relating to the Bailout Package were taken, had no authority to take such a decision as it was

neither a meeting of Delhi Development Authority nor of the MoUD, Government of India. This matter

ought to have taken to a meeting of the Authority, which is the body empowered to decide such

issues. Instead, the Authority was informed on 3rd June, 2009 about the Agreement signed between

DDA and Project Developer on 5th May, 2009 and to accord post facto approval to appropriation of


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funds of 256.94 crore and payment of 200 crore made for purchase of apartments by VC, DDA in

accordance with Rule 17 of DDA Budget and Account Rules.

Role of MoUD

7.16 Senior officers of the Ministry of Urban Development, including the then Secretary, were fully

aware of the Bailout Package and played a major role in finalizing the rate ‘acceptable’ to Emaar MGF

along with senior functionaries of DDA and causing a loss of anything between 134 to 220 crore to

DDA.

Role of Emaar MGF

7.17 The Games Village saga will remain incomplete without mentioning the role of Emaar MGF, the

Project Developer. They failed to perform as per the legally binding Project Development Agreement.

They deliberately withheld relevant documents such as the signed sub contract with ACIL from DDA

and their consultants. They generated documents of questionable veracity through their architect

which were relied upon by the Financial Consultant of DDA. They appear to have had the intent to

build excess FAR right from the beginning. They exploited the paucity of time available before the

commencement of CWG in October 2010 to their advantage and did not let go of any opportunity to

safeguard their interests. They had ready access to the senior office bearers of DDA and MoUD.

Role of Consultants

7.18 The consultant chosen by DDA (PwC) to advise them on execution of the Games Village Project

in the PPP mode failed to perform their assigned task satisfactorily. Certain critical omissions in the

Box 10: Loan Application of Emaar MGF to State Bank of India

Document submitted by Emaar MGF to SBI for obtaining Bank finance for the

Commonwealth Games Village Project reveals the following:

a. Project Cost including cost of land was 1264 crore

b. Per sft construction cost was estimated at 2600 for residential areas

c. Total Super Area was to be 2,599,893.50 sq.ft.

d. Average Sale Price was expected to range between 10,500 to 11,500/- per

sft.


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PDA such as those pertaining to provisions for escrow account and supply of audited statement of

accounts created conditions where the PD could submit unauthenticated documents and figures to the

Financial Consultants of DDA.

7.19 The Financial Consultant selected by DDA was also their Taxation Consultant and hence could

not be regarded as an ‘independent valuation expert’. They did not exercise due care and caution while

recommending the ‘value’ of the apartments to DDA.

Loss to DDA

7.20 It has been brought out that the estimated loss to DDA can be categorized under the following

heads:

Estimated loss due to purchase of 333 flats at a higher rate - 134 to 220 crore

Unauthorized payments to Emaar MGF contrary to PDA – 64 crore

Non-levy of Liquidated Damages - 81.45 crore

Carrying cost of unsold apartments with DDA - 35-40 crore per annum42

Responsibility

7.21 The responsibility for the various acts of omission and commission which brought ‘undue gains’

to Emaar MGF primarily lies with LG, Shri Tejendra Khanna, ex-officio Chairman of DDA; Shri Ashok

Kumar, Vice Chairman, DDA; Shri Nand Lal, Member (Finance) and Shri A.K.Bajaj, then Member

(Engineering) of DDA. Dr. M. Ramachandran, then Secretary, Ministry of Urban Development also

played a key role in determining the contours of the Bailout package including high valuation, etc.

7.22 There may well be other officials responsible in different degrees whose acts of omission and

commission contributed to the loss to DDA and that can be separately assessed.

42 This includes the likely expenditure on security, maintenance, electricity, water & sewerage charges etc.


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Chapter 8: Recommendations

8.1. Government may decide on action against the public servants responsible for doling out

largesse to the Project Developer.

8.2 Government may examine the governance structure of DDA including the continuance of the Lt.

Governor as the ex-officio Chairman of DDA and evolve measures to strengthen the ‘accountability

systems’ in DDA.

8.3 GoI / DDA may take appropriate action against Emaar MGF, Project Developer, for knowingly

supplying incorrect information and for its various acts of omission and commission.

8.4 A more detailed inquiry by investigating agencies (including Income Tax) may throw greater

light on deliberate acts of omission and commission of different parties involved.

8.5 It is given to understand that certain outstanding issues between DDA and the Project

Developer are yet to be resolved and that certain matters are under litigation. In the interest of the

DDA and the bonafide purchasers of the apartments, it is necessary to end the impasse so that the

process of transfer of apartments / fresh sales can start.


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Appendix 1: List of Documents examined S.No.

File No.

Description

1 F 9(72)SW/Coordn/06/DDA File pertaining to CGF

2 F9(73)SW/Coordn/06/DDA File pertaining to EKS – Games village brief

3 DDA Budgets Financial Year 2003-2004

4 Financial Year 2004-2005






10 CAG Audit Report

11 WAB (76)/Vol-40/Secy Record of WAB w.e.f 2006-2010

12 PS/FA (H)/DDA/2006 Selection of Financial Consultant for CWG

13 F9(66)/SW/Coordn/06/DDA Meetings at LG office

14 F9(66)SW/Coord/06/ DDA Meetings at LG office 19N/238C

15 F9(67)SW/Coordn/06/DDA Evaluation of Technical Bid for

Design/Financial consultants 9N and 206/C

16 F9(67)SW/Coord/06/DDA/Part II Evaluation of Technical Bid for

Design/Financial Consultant 20/N and

283/C

17 F9(18)SW/Coord/2005/DDA GOM meetings- CWG 2010

18 PS/FA(H)DDA/Valuation committee/09/07 Report of Committee Constituted by

Hon’ble Lt. Governor, Delhi for CWG

village project


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19 PS/FA(H)DDA/Pt Files Release of funds to M/S Emaar MGF for

purchase of apartments

20 F9(31)SW/coord/2005/DDA/Pt II High Powered Committee

21 F9(31)SW/coord/2005/DDA Pt I DDA Core Group Meetings (High Powered

Committee) Pg. Nos. 463 to 1039

22 F 1 (33) PC/ CWG/08/DDA Minutes of Dhindsa Committee

23 F 1 (24)/2006/LSR (R) RFQ and RFP docs justification of

disqualification of Technical Bid of DLF Ltd

24 F 9 (43) SW/05/DDA Venue Appraisal Study by the EKS

25 F5(49)2007-08/EE/CWGD1/A/DDA Emaar MGF Construction Pvt. Ltd. (Part I)

26 Emaar MGF Construction Pvt. Ltd. (Part II)

27 Emaar MGF Construction Pvt. Ltd. (Part III)

28 F5(29)2006-07/EE/CWGD1/A/DDA M/s Suresh Goel & Associates (Part I)

29 M/s Suresh Goel & Associates (Part II)

30 M/s Suresh Goel & Associates (Part III)

31 File pertaining to documents received

from Director (CWG)

32 Agreement No. 03/EE/CGD.1/DDA/2008-

09

Third party Quality inspection agency

(CBRI, Roorkee) for CGV residential project

of CWG-2010

33 Quality Assurance reports from CBRI

34 Agreement No. 1/EE/CWGD/DDA/2007-08 Copy of PDA for Construction of

Residential project of Common Wealth

Games Village on PPP Mode

35 F-5(126)2010 /EE/CGD1/A/DDA M/s Access Plus; Supply of Shower of

residential apartment

36 Minutes of Monitoring Committee for

monitoring the progress of CGV

37 F 8(23)/79/1L/Pt I Bochanwasi Akshardham Sansth


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38 TN 03 18/01/11 Ownership status of the land utilized for

CWG village

39 File No.3388/DDR/2007-DD VI (Vol. V) File of MoUD relating to Games Village


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Appendix 2: List of persons interviewed

S.No. Names Designation

1 Shri Vijai Kapoor Ex – LG, Delhi

2 Shri Dinesh Rai Ex VC, DDA

3 Shri Ashok Kumar Nigam VC, DDA

4 Shri Nand Lal Finance Member

5 Shri Ashok Khurana Engineer Member

6 Ms. Veena Ish Principal Comm. (CWG)

7 Shri Alok Swarup Director (Sports)

8 Shri Amar Singh Executive Engineer (CGD-1)

9 Shri A.K. Suneja Executive Engineer (CGD-2)

10 Shri K.G. Gupta Executive Engineer (CGD-8)

11 Shri A.K. Sarin Advisor (Ex-EM)

12 Shri Nitin Garg Representatives from Garg A. Associates

13 Shri Ashok Garg Representatives from Garg A. Associates

14 Shri K.N. Goyal Representatives from K.N. Goyal & Co.

15 Ms. Mala Rajan Representatives from K.N. Goyal & Co.

16 Shri Neel Kamal Pricewaterhouse Coopers

Commonwealth Games Village

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