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Mega Projects
A plum role for developer in film city
Raveen Thukral
Tribune News Service

Chandigarh , January 10
As the Central Vigilance Commission (CVC) begins the probe into the much-publicised but controversial mega projects of the Chandigarh Administration, questions are now being raised on the very validity of the contract signed by it for the Rs 191-crore Film City with Parsvnath Film City Limited (PFCL).

Interestingly, while the entire negotiations for the project were carried out by Parsavnath Developers Limited (PDL), the contract was signed with its subsidiary company, PFCL, which was incorporated on February 28, 2007, two days before the deal. Moreover, at the time of signing of the deal, the company did not even have the mandatory Certificate of Commencement of Business (CCB), issued by the Registrar of Companies.

Even the paid-up capital of PFCL on the day of signing the agreement, March 2, 2007, was only Rs 10 lakh, whereas as per the Expression of Interest invited by the administration, the eligible company had to have a paid up capital of Rs 50 crore. While PFCL gave an application for enhancement of its authorised capital to Rs 50 crore after May 10, 2007, the CCB was issued on April 11, 2007, over a month after the signing of the contract.

Questions are being raised on the need for forming a new company, which as per law is a separate entity, when technical bids of PDL were evaluated and approved. In fact, the administration has been mysteriously silent on the existence of PFCL and till date most of the records pertaining to the project refer to the company as PDL. Even the press release issued by the administration on March 2 stated that a contract for the project had been signed between PDL and the administration and there was no mention of PFCL.

While officials of the company were not available for comments, UT Finance Secretary Sanjay Kumar said “since the matter was now being looked into by the CVC, I wouldn’t like to comment on it”.

According to some senior chartered accountants, under Section 149 of the Companies Act, a limited company cannot commence business until and unless CCB is issued. “CCB is a formal approval from the government for starting a business and no limited company can get into a contract prior to its issuance,” they say, adding that any agreement signed prior to that would only be “provisional” and the company is a “non-entity”. They said even subsidiary companies or the ones formed as Special Purpose Vehicles (SPV) also needed a CCB.

RTI activist Hemant Goswami, who has procured over 1,000 pages of documents pertaining to the project under the Act, said the payment of Rs 48.3 crore made by PFCL to the administration was shown as an advance from PDL and on the day of signing the contract the company did not have any staff on the rolls. He said PFCL was showing an inventory of Rs 191 crore and then adjusting the same in its liabilities in the balance sheet.

Raising questions on the concept of the Film City project, Goswami said no one knew how it all started. He said in a reply given to him under RTI, the administration had claimed that the project was initiated after the visit of Vivek Atray, the then Director IT and S. K. Sandhu, the then Finance Secretary, to Malaysia and Singapore. However, in their report to the administration, the officers had strangely made no mention of their visit to any film studio and/or anyone associated with the movie trade during their foreign jaunt. He said the file also had no mention of any feasibility study, project report and/or any pilot study prior to taking up of the project.

Meanwhile, apart from these technical aspects, according to sources the CVC is likely to also look into the reasons for the undue haste adopted in the clearance of this project. A scrutiny of the Film City file (available with The Tribune) clearly reveals the speed with which sanctions were accorded.

There are two separate notes regarding the project in two separate files and both are dated March 7, 2006. The file was sent by Director Information Technology (DIT) on that day to the then Finance Secretary, who further forwarded it to the office of the then Adviser, Lalit Sharma, and who finally sent it for approval to the Administrator Gen (Retd) S F Rodrigues. All these officers signed and approved the project on March 7 itself.

Again, the file was moved by the DIT for further approval on March 27, 2006, and again it went through the four levels of officers and was approved by Rodrigues on the same day itself. A recommendation to call Expression of Interest was moved on March 28, 2006, and the advertisement in all newspapers was placed the very next day.

Another aspect that is likely to come under the CVC’s scrutiny is the administration’s controversial decision to allow Parsvnath to construct a hotel on an area of five acres within the 30 acres allotted to it for the project. Initially the project had no provision for a hotel site.

Goswami dubbed the deal as the “fraud of the highest order” and demanded that all officials, including the Administrator, linked with the project should be immediately removed for fair investigations.

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