IMGB land deal may hit legal hurdle

With IMGB having already registered 400 acres in its name, experts see possible legal wrangle

The decision by the state government to revise the price at which 400 acres of prime land in Hyderabad was allotted to IMG Bharata for setting up a sports academy may run into a legal tangle, as the land has already been registered by the company in its name.

Speaking to Business Standard, IMG Bharata director Billy Rao admitted that the 400 acres of land in Gachi Bowli had already been registered by the company.

"We registered the land a long time back," Rao said. Refusing further comment on the issue, Rao said, "We continue to take care of our obligations."

Legal sources point out that once the land is registered, it cannot be claimed back by the government.

"Once the land is registered, the government has to make a case legally that the land was allotted cheap and then make a move to acquire the land back. Then the government may have to pay the costs incurred by the company associated with the project as the land is legally owned by it," leading legal sources pointed out.

Senior state government sources though told Business Standard that the government was confident that it could find a way to cancel the registration if IMG Bharata was not willing to comply with the revision in the land price.

The state government had on Friday last rescinded the previous TDP government's decision to allot land for the company at Rs 50,000 per acre and revised the price by a whopping 400 times to Rs 2 crore per acre.

IMG Bharata, a wholly-owned subsidiary of the Florida-based International Management Group, is proposing to set up an athletic training, education, leisure and resort complex project in the city at a cost of about Rs 700 crore, to be in invested in two tranches.

The fate of the project is hanging in balance because the state government's decision has drastically altered the project cost. While the proposed project has seen IMG Bharata acquire 400 acres of land at a cost of Rs 2 crore, now the land cost alone would come to about Rs 800 crore.

The 'Group of Ministers' felt that the previous government's decision to give away 400 acres of land at a throwaway price of Rs 50,000 per acre was totally unjustifiable, especially when its market value was close to Rs 2 crore per acre.

The 'Group of Ministers' is headed by state finance minister K Rosaiah and has been constituted to review decisions of the Naidu regime taken after January 2003.

As per the government order (GO) issued by the Naidu government, the promoters of the project are supposed to pay only Rs 2 crore for the entire 400 acres of land which belonged to the Hyderabad Central University.

Besides signing an MoU in his last days in office, the then chief minister N Chandrababu Naidu had laid the foundation stone in the second week of February 2004.

As per GO Ms No 11 issued on February 9, after the dissolution of the state Assembly, the state Government sold to IMG Bharata (IMGB) 400 acres of University of Hyderabad land at a rate of Rs 50,000 per acre.

The GO also allowed IMGB to conduct activities that would generate profits, revenue fee among others, without limitation, without charging registration fee.

The Naidu government had also decided to sell another 450 acres of land near Shamshabad in Ranga Reddy district for the second phase of IMGB's activities.

Besides this, the said GO allows the transfer of the government's stadia properties for a long-term lease not less than 45 years, during which, IMGB has a right to purchase the buildings and land at its discretion at a value, comprising land, building, maintenance and development costs incurred.

For five years, the government would have to bear the cost of maintenance and upkeep of stadia property at Rs 2.5 crore per annum along with the insurance cost; The government would contribute towards defrayment of IMGB costs for the promotion of the city up to $50,000 every year for five years, apart from extending all concessions, subsidies and other incentives that are provided to educational institutions.

The state government under the GO should also ensure uninterrupted, high-quality power supply and potable water and shall reimburse to the IMGB 100 per cent of their power, water and sewerage bills in the first three years and for next four years 25 per cent of the said bills. There would be no entertainment tax for 10 years on any of the events held by the IMGB in the property.

Responsibilities of the IMGB as per the GO include that it shall pay the value of the land at the time of registration as follows: Rs 2 crore for the 400 acres of land in Hyderabad Central University, Rs 112.5 lakh at the time or registration of 450 acres in Shamshabad; an additional amount of Rs.112.5 lakh with respect to development of roads and other facilities for Shamshabad within 90 days of the inauguration of new international airport; the IMGB shall spent Rs 500 crore in phase I and Rs 200 crore in phase II.

The GO also said: "IMGB shall use its reach to secure sponsorship for major sporting, lifestyle and entertainment events in Hyderabad; the IMGB shall pay Rs 5 crore to University of Hyderabad for developing specialised academic sources for athletes training with IMG and allow them to study in the university. The payment shall start at the end of the third year of entering the MoU. The IMGB has been granted television and broadcasting rights, sharing of revenue through gate sales and advertising and sponsorships."