SHILLONG: The Comptroller and Auditor General (CAG) of India has asked Shillong Municipal Board to take necessary action to ensure that HM Cements Ltd deposit over Rs 1.44 crore dues.
HM Cements was to construct a five-star hotel on Jail Road that is yet to be completed.
In a recent report of CAG, the civic board has been asked to realise the bank guarantee of Rs 72.24 lakh as specified in the agreement and rent of Rs 72.24 1akh for January 2015 to December 31, 2015.
The report said an agreement was signed by the civic body and HM Cements for development of the land on ‘build, operate and transfer’ basis under public private partnership on February 27, 2009, for a period of 30 years.
The agreement was entered into after inviting request for proposal for which HM Cements was the sole bidder and it was found fit for the project.
The company was to develop the land and construct the five-star hotel and also provide the civic body with 30,000 sq ft of constructed space with an additional 5,000 sq ft of parking area.
“Since the land at Jail Road belonged to the government and the government was not a party to the agreement, the Urban Affairs Department entered into a fresh agreement with HM Cements Ltd. on June 25, 2010, on build, operate and transfer basis under the public private partnership method on similar terms as provided in the agreement on February 27, 2009. The land was handed over to HM Cements Ltd. on June 30, 2010,” the report said.
The CAG after scrutinising the records found several irregularities.
As per paragraph 9.1 of the agreement, HM Cements was to pay the municipal board a bank guarantee of Rs 72.24 lakh as security deposit 14 days prior to commercial operations date (COD) or estimated date of completion (EDC), whichever was earlier. As per paragraphs 4.2 and 4.3 of the agreement, the company was also to pay another Rs 72.24 lakh as rent to be payable quarterly at the rate of Rs 18.06 lakh from the COD/EDC, whichever was earlier. The COD/EDC was fixed as July 23, 2011, and later extended by the government to December 31, 2013.
In December 2013, HM Cements requested for further extension of COD/EDC date by another one year since the civic board was not being able to hand over some portion of the land due to litigations with the previous occupant.
The Urban Affairs Department did not grant the extension in May 2014 but reduced the rent only for the period from January-December 31, 2014, to Rs 36.12 lakh.
According to CAG, HM Cements despite availing of the benefits of extension of COD/EDC by two years and five months and reduction of rent by 50 per cent for one year, it paid in March 2015 only the reduced rent of Rs 36.12 lakh for 2014.
“HM Cements failed to pay the security deposit of Rs 72.24 lakh and rent of another Rs 72.24 lakh for the period January 1, 2015, to December 31, which was in violation of the deed of agreement,” CAG said.
As per the paragraph 8.2 of the agreement, HM Cements was given the right to mortgage the land, structures, fixture and fittings and other movable assets or the project only with prior intimation and approval of the civic body without making the government liable for the same.
“The mortgage was, however, to be limited to a period not beyond three years prior to the date of the end of the lease term. Though the SMB (Shillong Municipal Board) gave a no objection certificate on November 19, 2010, to HM Cements to mortgage the land, there was no provision in the agreement for charging any security from HM Cements Ltd for permitting it to mortgage the government land at Jail Road to protect government’s interest in case of any default on the part of HM Cements Ltd,” CAG said.
When pointed out, the CEO of the civic board stated in June 2016 that a legal notice was served to the company in May that year for not paying the security deposit and the rent. The CEO also said as the agreement was executed by the government, the extract of audit observation is being sent to the government for necessary action.
