Hotel land in question at Juhu

A scam by a top BJP leader to usurp the prime land of a five-star hotel in Juhu, Mumbai, at a throwaway price for a prominent builder has come to light. As per the Jantri rate or ready reckoner in Maharashtra, the seaside location on which the now defunct Centaur Hotel stands, has a price tag of over ₹3,200 crore. Macrotech Developers plans to earn ₹13,500 crore by building a luxury tower at the site. However, it has been alleged that the builder and the politician have misused the law to acquire the hotel for a mere ₹888 crore.

The uncanny silence over  the deal has raised speculation of the blessings and association of the BJP leader. 

It is shocking that the IBC (Insolvency and Bankruptcy Code, 2016) process has been manipulated to buy this company which is under insolvency proceedings due to debt. One of the most respected names in the hotel industry, 93-year-old Dr Ajit Kerkar of V Hotels Limited, has not only been betrayed by the leader and the builder, but also by the Resolution Professional and the creditors.

The hotel was owned by V Hotels Limited and financed by Bank of India, Union Bank, Canara Bank, Punjab National Bank, Vijaya Bank and Indian Bank. To recover 37% of the loan, a company named Pegasus was assigned by Canara Bank, while the remaining 63% loan responsibility was assigned to the Asset Reconstruction Company India Limited (Arcil). Banks had sold the loans to these companies in 2010.

How the loot took place 

When the hotel company failed to repay the debt of ₹150 crore in 2011 under a well-structured plan, Arcil decided to put in place a plan whereby the company had to pay instalments along with 22% interest per month.

This plan was unexpectedly cancelled in 2013. Subsequently, legal battles ensued in debt recovery tribunals from 2015 to 2019. Finally, the Bombay High Court and the Supreme Court ruled that Arcil cannot arbitrarily change the plan, or enforce the plan on the debtor.

The Tribunal and Appellate Tribunal also rejected Pegasus’ plant to increase the interest rate from 12.5% to 22%.

In May 2019, Arcil filed a petition to initiate bankruptcy proceedings against the company, in which the outstanding principal amount was Rs 150 crore and the interest rate was again kept at 22%.

Under the IBC, in May 2019, permission was granted to initiate insolvency proceedings against the company.

The bankruptcy petition in the Companies Appellate Tribunal was dismissed as the petition was not filed within the time frame. However, the Supreme Court accepted this petition and ordered for the proceedings to begin.

In February 2023, the Appellate Tribunal ruled that the company’s resolution plan cannot be prepared until the amount of money that has to be returned to the creditors is determined.

Having 97% majority stake in the Creditor Committee, Arcil and Pegasus reportedly approved the plan submitted by Macrotech Developers on June 19, 2023, making the move illegal.

On the third day i.e. June 21, the tribunal also approved the plan against the orders of the Supreme Court and other courts that no interest was to be charged on the principal. 

Despite the Appellate Tribunal's directive to keep the rate of interest at 14.5% instead of 22%, the plan was tabled in court in July for approval.

Financial institutions and banks are also complicit in this scam. Initially, debt claims of ₹2,085 crore were filed against the company, out of which claims of ₹1,143 crore were approved. However, only ₹943 crore of dues were sanctioned.

How the hotel was usurped at throwaway price

Despite hearings in various courts and appellates, the plan seemed to have been approved to benefit the BJP leader-supported Macrotech. The land being at a strategic location would benefit the builder only if the hotel was demolished and a building came up in its place.

The alleged collusion of the builder, the BJP leader, Arcil, Pegasus and all who decide how much value the company will yield if it goes into liquidation is an eye-opener.

Two valuation experts have stated that if the company goes into liquidation, it will yield ₹797.68 crore or ₹719 crore. The reality is however different.

In 2013, the minimum cost for the hotel for debt recovery and bankruptcy proceedings was estimated at ₹1,315 crore. 

According to the government ready reckoner of the 5.5-acre land of the hotel, the price should have been ₹2,117.27 crore. Then how can it be auctioned off for only ₹888 crore between 2013 and 2024, is a question the original owner Kerkar asks.

It is also alleged that the original owners, shareholders and other parties have suffered losses. There is also the question of how the cost of land can be lower than the government's ready reckoner.

Sources close to Kerkar allege that to hand over this extremely valuable piece of land to Macrotech Developers, the liquidation price was set at just ₹943 crore. It is also possible that due to political pressure or collusion there was only one bid from Macrotech Developers to buy the hotel.

Moreover, the possession of 51,531 square metres of the disputed premises was handed over to Macrotech even before the April 2024 order.

Demolition has begun at this site. It is estimated to earn ₹50 crore from its scrap and steel.

Apart from this, the electrical and other display items placed in the Centaur Hotel along with its accessories and appliances are estimated to be around ₹40 crore.

As per sources close to the development, Macrotech intends to build on each floor flats ranging from 10,200 sq feet to 20,000 sq feet. The sea-facing flats in Juhu are expected to generate a huge revenue of ₹13,500 crore.

Many believe that it would be possible for Macrotech to successfully implement its plan to generate 15 times more revenue than the purchase price of ₹888 crore with the state turning a blind eye on the developments and collusion between the beneficiaries.