Bambalapitiya flats redevelopment

project:Promoter conceals information

from Govt.

Bambalapitya flats
By C. A. Chandraprema-February 16, 2017,

In an article titled, "Bambalapitiya Flats

redevelopment project: Govt. taken for a right royal ride?"
published on 3 February 2017, we highlighted certain concerns
about the Bambalapitiya flats redevelopment project. The
Singapore registered company promoting this project UTL Global
Projects Pte Ltd is a nominal company with no real estate or
construction expertise or the financial resources to be able to take
on a project of this magnitude. This company had misled the
government into thinking that they had brought in a large Indian
government owned construction conglomerate Engineering
Projects India Ltd as their partner to both finance and build the
project but in actual fact Engineering Projects India Ltd was not a
shareholder of City Square Projects Pvt Ltd, which was formed in
terms of BOI requirements, to execute the Bambalapitiya flats
redevelopment project.

One of the main concerns raised in that article was the possibility
that the project promoter was trying to raise money by pledging
the Bambalapitiya land as collateral. With no proper financial
commitment from Engineering Projects India Ltd, there was no
one to finance the project. Following this expose, the Chairman of
the Project Steering Committee of the Bambalapitiya flats
redevelopment project at the Ministry of Housing and
Construction wrote to Prashanth Koorpathi of UTL Global Projects
Pte Ltd on 3 February 2017, drawing his attention to the questions
raised by The Island and requesting answers. Prashanth Koorapati
of UTL Global Projects Pvt Ltd now signing as a Director of City
Square Projects Pvt Ltd, wrote back to the Chairman of the Project
Steering Committee on 6 February 2017 pointing out that:

a) City Square Projects Pvt Ltd does have a consortium agreement

with Engineering Projects India Ltd which had been signed on 5
March 2016.

b) UTL Global Projects Pte Ltd owns City Square Projects Pvt Ltd
through its holding company named Centennial Holdings Pte Ltd
Singapore.

c) Engineering Projects India Ltd will take up equity in City Square

Projects Pvt Ltd after applying for the required permission from
the government of India. Till then they will continue to develop
the project as a consortium.
d) As stated in the agreement to be signed between NHDA and
the Consortium, they were committed to bring in 40 Million USD
into the City Square Projects Pvt Ltd account in Sri Lanka before
the owners vacate the project land.

e) The total project is estimated to cost 500 Million USD, which

needs to be developed with funding from financial institutions.

f) They have not pledged or mortgaged the land.

Allegations confirmed

In this letter Koorapati of UTL Global Projects Pvt Ltd has, in effect,
admitted that Engineering Projects India Ltd is not a part of City
Square Projects Pvt Ltd. According to the requirements of the BOI,
both UTL Global Projects Pte Ltd and Engineering Projects India
Ltd should have been the joint owners of City Square Projects Pvt
Ltd, the locally registered company, to which the Bambalapitiya
land will be transferred on a 99-year lease. That this requirement
has not been fulfilled is a clear violation of BOI rules. This letter
also reveals that Engineering Projects India Ltd which is an Indian
state owned entity has not yet got the required permission for this
project from the relevant Indian governmental agencies including
the Indian cabinet and the Reserve Bank of India.

It was back in 30 December 2014 that Vinoo Gopal the Director

Projects of Engineering Projects India Ltd wrote to the NHDA that
they were in the process of completing the required
documentation in relation to this project. More than two years
have gone by and nothing has happened. There is no guarantee
that Engineering Projects India Ltd will get the Indian
governments permission for this project. Even Megapolis and
Urban Development minister Champika Ranawaka has filed a
Cabinet Observation bearing Ministry Reference 2015/MPD/Obs 06
stating among other things, that a proper feasibility study has not
been carried out to ascertain the viability of this project. Will the
Indian government give their approval for a project which does
not have even a proper feasibility study?

If Engineering Projects India Ltd does not get the necessary

clearances from the Indian government, City Square Projects Pvt.
Ltd which is a wholly owned subsidiary of UTL Global Projects Pte
Ltd which in turn is owned by three Indian nationals, will be left
owning a 99-year lease over the 10 acre land in Bambalapitiya
without paying a cent to the government. There is something
seriously fishy in this whole business. In the above mentioned
letter to the Chairman of the Steering Committee, City Square
Projects Pvt Ltd has said that they have not pledged or mortgaged
the land. They havent done so because the land has not been
transferred to them yet. But the moment the land is transferred to
them, that is exactly what is going to happen.

A local bank has expressed willingness to provide an overdraft

facility of 25 million USD to City Square Projects (Pvt) Ltd for the
construction of residential towers in Colombo 4. The security that
the bank will retain against the money advanced will be a
mortgage over the project assets which is in effect the
Bambalapitiya land which is to be transferred to City Square
Projects (Pvt) Ltd by the NHDA.

In the letter that Prashanth Koorpathi has sent to the Chairman of

the Project Steering Committee he has claimed that they do have
a consortium agreement with Engineering Projects India Ltd
signed on 5 March 2016. He has even provided a redacted version
of this consortium agreement for the perusal of the Project
Committee stating that the rest of it is highly confidential. Any
consortium agreement for the redevelopment of the
Bambalapitiya flats should have been formed between UTL Global
Projects Pte Ltd and Engineering Projects India Ltd as per the
requirements of the BOI. The General Manager of the NHDA wrote
to both these parties on 19 April 2016 telling them to jointly
register a company to execute the project.

The disappearing 300 million USD

The BOI agreement that was signed on 22 June 2016 said that the
project would be a joint venture between UTL Global Projects Pte
Ltd and Engineering Projects India Ltd. Even the agreement that is
to be signed between City Square Projects (Pvt) Ltd and the NHDA
is based on the premise that UTL Global Projects Pte Ltd and
Engineering Projects India Ltd had jointly formed City Square
(Pvt.) Ltd. Now, Koorpathi of UTL Global Projects Pte Ltd has
admitted in his letter that City Square Projects (Pvt) Ltd is a wholly
owned subsidiary of UTL Global Projects Pte Ltd with Engineering
Projects India Ltd not being a part of it.

It should be borne in mind that UTL Global Projects Pte Ltd, is just
three members of the same family of Indian nationals Koorapati
Premalatha Rani, Meena Pooja and Prashanth Koorapati; with no
background in construction or real estate development or the
financial resources to be able to handle a project of this nature. It
is to a subsidiary wholly owned by them that the Bambalapitiya
land is to be transferred. The claim put forward now is that even
though Engineering Projects India Ltd does not have a consortium
agreement with UTL Global Projects Pte Ltd, they do have an
agreement with its wholly owned subsidiary City Square Projects
(Pvt) Ltd. Firstly, that is procedurally wrong. The consortium
agreement should be between UTL Global Projects Pte Ltd and
Engineering Projects India not between Engineering Projects India
Ltd and City Square (Pvt.) Ltd.

Secondly and most importantly, what exactly has Engineering

Projects India Ltd undertaken to do in terms of this agreement
with City Square Projects (Pvt) Ltd? The BOI, the NHDA, the
present residents of the flats and the Housing and Construction
Ministry may be under the impression that Engineering Projects
India Ltd has undertaken to invest 300 million USD in this project
because Vinoo Gopal the Director Projects of Engineering Projects
India Ltd wrote to the NHDA on 20 December 2014 expressing
their interest in the project and provided a reference from the
Indian Overseas Bank and stating that Engineering Projects India
Ltd had the finances to be able to complete the proposed 300
million USD project if it was awarded to them.

The fact that Koorpathi has sent only a redacted version of the
agreement between Engineering Projects India Ltd and City
Square Projects (Pvt) Ltd to the Project Steering Committee
claiming that the rest of it was highly confidential points to
another bid to mislead and deceive the government of Sri Lanka.
From this redacted version, Koorpathi has excluded the most
important part which gives details of the financial commitment
made by Engineering Projects India Ltd to this project. In his letter
of 6 February 2017, Koorpathi has said that Engineering Projects
India Ltd will take up equity in City Square Projects Pvt Ltd after
applying for the required permission from the government of
India, but without mentioning the amount committed. Why this
reluctance to reveal the amount and nature of the financial
commitment made by Engineering Projects India Ltd?

The redacted version of the consortium agreement states that

Engineering Projects India Ltd will endeavour to find a third party
to provide the working capital for the project. That does not
amount to a financial commitment. When this project proposal
was going through the BOI and the NHDA processes, there was no
talk of an unspecified third party who would be providing the
money for the project. The government of Sri Lanka was all along
obviously under the impression that Engineering Projects India Ltd
will contribute at least 300 million USD to the project in
accordance with the letters provided to the NHDA back in
December 2014. However the actual commitment made by them
in the agreement signed on 5 March 2016 is being concealed from
the government of Sri Lanka. The government of Sri Lanka should
find out why these details are being withheld. They may be in for
quite a surprise.

Hiding information from govt.

The most important part of the project is the finances. If the

money is available, architects, engineers and contractors can be
hired and the project completed. But, Koorpathis letter to the
Project Steering Committee clearly indicates that despite their
claim that Engineering Projects India Ltd is involved in the project,
neither party still knows where the money for the project is going
to come from. They have mentioned that the money will have to
be raised from third parties but no such third parties have been
identified yet. That cant be the proper way to go about a project
of this nature. Koorpathi has said that they will bring USD 40
Million into the City Square Projects Pvt Ltd account in Sri Lanka
before the owners vacate the project land. There is little doubt
that they will raise this USD 40 million the same way they sought
to raise 25 million USD from the local bank as mentioned earlier.

If this project fails, the promoter will disappear, unknown foreign

and local third parties will be left in possession of the
Bambalapitiya land for 99 years and the residents of the present
Bambalapitiya flats and the government of Sri Lanka will be left
high and dry. The promoters would have mortgaged government
owned land without paying a cent to the government of Sri Lanka.
The government of Sri Lanka should therefore reconsider this
project. All agreements entered into by the BOI and the NHDA
with UTL Global Projects Pte Ltd or its wholly owned subsidiary
City Square Projects (Pvt) Ltd should be suspended and reviewed
because they have clearly attempted to deceive the government
of Sri Lanka without disclosing material facts.

The government of Sri Lanka should insist on seeing the whole

consortium agreement signed between City Square Projects Pvt.
Ltd and Engineering Projects India Ltd on 5 March 2016. How can
there be confidential matters which the government of Sri Lanka
should not see in an agreement between two foreign companies
when they are to get 10 acres of the best land in Colombo on a
99-year lease without paying the government any money by
virtue of that very agreement? Besides, the Bambalapitiya land is
public property. It has to be stated most emphatically that even if
further letters from Engineering Projects India Ltd are produced,
or an official from that company turns up in person to sign
documents in Colombo, that means nothing because Engineering
Projects India Ltd has not made any worthwhile financial
commitment in their agreement with City Square Projects Pvt. Ltd.

It should be noted that Koorapatis letter of 6 February 2017 to

the project Steering Committee has stated that any involvement
of the Engineering Projects India Ltd will be completely dependent
on the Indian government granting them the necessary clearance
for this project. If the Indian government does not give
Engineering Projects India Ltd permission to go ahead with the
project they will drop out of it automatically and through
ownership of UTL Global Projects Pte Ltd which wholly owns City
Square Projects (Pvt) Ltd, three individuals, Koorapati Premalatha
Rani, Meena Pooja and Prashanth Koorapati will be left holding a
99-year lease on 10 acres of land in Bambalapitiya without paying
a cent to the government. It is absolutely vital that the
government should see the entire agreement that was signed
between City Square Projects Pvt. Ltd and Engineering Projects
India Ltd on 5 March 2016. The bottom line is that funding for the
project should be available upfront before any approvals are
granted or the land handed over.
Posted by Thavam