Second Report of Commonwealth Games Village

COMMONWEALTH GAMES VILLAGE

2/11/2011

Second Report of

Second Report of HLC

Vigyan Bhawan Annexe, New Delhi

HIGH LEVEL COMMITTEE

2011

Commonwealth Games

Village Second Report of HLC

V I G Y A N B H A W A N A N N E X E , N E W D E L H I

Commonwealth Games Village

Page 1

Contents Chapter Particulars Page No.

Acronyms 2

Executive Summary 3

1 Introduction 9

2 Location of Games Village 14

3 Planning and Bidding 21

4 Project Development Agreement and Execution 31

5 Bailout Package and Release of Funds 41

6 Completion and Handover 69

7 Main Findings 75

8 Recommendations 81

Appendix 1: List of Documents Reviewed 82

Appendix 2: List of persons interviewed 85

Annexures


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Acronyms AGL Above Ground Level

ACIL M/s Ahluwalia Contracts (India) Ltd.

BSES Bombay Sub-urban Electric Supply

CGV Commonwealth Games Village

CGF Commonwealth Games Federation

CFO Chief Financial Officer.

CPWD Central Public Works Department

COS Committee of Secretaries

CW&PRS Central Water and Power Research Station

DDA Delhi Development Authority

DJB Delhi Jal Board

DPCC Delhi Pollution Control Committee

DUAC Delhi Urban Art Commission

Emaar MGF M/s Emaar MGF Construction Private Limited

FM Finance Member

FAR Floor Area Ratio

GoM Group of Ministers

GoI Government of India

HLC High Level Committee

HIG High Income group

ITDC Indian Tourism Development Corporation

LIG Lower Income Group

LG Lieutenant Governor of Delhi

MCD Municipal Corporation of Delhi

MIG Middle Income Group

MoYAS Ministry of Youth Affairs and Sports

MoUD Ministry of Urban Development

MoEF Ministry of Environment and Forests

NDMC New Delhi Municipal Council

NEERI National Environmental Engineering Research Institute

NOC No Objection Certificate

OC Organizing Committee

PIL Public Interest Litigation

PPP Public Private Partnership

PDA Project Development Agreement

PD Project Developer

PWD Public Works Department

RFP Request For Proposal

RFQ Request For Qualification

SBI State Bank of India

SC Supreme Court of India

YJA Yamuna Jiye Abhiyaan


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Executive Summary

Nodal Agency for Games Village 1. Delhi Development Authority (DDA) is the nodal agency for urban planning and its implementation

in Delhi. It has been the primary organization for undertaking urban development projects in Delhi

since 1957.

2. DDA was assigned the responsibility for development of the Games Village, arguably the most

important infrastructure necessary for holding the Commonwealth Games, 2010. It was designed

to accommodate about 8000 athletes and Team officials during the Games.

3. The Games Villages residential zone was developed by M/s Emaar MGF Construction Private

Limited (Emaar MGF). The residential zone consisted of 34 residential towers and 1168 apartments.

The unit mix of the total apartments constructed was as under:

Particulars 2 Bedroom 3 bedroom 4 Bedroom 5 Bedroom Total

Number of

apartments

31 765 209 163 1168*

*Source Data submitted by Emaar MGF to DDA (March-April 2009)

Loss of Precious Time 4. While the Games were awarded to India on 13th November, 2003, by when the site for Games

Village had also been frozen, the decision on the mode of development of the Games village was

finally taken and agreed to by all stakeholders only by January 2006. This delay of over two years in

finalizing the development strategy proved costly to DDA in so far as it prevented DDA from

considering an alternative in the situation which emerged in 2008-09.

Development Costs associated with Site 5. The site selected for the development of the Games Village suffered from several shortcomings,

which got highlighted with the passage of time. Due to this particular location, the site necessitated

an expenditure of about 633.06 crore on construction of an elevated road over Barapullah Nullah

(linking CGV to JLN Sports complex), Flyover on NH 24 near the Games Village (to provide


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uninterrupted ingress and egress into and from CGV) and noise barriers along NH24 and adjacent

railway track. The details of the cost are in Chapter 2 of the Report.

Project Execution in Public Private Partnership mode 6. According to DDA documents, the decision to adopt the PPP mode for developing the

Commonwealth Games Village was taken keeping in view constraints of scale, time, quality,

specifications and the need for 4000 rooms during the Games period. Based on their

recommendation, Government approval for implementation of the project on a Public Private

Partnership mode (PPP) was granted. However, the PPP mode of execution, little understood by

DDA, was distorted to such an extent by the Project Developer and DDA that it virtually ceased to

be a PPP project. Instead it became a project implemented by DDA and constructed by the

Developer through a sub-contractor.

Deviations from Model Concession Agreement in PDA

7. DDA did not include certain key provisions of the Model Concession Agreement, in particular, those

relating to (a) establishing an escrow account and, (b) audit in the Project Development Agreement

(PDA) signed with the selected Project Developer. This significantly diluted the ability of DDA to

monitor the implementation of the CGV project and make a proper assessment of the fund

requirement of the Project Developer in 2009.

Failure to meet Contractual Obligations 8. Emaar MGF sought concessions / relaxations not contained in the PDA. These included, inter- alia,

extension on milestones and financial assistance. Emaar MGF contrived an emergency situation;

DDA chose neither to enforce contractual rights nor to resist Emaar MGF demands.

9. DDA spent substantial amount on items which were to be taken up by Emaar MGF and has to

recover the amount from the Project Developer. The total amount due from Emaar MGF on

account of quality issues and non-performance aggregates to 96.33 crore. However, this amount

is under dispute. Details are in Chapter 6 of the Report.


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Fallout of emergency situation

10. According to the Project Development Agreement signed on 14th September, 2007, DDA and

Emaar MGF were to share the residential apartments in the ratio of 1:2. This was effectively

changed to 1:0.63 with the decision to bail out the Project Developer through purchase of 333

apartments from Emaar MGFs share of the apartments. It should be noted that the Project

Developer had asked for 321 crore as loan at normal rate of interest or purchase of 250

apartments. It was DDAs decision to purchase 333 apartments.

11. The Bailout package was premeditated, suggestive of the outcome preceding the process. DDA

formed a Valuation Committee which, in turn, appointed two Independent Consultants to

determine fund requirement of Emaar MGF and the value of apartments (in March 2009) for

arriving at the number of additional apartments to be purchased by DDA. A Negotiation

Committee, which was set up with the approval of LG, was unable to reach a mutually acceptable

sale price with Emaar MGF. Emaar MGF, then addressed a letter to LG dated 22.04.2009 stating

their readiness to accept a rate of 11,000 per sft which was endorsed with alacrity on 24.04.2009

at a meeting chaired by LG, attended by Secretary and Joint Secretary, Ministry of Urban

Development, Vice Chairman, DDA and Finance Member and Engineer Member, DDA. The locus

standii of this Group to take such an important decision is not known. It is surprising that such a

decision was not taken by the competent Authority: DDA. Such a major decision with large financial

implications, not being taken by the competent authority, renders it suspect. It was referred to the

Authority only in June 2009 after the Bailout Agreement had been signed in May, 2009.

12. The Technical consultants, based on the project specifications, estimated the cost price of the

project at 934.49 crore (excluding the land cost). This estimation was later ignored. In the process

of finalizing a sale price, which was also agreeable to Emaar MGF, the sale price recommended by

the Financial Consultants was revised several times to finally accommodate 10% cost of capital and

15% Developers margin. It may be noted that as per industry norms, cost of capital is borne by the

Developer. In the calculations, the sub-contract price of 1168.21 crore was accepted at face value

even though no signed contract was shown to the Financial consultant.

13. A copy of the sub contract between Emaar MGF and M/s Ahluwalia Contracts (India) Ltd., which

was apparently not earlier available to the DDA, was obtained and referred to a Consultant of the


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HLC. Based on this document, the TDS returns filed by Emaar MGF and the Project Report

submitted to SBI by the PD, the Consultant has calculated that the total estimated Project Cost was

1368.42 crore and the per sft. Cost, inclusive of Developers margin, should not have been more

than 7829 per sft.

14. Expert analysis of the cash flow statements of Emaar MGF Constructions Pvt. Ltd., Emaar MGF Land

Ltd. and the Group for the years 2007-08, 2008-09 and 2009-10 reveal that the Project Developer

did not really require the fund infusion from DDA for completion of the project and it was just a

ruse for selling off a huge chunk of its share of unsold flats to a bulk buyer at a price that was

acceptable to them and at a time when the real estate market was sluggish!

Undue Favours to Project Developer 15. Some of the undue favours that were bestowed on the Project Developer by DDA are as under:

(a) Purchase of apartments

DDA purchased the apartments from Emaar MGF at the rate of 11,000 per sft, which was way

higher than the rate of 7829 per sft. arrived at by the Consultant of HLC based on assessed

cost of the Project or the market price of 9068 per sft arrived at by HLC. The sale price paid

by DDA was also much higher than what had been recommended by the experts of DDA and

the highest price initially recommended by the Valuation Committee, which was 9,720 per sft.

Whether based on the assessed cost of the Project or the market price determined by HLC,

the purchase of 333 apartments by DDA @ 11,000 per sft. caused undue financial gain for

the Project Developer of an amount ranging between 134 crore to 220 crore.

(b) Recovery from Customers

The Valuation Committee based on the advice of the experts recommended to the Negotiation

Committee that the funding by DDA to the Developer under the Bailout package should be net

of the funds received by Emaar MGF from the sale of apartments. While this advice was noted,

the Negotiation Committee failed to include any definitive clause in the Bailout package to

ensure that cognizance of this stream of funds was taken while deciding the installment

amount to be released by DDA to the PD.


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(c ) Unauthorized payments

The Bailout Agreement specified the expenditure which could be met through the funds

received from the bailout package aggregating to 766.89 crore. Emaar MGF made payments

to other Group companies, incurred marketing expenditure etc. (as indicated in their utilization

certificate) which was not authorized and hence has been termed unauthorized expenditure

by the Financial Consultant. As per the utilization certificate for the period ending 3rd March

2010, such payments aggregated to 64 crore. Further, excess funds aggregating to 192.71

crore from the Bailout package with Emaar MGF as on 31st March, 2010 were parked by the

Developer in a short term investment fund.

16. The summary of the financial favours/ loss to DDA by a series of decisions taken to support Emaar

MGF are set out in the following Table:

S.NO. Particulars Claim ( Crore) Reference

I Non levy of Liquidated Damages on the Emaar MGF as per the Agreement terms DDA waived the damages

81.45 Chapter 4

II Bailout Package

A Purchase of apartments at a very high rate of 11,000 per sft

134.00 220.00 Chapter 5

B Recovery from customers and sale of new apartments not reduced from the fund requirement for the project (as recommended by the Financial consultants to the Valuation Committee)

686.34 Chapter 5

C Unauthorized payments contrary to the Agreement 64.00 Chapter 5

D Investments (as on 31st March, 2010) 192.71 Chapter 5

Poor Monitoring 17. Although DDA had an oversight and monitoring responsibility, it failed to detect contract violations

/ other problems. Records reveal that on several occasions the Monitoring Committee discussed

the significant delays and other related issues but the same were documented in a very

perfunctory manner.


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Box: 1 Games Village Saga

DDA was the chosen agency for development of the Games Village for CWG, 2010. The Village was over-

designed to accommodate 8000 athletes and officials while provision for 6000 would have been

adequate. This was mentioned in the Report of the Evaluation Commission set up by CGF in October 2003

itself.

Over two years were frittered away in deciding the development strategy. Ultimately, it was decided to

adopt the Public Private Partnership model for development of Games Village in January 2006 and the

Project Development Agreement could be signed only in September, 2007.

Trouble began to brew by early 2008 and in February, 2009, the Project Developer (Emaar MGF) formally

sought financial assistance from DDA/Government. Bailout package was given to the Developer on his

terms and conditions as by then DDA had concluded that it had no other viable option left if the Games

Village was to be ready in time. So, as with other CWG projects, in the national interest DDA decided to

forego terms and conditions of a valid legal document the Project Development Agreement and

sacrifice its own interests.

DDAs decision to purchase 333 apartments from Emaar MGFs share in 2009 only helped the Project

Developer to offload his share of unsold flats in bulk at a price that was acceptable to him and was way

above the prevailing market price. Funds made available by DDA in 2009-10 enabled the Project

Developer to divert funds to various applications other than the CGV Project such as repayment of interest

bearing loans, investment of surplus funds into mutual funds and transferring funds to other Group

companies.

Finally the Games Village was ready but at a huge cost. Key principles of PPP model were ignored and the

only principle that remained was that risk and loss would be borne by DDA while profit would be of

Emaar MGF.


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Chapter 1: Introduction Bidding for the Games

1.1 In May 2003 Government of India gave its nod to the Indian Olympic Association (IOA) to bid for

the Commonwealth Games 2010 (CWG) at an estimated expenditure of 296 crore towards sports

infrastructure and conduct of games, with expenditure on security and Games Village to be incurred by

the Government and Delhi Development Authority (DDA)

1.2 India was awarded the rights to host the Commonwealth Games (CWG) for 2010 by the

Commonwealth Games Federation in November 2003.

1.3 Indian Olympic Association/ Organizing Committee together with the Government of National

Capital Territory of Delhi and Government of India entered into the Host City Contract with the

Commonwealth Games Federation on 13th November, 2003 for holding of XIX Commonwealth Games

in Delhi during 03-14 October 2010.

1.4 The major responsibilities regarding the successful delivery of the XIX Commonwealth Games

were of the OC, GNCTD and GOI. The major responsibilities of the stakeholders were as follows:

Key Activities Stakeholders

Sports Infrastructure Ministry of Youth Affairs & Sports; Govt. Of Delhi; Delhi

Development Authority (DDA) and New Delhi Municipal

Council (NDMC)

City Infrastructure City Government; Municipal Council of Delhi (MCD) and

NDMC

Games Village Delhi Development Authority (DDA)

Conduct and Delivery of Games Organizing Committee (OC)

Host Broadcasting and Media Press

Centre

Prasar Bharati and Ministry of Information &

Broadcasting

Tourism and Accommodation for

Tourists

Ministry of Tourism

Security Ministry of Home Affairs


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Role of DDA

1.5 DDA was created in 1957 under the provisions of the Delhi Development Act, 1957 to promote

and secure the planned development of Delhi. The charter lists the following objectives as incidental

and ancillary to the working and functioning of DDA:

To formulate a Master Plan for covering the present and future growth of Delhi and to

promote and secure the development of Delhi according to the plan covering all possible

activities.

To acquire, hold, manage and dispose of land and other property.

To carry out building, engineering, mining and other operations.

To provide services and amenities incidental to the above

1.6 DDA was given the following mandate with respect to the XIX Commonwealth Games:

Development of the Games Village for the accommodation of the participants during the

Games;

Development of the Yamuna Sports Complex;

Development (including up-gradation) of the Siri Fort Sports Complex;

Development of Vasant Kunj flats to accommodate tourists during the Games; and

Development of 33 hotels to accommodate the projected tourists during the Games.

Organizational Structure

1.7 The present organization structure of DDA is illustrated in the following chart:


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1.8 To ensure timely completion of the CWG projects, various divisions were created by DDA under

the supervision of Director (Sports) and entrusted with the responsibility of construction of the same.

Under this format, 13 divisions were formed.

a. Division 1 - 9 : Responsible for civil work at various projects

b. Division 10 - 13: Responsible for electrical work at various projects

Governance Structure for CWG projects - DDA

1.9 Various committees were constituted by DDA to monitor the progress and provide constant

quality assurance with regards to the CWG project. Four major committees were constituted for this

purpose, namely:

Monitoring Committee (CGV)

The Monitoring Committee was formed under the chairmanship of an Independent engineer,

(who was unanimously elected by the two parties to the Agreement) and had Chief Engineer,

SEZ, DDA and a representative of the Project Developer for the Games Village project, as

members. The committee was mandated to meet every month to review the progress of work

at the Commonwealth Games Village

Chairman, DDA (LG of

Delhi)

Vice Chairman

FinanceMember

Engineer Member

Principal Commissioner


Principal Commissioner cum Secretary

Chief Officers, Engineers ,

Commissioners, & Directors

Chief Legal Advisor


(CWG)

Commissioner Planning

Chief Vigilance Officer


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Stadia Committee

The mandate prescribed for the Stadia Committee was to conduct regular meetings to address

all issues relating to the development of the Games Village site. Weekly meetings were to be

held to assess the progress of the project and resolve all project related issues relating to

flyover, residential facility, temporary overlays, practice venues etc.

Weekly Site Coordination Committee

This committee was formed on 27th May 2009 by the Principal Commissioner (CWG) to facilitate

internal co-ordination amongst the contractors, consultants and the DDA engineers and

resolution of issues of mutual interest.

High Powered Committee (HPC)

The Vice Chairman, DDA constituted a HPC to monitor the progress regarding preparation for

the Commonwealth Games. The committee was empowered to monitor and ensure early

solutions of all issues relating to the Commonwealth Games. Following were the committee

members:

Finance Member, DDA - Chairman

Engineer Member, DDA

Pr. Commissioner (CWG), DDA

Director Sports (Member Secretary), DDA

Representative of Delhi Govt. (GNCTD)

Representative of Organizing Committee, Commonwealth Games 2010

Copies of orders constituting the above mentioned Committees are at Relevant Document 1.

Scope of Report

1.10 This Report reflects the findings and conclusions of the High Level Committee (HLC) on various

aspects relating to the development of the Commonwealth Games Village for providing

accommodation to the participating athletes and Team officials.

1.11 The HLC through its team of officers / experts examined the performance of the DDA against

the Terms of Reference of the Committee, with special focus on:


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Planning and execution of development of Games Village execution and delivery with

reference to time, cost and quality

The effectiveness of the organizational structure and governance, in particular, within DDA

Weakness in management, alleged irregularities, wasteful expenditure and wrongdoing in

performance of the tasks assigned to DDA

Criteria

1.12 The HLC evaluated the management and performance of the key functions carried out by DDA

in the background of reasonable timelines for initiating and completing the projects in accordance with

established standards, generally accepted best practices and conformity to good governance.

Methodology

1.13 The key procedures carried out for the purpose of review were:

a. Identification and examination of relevant file notes of DDA, Ministry of Urban

Development, extracts of the Notes for Cabinet, records of the meetings of GoM, and

correspondence on the subject matter. The list of documents reviewed is at Appendix 1.

b. Interview with officers and functionaries responsible for planning, execution and

monitoring of the CGV project. The list is placed at Appendix 2.


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Chapter 2: Location of the Commonwealth Games Village

2.1 The Games Village is located in Pocket III of Sub-Zone 6 of the River Yamuna, developed on an

area of 59.28 hectare between river Yamuna and the flood protection bund on the eastern side.

2.2 The HLC has been informed by DDA that the location of the Games Village was identified by the

Planning Department of DDA in consultation with the then LG, Shri Vijai Kapoor, in the year 2003.

However, there is no documentary evidence to suggest the type of inputs that were taken into account

before it was concluded that the present location of the Games Village is the best available site.

2.3 On 14th May, 2003, the LG in his letter addressed to the Chairman, Commonwealth Games

Federation (CGF) mentioned that we have set aside land for building a brand new Games Village. A

copy of the letter is at Annexure 1.

2.4 Further, in his letter dated 22nd August 2003 to the Secretary, Department of Youth Affairs and

Sports, Government of India (GOI), the LG stated that the site was showcased to the Evaluation

Commission of the Commonwealth Games Federation (CGF) that had visited New Delhi in August 2003

to evaluate the citys bid for Commonwealth Games 2010. There is a mention in the said letter that the

site was liked immensely keeping in view its salubrious environs, its location vis-a-vis the competition

sites and its location on the transportation map which will include metro line from NOIDA to the

centre of the city by the year 2010. A copy of the letter is at Relevant Document 2.

Box: 2 Excerpts from the Report of the CGF Evaluation Commission (October 2003)

The DDA (Government) is constructing the Village on a pleasant and high quality site. No

detailed architectural planning has been undertaken to date. A design competition will be

conducted. 40 hectares of land has been reserved in the heart of Delhi.

The proposed Village site adjoins the National Highway-24 and will be connected with the

Mass Rapid Transit System (MRTS) and Electric Magnetic Unit (EMU) Trains.

The estimated cost of construction of the Commonwealth Games Village will be Rs.185.8 crore

(USD 38.8 million).


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2.5 Subsequently, on 11th September 2003, Union Cabinet approved the site of the Games Village

at the current location based on the proposal of LG.

2.6 The HLC, based on the records made available to it, finds that the Union Cabinet was not

provided with all the information regarding the pros and cons of the location of the Games Village. The

Cabinet approval, therefore, seems to be based solely on the assertions made by the LG. Moreover,

the Group of Ministers (GoM) merely acknowledged the decision of the Cabinet and asked DDA to

make available strategy options for development of the Games Village in its 4th meeting held on 17th

March, 2005.

2.7 Once the site had the seal of approval of various authorities, what followed was a series of

steps undertaken by DDA to regularize the decision.

Change in Land Use

2.8 The first step towards regularization of the site for development of the Games Village was in

the form of change of land use of the earmarked area. Vide notification dated 2nd March, 20061, the

land use of area measuring 42.5 hectares (105.0 acres) was sought to be changed from agricultural

and water body to public and semi-public facilities. Further, vide notification dated 18th August,

20062 (a modification of the earlier notification), the land use of an area of 16.5 hectares was changed

to Residential for 11 hectares and 5.5 hectares to Commercial/ Hotel.

2.9 Initially, DDA had proposed that hotels would also come up at the same site. However, this was

opposed by Chairman, OC on the ground that it would be discriminatory to put up some athletes and

Team officials in hotels and others in Games Village. On 19.11.2006 GoM agreed, in principle with the

model where the residential accommodation for the athletes may be developed on a PPP model in the

form of a residential complex with additional hotel accommodation being provided in close proximity

to the Games Village which would assist OC officials in making arrangements for technical officials.

1 See Relevant Document 3 2 See Relevant Document 4


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2.10 Through February-August 2007, a NGO named Yamuna Jiye Abhiyaan (YJA) in its

communication to several GOI ministries including MoUD, MoEF, and MYA&S had raised many

pertinent issues relating to the location of the Games Village. YJA sought an appointment with these

agencies, including the GoM, to discuss their submission of the issues highlighted; however, they were

only given an audience by GoM during the 12th meeting held on 12th November 2007. By this time the

GoM had taken all major decisions relating to the development of the Games Village at the site

selected and the PDA had also been signed by DDA and Emaar MGF. Thereafter, any appeal to change

the location of the Games Village could be brushed aside stating that the current time frame to

develop the Games Village did not permit any deliberation on the matter.

Alternative Sites

2.11 Perusal of the presentation made by YJA to the GoM, indicates that it had suggested certain

alternative sites, which included

(a) Safdarjung airport

(b) Jasola Sports complex and

(c) Dwarka - Sector 20.

While the HLC has not examined the suitability of such sites vis a vis the current site, it may be stated

that the Government and DDA ought to have examined various options before zeroing in on the

location of the Games Village. It may be pertinent to note that the Asian Games Village in 1982 was

located within two kms. of the Jawahar Lal Nehru Stadium and hence faced minimal transportation

problems. HLC has been informed that during the run up to the CWG 2010, there were suggestions for

an alternative location close to Jawahar Lal Nehru Sports complex which, unfortunately, was never

considered.

Environmental Clearance

2.12 At the first instance, MoEF granted conditional clearances vide its letter dated 14th December,

20063. MoEF insisted that a study needs to be conducted to assess the impact of Akshardham bund on

3 See Relevant Document 5


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the area of flood plain in the upstream reaches of river Yamuna. Accordingly Central Water Power

Research Station (CW&PRS) was entrusted with the study. CW&PRS submitted its report to MoEF in

March 20074. The report indicated that the bund would cause insignificant flood problem upstream as

well as in the region of the bund. Accordingly, MoEF amended its environmental clearance of 14th

December 2006 and issued an amended letter on 29th March 20075.

2.13 In January 2008, DDA made a reference to National Environmental Engineering Research

Institute (NEERI) seeking their opinion on whether the proposed site for Games Village was part of the

Yamuna Flood Plain and whether having complied with the MoEF conditions for environmental

clearance, there would be any further threat of environmental degradation / loss of ground water

recharge and /or if there are any additional abatement / measures required to be undertaken. The

opinion indicated that the project posed insignificant risk6.

2.14 Environmental clearances /reports, in particular NEERI Report, ought to be viewed in context of

what happened during August September, 2010. It rained as it should; unfortunately for these

agencies, more heavily than usual. Yamuna water including seepage compromised the site to a point

where its use was in question unless the monsoon abated. Vestiges remain; the jury is still out on

remedial measures, costs, responsibility et al.

2.15 While the process of compliance with environmental issues may appear transparent at first

glance, the HLC noted that DDA did not inform the following agencies / statutory authorities, which

have regulatory role vis--vis the river Yamuna. These include:

Yamuna Standing Committee (YSC) of Central Water Commission No approval

accorded by the concerned authority with respect to the development of the Games

Village as this project was never referred to it.7

4 See Relevant Document 29 5 See Relevant Document 6 6 See Relevant Document 7 7 It may be noted that since October 2003, 19 projects had been cleared by the Yamuna Standing Committee including construction of elevated road over Barapullah Nallah but the Games Village Project was never referred to YSC of Central Water Commission for their approval. See Relevant Document 8.


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Central Ground Water Authority (CGWA)

Yamuna Removal of Encroachments Monitoring Committee

Public Interest Litigation 2.16 Thereafter, a plethora of objections were raised and a Public Interest Litigation (PIL) was also

filed. The issues addressed in the PIL were finally dismissed by the Supreme Court judgment dated 30th

July 20098. The judgment was largely based on expert opinion. However, this case took considerable

time of the various government authorities including MoEF, Ministry of Youth Affairs and Sports,

Ministry of Urban Development and Poverty Alleviation, Government of Delhi and DDA as all had to file

separate counter affidavits dealing with all the subjects including the apprehensions about the alleged

damage to the ecology of the Yamuna riverbed, floodplain and other environmental hazards.

Avoidable Development Cost

2.17 As brought out in the preceding paragraphs, the process of regularization of the current site

for development of the Games Village took considerable time and Government also had to bear

possibly avoidable development cost of about 633.06 crore towards removing/mitigating inter alia

transportation bottlenecks and noise pollution, which was highlighted by Mr. Mark Fennel, President,

CGF. Details of such expenditure are as under:

Particulars Expenditure

( in crore)

Comments

Additional Land requirement 21.34 DDA/ Ministry of Urban Development negotiated with the Government of Uttar Pradesh the purchase

of land measuring 31.542 acres

Bund Road 13.39 Widening and strengthening of the bund road between NH-24, Railway line near Akshardham

temple

Construction of flyover on the

intersection of NH-24 and

bund road near the Games

Village

90.77 The proposal for construction of the flyover was rejected by DUAC vide their letter dated 29

th

October, 2007 stating that keeping in view the short

duration of the games with the volume of traffic and

also with the Noida mode interchange which was

8 See Relevant Document 9


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approved and likely to be commissioned by 2010, the

traffic during the games could be managed with

suitable traffic management interventions. A copy of the Letter from DUAC is at Relevant Document 10.

Noise Barrier 4.84 The CGF COCOM raised issue related to noise management at the selected site on account of

railway line running close to the proposed village and

the construction of flyover at the proposed

intersection. OC had raised this issue in the 8th GOM meeting and recommended change of Games Village

location. LG indicated that the change of site would

not be possible. However, it was agreed that the

issue of noise pollution would be taken care of. In order to mitigate the issue of noise, noise barriers

were constructed on the side of the flyover and

temporary noise barrier was constructed along the

railway line.

A copy of the relevant minutes of the GoM meeting is

at Relevant Document 11.

Elevated road over Barapulla

Nullah

440.00 As per the Chief Minister, Delhis submission to the GOM, the said flyover did not have any legacy value

after it ceased to achieve its objective of connectivity

of the Games Village to the Jawaharlal Nehru

Stadium. However, the same was constructed as the

decision for locating the Games Village was cited as

an irreversible decision on account of limited time

available before the commencement of the Games.

A Copy of the letter from the Chief Minister is at

Relevant Document 12.

Extra Piles driven

(proportionate cost)

62.72 This expenditure relates to the extra piling work done by the project developer (M/s Emaar MGF

Construction Pvt. Ltd.) due to soil conditions of the

selected site. As against an approximate figure of

2850 piles, approximately 14060 piles were driven for

the structure of the residential complex.

A copy of the letter from Emaar MGF giving the piles

actually driven as against the estimates is at Relevant

Document 13.

TOTAL 633.06

2.17 Based on the review of the documents and discussions with the DDA officials, the HLC is of the

view that various options regarding suitable site for Games Village were not adequately examined and


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documented, which indicates lack of informed decision making process. The site recommended by the

then LG was accepted by OC, CGF, Cabinet and GoM at its face value. In fact, several steps had to be

taken later to regularize the site for the purpose of development of the Games Village.

2.18 The site, inter alia, had a number of constraints with respect to zoning, land ownership,

Akshardham temple interface and transportation / access issues apart from the fact that it was located

close to the Yamuna river. The flooding of the basements of the newly constructed residential towers

in August September 2010, following heavy rainfall in Delhi served to highlight the potential danger

that could be posed by Natures fury to buildings constructed in this fragile and vulnerable location.


Page 21

Chapter 3: Planning and Bidding Planning

3.1 It is evident from records that the site for the Games Village had been identified in May 2003

itself and had been favourably commented upon by the Evaluation Commission of the CGF in its Report

forwarded to all Commonwealth Games Associations in October 2003 ahead of the crucial vote for

selection of Host City for CWG 2010 in November 2003. However, there is nothing on record to suggest

that DDA undertook any activity relating to the development of Games Village at the identified site

during the entire year 2004.

Box: 3 Conclusions of Evaluation Commission regarding Games Village

Based on the information provided by Delhi and independent expert analysis the Evaluation

Commission has concluded the following in relation to the Village Plans.

i. More detailed planning is required. However, the undertakings of Delhi provide sufficient

comfort at this stage that a suitable Village will be developed.

ii. When constructing a new site to act as a Village the planning for Games Operations Overlay is

a major undertaking and is a significant financial commitment. The Village will require a large

amount of physical space to support the operations of offices, logistical, and athlete service

areas. The supply and fitout of these spaces will be additional to the cost of constructing the

actual housing stock. The Commission, while provided comfort by the role of the DDA,

stressed the need for Delhi to ensure that there is sufficient clarity as between the DDA and

the future Organising Committee (and now the Bid Committee) to ensure that the Games

times Operations Overlay is adequately financed.

iii. Having an extra capacity of upto 2,500 bed spaces does not adversely affect the operation of

the Village providing it does not cause excessive operational expenditure. It may be possible

to use some of the surplus spaces for supporting CGA offices and other Village operational

functions.

iv. Some services (dining facility/capacity) may be over-scoped however this can be adjusted

during more detailed planning.

v. The configuration of bedrooms will be critical to determining if these housing requirements

can be met in an operationally sound manner and needs to be contemplated in the planning

process.

vi. The proximity of the Village to the airport, city and the venues is excellent and will allow all

athletes to live in one Village.


Page 22

Delay in finalizing Development Strategy 3.2 GOM in its 4th meeting held on 17th March, 2005 instructed DDA to make available two or three

strategy options to develop the Games Village for the consideration of the GOM. Accordingly, DDA on

19th April, 2005 submitted the concept paper which provided for the accommodation for 7000 athletes

and officials in the residential zone which could be utilized post Games as hotels, hostels / apartments.

A copy of the concept paper is set out as Relevant Document 14.

3.3 It has been stated that DDA held detailed deliberations with almost all major real estate

developers, NHAI, Ministry of Urban Development and Planning Commission before they finalized the

PPP structure of the project. According to DDA officials, the decision to adopt the PPP mode for

developing the Commonwealth Games Village was taken keeping in view constraints of scale, time,

quality, specifications and availability of 4000 rooms during the Games period. DDA was of the view

that it was not possible to develop the residential facility through other options such as auction of land

or self development.

3.4 Subsequently, GOM in its 6th meeting held on 8th September, 2005 directed DDA to prepare

three options for the Games Village including the option relating to its possible use as Games Village

for Asian Games 2014, in consultation with Organizing Committee (OC). Vice Chairman, DDA made a

presentation to the GOM in its 7th meeting held on 27th September, 2005 wherein it was proposed that

the facilities would be developed under the Public-Private-Partnership framework to ensure

commercial viability. Further, the OC was asked to complete the consultation process with regard to

the Games Village and venues by 15th October 2005, after discussion with the stakeholders and submit

their views to the Ministry for placing them before the GOM for consideration.

3.5 GOM finally decided in the 9th meeting held on 4th January, 2006 that the Games Village would

be developed on the Public Private Partnership (PPP) model. A copy of the GoM decision is at

Annexure 2.

3.6 Thereafter, DDA engaged M/s. Pricewaterhouse Coopers Pvt. Ltd. (PwC) on 16th June 2006 to

provide expert advice and consultation services with respect to the development of the Games Village

under the PPP model. The report was submitted by the consultants in August 2006.


Page 23

3.7 Thus, it is clear that there was unacceptable delay in formulating a strategy to develop the

Games Village and almost three years were lost even after the site had been finalized in the year 2003

itself.

3.8 This delay in planning for the Games Village did not leave any room for addressing

contingencies in an effective manner. As the subsequent events revealed, grave consequence of poor

planning was witnessed in more areas than one. Some instances are -

Even when there was extremely poor response to the RFP from reputed developers who

felt that the time period for project completion was too tight, DDA could not explore

alternatives;

DDA had to be content with selection of a project developer even when there was only

a single successful bidder who had no past record of actual completion of any

residential project in India.

DDA had to succumb to the demands of the Project Developer for funding the project.

3.9 Based on the planned timeline, the total time available for the project development from the

date of signing of the Agreement was 30 months (September 2007 March 2010).

Box: 4 Why PPP?

The reasons for taking the decision to develop Commonwealth Games Village in Public Private Partnership

mode by DDA are unclear.

DDA was and is the premier agency undertaking Housing schemes in Delhi and reportedly has a 2/3rd market

share. Its specialization lies in design, development and construction of housing projects for all sections of

society. It had developed the Asian Games Village for accommodating athletes and officials during 1982 Asian

Games.

DDA reportedly had huge cash reserves. Thus, it had the expertise and the funds to develop the

Commonwealth Games Village. It had zeroed in on the site and had also been identified as the Nodal Agency

for developing the Games Village by the Union Cabinet in September 2003 itself.

Thus, it defies logic why it did not initiate action in this regard in early 2004 and decided to adopt PPP mode

when there was no precedent in the real estate sector and wherein DDA had no expertise.


Page 24

An Artists impression of the Residential Towers in Commonwealth Games Village, Delhi

Bidding Process for selection of the Project Developer

3.11 The selection of the Project Developer (PD) under the PPP model was based on a two-stage

tendering process.

(1) Short-listing of the qualified developers through inviting expression of interest from

interested parties

(2) Inviting detailed proposal from shortlisted developers

3.12 The timelines for the bidding process and selection of the project developer is set out below:

Particulars Date Comments

Request for Qualification (RFQ) 4th Dec., 2006 During the process a pre-bid meeting was

conducted by DDA to clarify any doubts of

developers and invite suggestions Over 30

developers participated.

Last Date for submission of RFQ 12th January,

2007

15 bidders submitted their response by the


Page 25

Particulars Date Comments

last date and time.

Short listing of Bidders 19th January,

2007

After evaluation by the committee formed

for this purpose, 11 parties were qualified

and notified by DDA.

Request for Proposal (RFP)

24th April, 2007 RFP issued. A Copy of the RFP is at Relevant

Document 15.

Pre Bid Meeting 15th May, 2007 Pre Bid meeting with Qualified Parties.

Last Date for receiving Bids 25th May, 2007 No bid was submitted by the submission date. Last date extended to 15th June, 2007

Relaxation of terms of RFP 7th June, 2007 Relaxation of some of the terms of the RFP by the High Powered Committee

Addendum to RFP document 8th June, 2007 Addendum to RFP document issued by DDA incorporating the relaxations agreed to in the meeting of HPC on 7th June.

Revised Last Date for submission

of Bids

15th June, 2007 Two bids submitted post the relaxation M/s DLF Ltd. And M/s Emaar MGF Construction Pvt. Ltd.;

Opening of Bids & Report of

Technical Evaluation Committee

15th June, 2007 Bid of M/s DLF Ltd. Bid was found non-responsive and hence disqualified. Only ONE developer qualified Consortium of Emaar MGF

Issue of LOI 5th July, 2007 DDA issued LOI to Emaar MGF.

Signing of PDA 14th September,

2007

DDA signed the PDA with Emaar MGF

The above stated sequence of events highlights the poor response to the proposed project by

experienced Developers and, finally, there was only a single valid bid for the project.

3.13 During the Pre Bid Meeting held on 15th May, 2007, several queries were raised by the

prospective Bidders and the clarifications issued by DDA on the same during the Pre-Bid Meeting along

with concessions announced in the Addendum are represented in the Table below and in Para 3.13:


Page 26

S.No. Question Raised Clarifications

provided

Subsequent changes

incorporated in

Addendum to RFP/

concession provided to

Emaar MGF

1 Compensation for delay in

milestone completion should

be based on fair assessment

of delay & causes &

Developer alone should not

be held liable

Specific reference

made to Annexure - 3

Compensation for delay

was lowered and was

refundable to the PD after

completion of the

milestone.

2 Suggestion to lower the

penalty amounts as per

suggestions

No specific reply given

by DDA, only

reference is made to

the concerned

Annexure & Clauses

Lowered thereafter vide

Addendum to RFP issued

by DDA on 8.6.2007.

3 Request to extend the first

milestone considering the

extensive work involved &

the delay that could occur

due to the monsoon season.

Further the request clearly

laid out that such extension

may not delay any further

milestones.

DDA extended the

time for completion of

first milestone from

D+120 days to D+150

days.

Timelines were extended

further after starting the

construction of the

Project.

4 Request for extension of

time limit of the milestone

for construction &

completion of the Mock-up

Unit.

DDA extended the

time for completion of

first milestone from

D+120 days to D+150

days.

The level of achievement

of first 2 Milestones was

relaxed by the Addendum

to RFP.

5 Clarifications regarding

layout and construction work

w.r.t filling of earth &

conceptual clarity

DDA specified no

earth filling is required

& referred to

structural drawings

and other

architectural material.

-


Page 27

S.No. Question Raised Clarifications

provided

Subsequent changes

incorporated in

Addendum to RFP/

concession provided to

Emaar MGF

6 Number of returning

performance security

payments may be increased

in terms of achieving every 2

milestones, so that it reduces

the burden on the PD in

terms of paying interest to

the banks.

Please refer to Section

II, Instructions to

Bidders, Clause E

Approved thereafter vide

Addendum to RFP issued

by DDA.

It will be noticed from the Table above that several critical suggestions made at the time of the Pre-Bid

meeting with 11 selected / qualified bidders were later relaxed and the Addendum was issued on 8th

June, 2007, which was just seven days prior to the revised last date for submission of bid. The period

provided for submission of bids, after the Addendum had been issued, appears to be inadequate.

Changes in Request for Proposal (RFP)

3.14 In its meeting dated 7 thJune, 2007, following important relaxations were made

by the High Powered Committee (HPC) and major modifications were made in the RFP

document, which are as under :

Percentage share of DDA in the total number of apartments was reduced from 50% to

33.3%

Sharing methodology block by block

Bank guarantee for performance security reduced to 400 crore from 500 crore

Upfront amount remained at minimum of 300 crore but payment schedule relaxed.

First two Milestones relaxed.

Penalty for delay in achievement of Milestones was relaxed from 25 lakh to 20 lakh

per day after first 15 days of delay.

Deletion of third penalty slab of 50 lakh per day after 30 days of delay


Page 28

A copy of the minutes of the HPC is set out as Annexure 3.

3.15 It may be noted that even the modified provisions in the RFP did not lead to active participation

and only two bids were received. One of the two bids received from M/s DLF Ltd. (DLF) was found to

be non-responsive on grounds of it being conditional and, hence, rejected by the Evaluation

committee. A copy of the bid (letter) submitted by DLF is set out as Annexure 4. It is pertinent to note

that against the reserve price of 300 crore for the land in the RFP, the amount quoted by the single

bidder was only 321 crore. It is very likely that in case competitive bidding had taken place, this

amount would have been substantially higher. To that extent, DDA has been a loser.

3.16 At this stage there was no serious deliberation in the DDA for evaluating the capability of the

project developer to deliver on the contractual obligations considering the fact that Emaar MGF had no

past record to demonstrate the delivery of any successful residential project in India. Based on the

Draft Red Herring prospectus issued by Emaar MGF Land Pvt. Ltd. (Parent company) on 30th

September, 20109, the company was at that time yet to complete any residential project in India.

3.17 A due diligence exercise based on common sense and financial prudence was of prime

importance as the timely completion of this project was critical to the organization of the

Commonwealth Games. The HLC was informed by the Finance Member, DDA that most developers

having extensive experience in the Indian market were of the opinion that the timelines were very

tight and the financial terms were not attractive, the penalty clauses were very severe and not in line

with market practice.

3.18 Given the circumstances described above, it was imperative that DDA should have put in place

a contingency plan to mitigate the risk of the developer failing to deliver on the Agreement.

3.19 The HLC, based on the sequence of events, finds that while the entire competitive bidding

process evoked poor response, no other option for the development of Games Village was seriously

explored before 2006. Even within the selected solution, further options to attract a larger base of

experienced developers were not explored. The HLC also finds it intriguing that DDA did not deliberate

9 Extracts are at Relevant Document 16.


Page 29

or seriously consider the option of developing the Games village by itself, one of the two options

recommended by its consultants.

3.20 If the objective was not to take on the financial burden or financial risk of the project, then DDA

failed to achieve its objectives as they ended up doing both infusing funds to complete the project

and carrying the financial risks of the project as explained in subsequent chapters.


Page 30


Page 31

Chapter 4: Project Development Agreement and Execution Public Private Partnership (PPP)

4.1 The Report of the PPP Sub-Group on Social Sector by Planning Commission states that a Public-

Private-Partnership (PPP) provides an opportunity for private sector participation in financing,

designing, construction and operation & maintenance of public sector programmes and projects.

4.2 Public-Private-Partnership or PPP is a mode of implementing government programmes /

schemes in partnership with the private sector. The term private in PPP encompasses all non-

government agencies such as the corporate sector, voluntary organizations, self-help groups,

partnership firms, individuals and community based organizations. PPP, moreover, subsumes all the

objectives of the service being provided earlier by the Government, and is not intended to compromise

on them10.

4.3 PPP is an approach, under which services are delivered by the private sector (non-profit / for-

profit organizations) while the responsibility for providing the service rests with the Government11.

4.4 To sum up, for this project the defining element of a PPP model is that the private party would

bring in technical, financial and project management skills and the public agency would monitor,

ensure accountability and timely completion of the project. The financial risk was to be carried by the

private party.

Project Development Agreement (PDA)

4.5 The PDA, which was said to have been modeled on the approved PPP concession agreement,

was signed on 14th September, 200712 between DDA and M/s Emaar MGF Construction Private

Limited.

10 Report of the PPP Sub-Group on Social Sector by Planning Commission, GoI; published in 2004 11 Report of the PPP Sub-Group on Social Sector by Planning Commission, GoI; published in 2004


Page 32

4.6 The HLCs review of the PDA showed that several key clauses related to accountability of the

private developer and subsequent monitoring mechanisms were not included in the PDA. Such clauses

form a part of the standard Model Concession Agreement as prescribed by the Planning Commission

and are extensively used in most infrastructure projects (port, railways etc.) executed on the PPP

model. Considering the fact that this project was the first of its kind in the real estate sector and

especially for DDA, prudence demanded inclusion of risk mitigation norms in the Agreement. The

exclusion of such clauses provided little or no recourse to DDA to detect early signals of problems in

the development of Games Village. Ironically, the PDA included a non-intrusion clause that prevented

the DDA from effectively monitoring this critical project for the Commonwealth Games 2010.

Deviations from Model Concession Agreement

4.7 The key clauses in accordance with the Model Concession Agreement which were not included

in the PDA and its implications are set out below:

Escrow account The clause for maintaining an Escrow account is understood to be

critical for all PPP agreements. An escrow account plays a critical role to ring fence the

funds for the project. This was particularly important in this project as the PDA allowed

the sale of apartments during the period of construction, the proceeds of which were to

be used to fund the project. Therefore, a sound monitoring system should have been

provided to ensure that all revenues accruing from the sale of apartments were

available for completion of the project.

Absence of an escrow account effectively restricted the ability of the DDA to monitor

financial parameters and periodic transfers of funds by PD to Emaar MGF Land, the

parent company.

Audit and Accounts - The importance of the Audit and Accounts clause is that it enables

the public party to have access to the books of accounts of the project and if required to

12 A copy of PDA is at Relevant Document 17


Page 33

audit the accounts of the project. This is a tool used for effective monitoring and control

over the project executed under the PPP model. Also, in the CGV project this would

have enabled DDA to get the actual cost of construction when fixing the price for

purchase of apartments.

A copy of the Model Concession Agreement recommended by the Planning Commission with respect

to the two clauses is at Relevant Document 18.

Risk Assessment & Mitigation

4.8 Risk assessment and mitigation measures are standard pre-requisites in Project Management

especially where outputs have to be delivered within a prescribed time frame.

4.9 DDA failed to undertake risk assessment exercise at several stages of decision making related to

the development of the Games Village including evaluation of options, selection of a credible

Developer and ensuring accountability of the Developer.

4.10 The execution of a PPP contract does not reduce the responsibility and accountability of the

public agency and public servants concerned. On the other hand, it places substantial responsibility on

them to see that the arrangement succeeds in safeguarding public interest by managing the PPP

economically, efficiently and effectively. The absence of the monitoring provisions in the PDA reflects

Box: 5 Public Private Partnership in Commonwealth Games Village Project?

DDA decided to develop the Commonwealth Games Village Project in the PPP mode. The Project

Development Agreement was signed with the selected Project Developer, Emaar MGF on 14th

September, 2007.

The way this PDA was executed by DDA accorded a new meaning to Public Private Partnership

altogether. Here, finally

all risk was borne by DDA;

all comforts, legal and financial, were provided to Project Developer by DDA;

the Developer was able to recoup his investment even before completion of the project;

defects had to be rectified by the DDA;

DDA had to bear the cost of blocked capital.


Page 34

the lack of understanding of the risks involved as evidenced by inadequate risk management process

on the part of DDA. It may be noted that the occurrence of certain future events, primarily the Bailout

package to the PD, could have been anticipated and pre-empted. To illustrate, the Project

Development Agreement could have included the clause regarding escrow account. Such an account

normally requires maintaining of a defined average fund over a period of time. Absence of this

account resulted in DDA not detecting early signs of possible financial crisis faced by the PD and

thereby afforded inadequate time for a more deliberated option under the situation. Further, the

escrow account would have ensured transparency in the project financing as all project related

revenue and expenditures could have been properly monitored.

4.11 In the absence of risk assessment and mitigation strategy, DDA could not take remedial steps

for any potential or actual failure of the developer. Instead, at every instance, the Developer stage

managed situations exerting pressure on DDA to take decisions that eventually turned out to be

weighed in favor of the PD.

Execution of the PDA

4.12 The PDA recognized 9 milestones in the execution of the Project. Various committees were

constituted to monitor the progress and provide constant quality assurance with regards to the

project. Three major committees were constituted by DDA namely:

Monitoring Committee

Stadia Committee

High Powered Committee

Third Party Quality Assurance by CBRI, Roorkee was also put in place.

Monitoring Committee

4.13 The Monitoring Committee formed by DDA included representatives of Emaar MGF and DDA as

members and was chaired by an Independent Engineer who was unanimously elected by the two

members.


Page 35

4.14 The committee held 32 meetings over a span of 29 months from its inception on 30th January,

2008 till the last meeting held on 31st July 2010. The committee was mandated to meet every month to

review the progress of the project, resolve any issues, and facilitate work on the project and record

completion of milestones.

Stadia Committee

4.15 The mandate prescribed for the Stadia Committee was to conduct regular meetings to address

all issues relating to the development of the Games Village site. The meetings were held weekly to

assess the progress of the project and to resolve issues relating to the project site and flyover,

residential facility, temporary overlays, practice venues etc.

4.16 These meetings were held on a weekly basis till August 2010, after which daily meetings were

held in view of the directive given by DDA.

High Powered Committee

4.17 The committee was constituted by the VC, DDA and was empowered to find and ensure rapid

resolution of all issues relating to the Commonwealth Games.

Third Party Quality Assurance by CBRI, Roorkee

4.18 The PDA also prescribed regular inspection and supervision of the project by a Third Party

Quality Assurer (QA) to verify the quality of construction and carry out regular supervision of

construction work carried out by the PD independently of both parties to the Agreement. The PDA

required that such appointment be within 6 months of entering into the Agreement, and accordingly

CBRI, Roorkee were appointed.

4.19 As per contract, the QA was required to inspect the site on a monthly basis and thereafter

provide Monthly Quality Assurance Reports to DDA and the PD. These reports served as a benchmark

for DDA engineers and were forwarded to the PD, who was required to comply with the specific issues

raised therein. In response, the PD was required to furnish Action-Taken reports on such issues and

to rectify the structural & quality lapses. The reports were supported by photographs & other

technical data.


Page 36

Ineffective Monitoring

4.20 Based on the documentation available it has been noted that there was a delay of 2 months

from the date of signing of PDA and the actual date of appointment of the QA. Further, the frequency

of the reports was reduced from monthly to quarterly effective January 2009 without any formal

communication to this effect from DDA.

4.21 Review of the Minutes of the Meetings held reveal that the issues and concerns regarding the

development of the Games Village were documented in a perfunctory manner. The first meeting of the

Monitoring Committee took place on 5th April 2008, after the Project Developer had missed his first

milestone and sought revisions13.

4.22 The oversight and monitoring functions by the committees set up by DDA were ineffective as

several defects and quality issues relating to the construction of the residential zone by the Project

Developer continued to persist.

Milestones

4.23 The Project Milestones were laid down in the RFP issued for the project. It was stipulated that

these timelines need to be adhered to and severe liability/ penalty shall be levied in case of default or

deviation from such dates. However, as the project execution progressed, the project timelines were

regularly revised at the behest of the PD and these were approved by DDA without documentary

support or evidentiary proof necessitating such revisions.

Non Levy of Liquidated Damages

4.24 Although PDA did not provide for extension of milestones, DDA extended timelines for

achievement of milestones and did not impose penalty as per the PDA. On account of such decisions,

DDA has foregone 81.45 crore in favor of Emaar MGF. Details are set out in the Table below:

13 See Minutes of the First Meeting of Monitoring Committee placed at Relevant Document 19.


Page 37

S.No. Milestone Original Date

of

completion

Actual Date of

completion

Delay

(Number

of days)

Liquidated

damages

foregone ( in

crore)

1 Foundation work (including

Plinth Level) up to Plinth

level for 33% of blocks

11th Feb,

2008

11th May,

2008

90 17.25

2 Structure work up to G+2

level

11th May,

2008

10th Aug,2008 91 17.40

3 Structure work up to terrace

level, with associated

electrical works & B.W. up to

G+4 level

07th Nov,

2008

29th Jan.,

2009

83 15.85

4 Completion of brick work up

to terrace level & internal

plaster, flooring, etc. for 5

levels, with associated

electrical works

06th May,

2009

15th Sept,

2009

132 25.65

5 Completion of flooring &

furnishing, with associated

electrical works of all blocks

all levels upto terrace level

02nd Nov,

2009

02nd Dec, 2009 30 5.25

6 External finish of all blocks &

all levels

01st Jan,

2010

01st Jan, 2010 0 0

7 Completion of all electric

work including lifts, ESS etc.

& completion of UGR/ Pump

Rooms/ Lifts/ Pump sets etc.

31st Jan, 2010 31st Jan, 2010 0 0

8 Completion of all

development work including

landscaping

02nd Mar,

2010

13th Dec, 2010 286 DDA has filed

for recovery as

the extension

was not

approved

9 Project Completion Date 01st April,

2010

13th Dec 2010 254 DDA has filed

for recovery as

the extension

was not

approved

TOTAL 81.45


Page 38

4.25 It is evident from above that nearly all achievement dates were delayed barring Milestones 6 &

7. It is pertinent to note that all delays, except Milestones 8 & 9, were permitted by DDA without

levying liquidated damages as provided in the PDA. DDA has issued a claim letter to Emaar MGF in

October 2010 setting out the recovery of liquidated damages on account of delays related to

milestones 8 and 9 alone as per the PDA14.

Construction of excess FAR

4.26 The site selected for the CWG Village had an approved FAR of 1.67 initially, which was increased

to an FAR of 2.00 by the Delhi City Master Plan 2021 which came into force effective 07th February,

2007. The Project was thus approved with a built up FAR of 2,05,140 square meters by the Building

Section of DDA on 18th March, 200815.

4.27 However, an actual FAR of 2,30,689.33 square meters was built as per the plan submitted by

Emaar MGF for obtaining Completion certificate from DDA. The Developer, therefore, constructed an

FAR of 25,549.33 square meters in excess of the approved plans. This was almost 12.5% more than the

approved FAR. This was in the knowledge of the Monitoring Committee of DDA at least from January

2009 (See item 3 in Table above) and also the top officers of DDA including Vice Chairman and LG

from April, 2009 when the Bailout Package was being finalized.

4.28 Again, belatedly DDA took a stand on this matter by issuing a Sealing - cum- Demolition notice

only on 20th August, 2010 in respect of the excess constructed area. Reacting to this notice, the PD had

filed a case with the Appellate Tribunal of MCD (Order dated 26th October, 2010 of Appeal No. 549 &

550/ATMCD/2010) which ruled in favour of the PD and advised them to file for a new completion

certificate. The Tribunal also stated that such lapse is compoundable by DDA within a limit of 5% of the

permissible FAR on payment of prescribed charges by the PD. A copy of the judgment is at Relevant

14 See Annexure 5. 15 See Relevant Document 20.


Page 39

Document 21. DDA has filed an appeal against the Order of the Tribunal in the Court of LG and the case

is still pending.

4.29 The issue of delayed milestones, approvals to waive liquidated damages without justification on

record and construction of excess FAR point to the ineffectiveness of the monitoring regime set up by

the DDA and complicity of DDA officials. These issues incidentally were NEVER placed on the agenda of

any of the meetings of the Monitoring Committee by any of the several officers specifically stationed at

the project site by DDA.

Box: 6 Actual Ground Coverage & Floor Area of Commonwealth Games Village

(in sq. m.)

A. Total (Residential Towers + Club /Community Centre

i. Permitted Ground Coverage (as per PDA) = 36,663.89

ii. Sanctioned Ground Coverage (27,664.19 + 1438.13) = 29,102.32

iii. Sanctioned Floor Area (203087.25 + 2052.75) = 2,05,140.00

iv. Existing Ground Coverage (225900.70 + 3032.06) = 2,28,932.76

v. Extra Floor Area constructed beyond sanction limit = 23,792.76

B. Residential Towers:

i. Existing Floor Area (considered in FAR calculation) at site = 2,25,900.70

ii. Sanctioned Floor Area (FAR) = 2,03,087.25

iii. Constructed Floor Area (FAR) under DDAs possession = 1,34,819.48

Constructed FAR in respect of 11 Towers (1/3rd ) as per PDA = 73,771.90

Constructed FAR in respect of 333 flats purchased by DDA subsequently =61,047.53

iv. Total Floor Area in possession of Developer:

Balance sanctioned FAR under Developers possession (ii iii) = 68,267.77

v. Extra Floor Area = 22,813.45

C. Club / Community Area

i. Existing Floor Area of the Club = 3032.06

ii. Sanctioned Floor Area = 2052.75

iii. Extra Floor Area = 979.31

(Source: Data provided by DDA)


Page 40

Box: 7 Salient Features of the Games Village at a Glance

No. of residential towers - 34

No. of 2/3/4/5 bedroom apartments 1168

Date of signing Project Development Agreement 14.09.2007

Scheduled Date for Completion 31st March, 2010

Actual Date of Completion 13th December, 2010

No. of residential apartments to be shared between DDA and Emaar

MGF as per PDA in the ratio 1:2

Ratio of flats to be shared between DDA & Emaar MGF after Bailout

Package 1:0.63

No. of apartments finally allocated to DDA after Bailout Package 715

No. of apartments finally remained with Emaar MGF 453

Total cash infusion by DDA in Games Village Project 728.89 crore

Total cash infusion by Emaar MGF in Games Village Project 595

crore

No. of apartments sold by Emaar MGF till 28th December, 2010 - 426

Money raised through sale of 426 apartments by Emaar MGF 1354

crore


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Chapter 5: Bailout Package and Release of Funds Background

5.1 The PDA did not provide for any financial assistance to the PD. However, on the persistent pleas

of the PD and in order to ensure that the Games Village project could be completed within the planned

timeframe, DDA entered into a separate Agreement with Emaar MGF to provide financial assistance.

Brewing Trouble

5.2 The signs of inability of Emaar MGF to complete the Games Village surfaced as early as January

2008. These included:

a. According to the PDA the lead partner of the consortium (Emaar PJSC) was required to

bring in the equity (26%) within six months from the date of issue of Letter of Intent

(LOI); while the LOI is dated 4th July 200716, the equity was brought in only on 8th

February 2008, a delay of 31 days from the agreed deadline date.

b. According to the PDA, the date for achievement of first milestone was 11th February

2008. Emaar MGF sought extension till 11th May, 08 and the same was granted by the

HPC on 21st April 2008. The first milestone was achieved on 11th May 2008. This

situation was more worrisome considering DDA had extended a relaxation to the

Developer in the form of permission to begin the construction work at the site while the

PDA was not executed. Even though the PDA was signed only on 14.09.2007, DDA

handed over the site to Emaar MGF on 20th August 2007. A copy of the minutes of HPC

meeting dated 21st April, 2008 is set out as Annexure 6.

16 See Relevant Document 22.


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c. In April 2008, Emaar MGF indicated financial problems to DDA and requested pre-

ponement of allocation of flats. The key premise of Emaar MGF for assistance at this

stage was its inability to raise funds via advances from the sale of apartments to

customers, due to non-allotment of the flats. It may be highlighted that the allotment of

apartments between DDA and Emaar MGF based on the apportionment formula as per

the PDA was scheduled for 14th June 2008 and such a demand for early allotment was

therefore not warranted.

Chronology of Events leading to Bailout Package

5.3 A chronology of events leading to the signing of the Bailout Agreement between DDA and the

Project Developer, Emaar MGF, is as under:

S. No. Date Event

1 3 r d November, 2008 Decision of Delhi High Court 17

2 5 th December, 2008 Letter of Emaar MGF to DDA seeking f inancial

assistance 18

3 8 th December, 2008 Meeting of Emaar MGF with Secretary, MoUD

4 9 th December, 2008 Shri Sanjay Malhotra, on behalf of Emaar MGF addressed a letter 19 to Secretary, MoUD wherein they, inter alia, mentioned that due to the recent directions given by the Honble High Court of Delhi in the matter of the CGV project, there has been an adverse fallout on the project in terms of banks/lenders to the projects and the customers (present and potential) raising concerns on the further development of the project. DDA was requested to assist the project by provid ing funding support, which is most crit ical for further

17 See extracts at Annexure 7 18 See Annexure 8 19 See Annexure 9


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progress.

4 10 th December, 2008

Shri Sanjay Malhotra, on behalf of Emaar MGF addressed another letter 20 to Secretary, MoUD enclosing requests made to DDA as requested by your office


Secretary, MoUD forwarded details of assistance sought by Emaar MGF group to Shri Arun Ramanathan, Finance Secretary, GoI for appropriate facil itation. 21


Director (DD), MoUD sought comments of DDA on issues raised in letters of Sanjay Malhotra, Chief Operating Officer, Emaar MGF. 22


Pr. Comm.(CWG) informed COO, Emaar MGF that in the l ight of Clause 8.8 of the Project Development Agreement, their request for f inancial assistance cannot be accepted.23

8 10 th February, 2009 Emaar MGF in its letter to DDA sought return of 321 crore as loan

at nominal rate of interest or suggested that DDA buy 250

apartments keeping in view the requirement of funds at that

stage24.

9 17 th February, 2009 Issue discussed in Meeting of COS.

10 12 th March, 2009 LG provided in principle approval for 25

Outright purchase of apartments by DDA from PD

Constitution of Committee with experts from NBCC, CPWD,

SBI Capital and DDA to determine the total funding

requirement and the purchase price of the apartments.

In response to the PDs request, vide letter dated February 27,

20 See Annexure 10 21 See Annexure 11 22 See Annexure 12 23 See Annexure 13 24 See Relevant Document 30 25 See Annexure 14


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2009 of advance of Rs.150 crore, a part payment of Rs.100

crore may be made under a MoU, which would be adjusted at

a later stage once the cost of the apartments to be bought as

determined.

11 16 th March, 2009 PC (CWG) wrote a letter to Secretary, MoUD on the issue of f inancial assistance to the Project Developer. 26 Reference is made to economic slowdown.

12 18 th March, 2009 Constitution of Valuation Committee

13 19 th March, 2009 Valuation Committee briefed by PC (CWG), DDA

14 25 th March, 2009 LG ordered that in providing the advance of Rs.100 crore, f inancial interest of DDA should be fully secured

15 26 th March, 2009 DDA asked the PD to provide a Bank Guarantee of Rs.100 crore valid t i l l the date of f inal ization of the purchase agreement, in addit ion to providing an unconditional corporate guarantee, encumberance certif icate from ROC for 75 apartments proposed to be kept at the disposal of DDA and action plan for util iz ing the advance amount.

16 26 th March, 2009 PD expressed its inabil ity to provide a BG of Rs.100 crore and offer unconditional corporate guarantee to DDA

17 30 th March, 2009 Shri Mukesh Dham, wrote to Secretary, MoUD wherein he referred to their previous discussions and the funding challenges being faced by the CGV Project due to the l it igation on the project as well as economic slowdown. He also complained thatA committee was formed on 21 s t March 2009 to submit its report within 7 days. We have been providing al l the information required by them, but to date report has not been submitted by the Committee. 27

26 See Annexure 15 27 See Annexure 16


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18 30 th March 2009 Note sent by Secretary, MoUD to VC, DDA seeking details of resolution worked out so that t imely implementation of project does not suffer. 28

19 6 th April , 2009 VC, DDA sent a detai led Note to Secretary, MoUD. 29

20 9 th April , 2009 Recommendation of Valuation Committee received.

21 15 th April , 2009 Constitution of Negotiation Committee

22 22n d Apri l , 2009 Emaar MGF wrote to LG 30

23 23 r d Apri l , 2009 Meeting held in chamber of VC where Financial experts were cal led and asked to provide for 15% Developers margin on total Project Cost and 10% as cost of capital towards the funds invested by Emaar MGF and finally arrived at a rate of Rs.11,055.64/ - per sft .31

24 24 th April , 2009 Meeting held under chairmanship of LG which is attended by Secretary and Joint Secretary, MoUD and VC, Finance Member & Engineer Member, DDA which decided the purchase price of f lats under Bailout Package.

25 5 th May, 2009 Bai lout Agreement signed.

No CWG Village Bogey

5.4 In November - December 2008 and January February 2009, Emaar MGF made repeated

requests to DDA as well as Ministry of Urban Development to provide financial assistance for

completion of the project. Such requests were rejected by DDA as the PDA did not provide for financial

assistance. However, in February 2009 Emaar MGF exerted pressure on DDA and cited consequence of

non-completion of the Games Village within the stipulated time period i.e. 31st March 2010. This led to

28 See Annexure 17 29 See Annexure 18 30 See Annexure 19 31 See Detailed Background Note at Annexure 20


Page 46

a situation termed by DDA as critical which, according to the LG and Cabinet Secretary, required an

out of box solution.

5.5 In its submission to DDA and MoUD in December 2008, Emaar MGF referred to the PIL filed in

the court against the location of the Games Village stating that the litigation had caused negative

impact on the project and thereby affected its ability to raise funds for the project.

5.6 A PIL had been filed and the High Court had issued a notice on 17th July, 2007. The case came

up for hearing in the High Court only on 9th June, 2008. The High Court passed its judgment on

3.11.2008. The Court observed that any construction made or third party rights created are at the

peril and risk of the organizers / Government. DDA filed a SLP in the Supreme Court against this order.

The interim stay of the Supreme Court was dated 5th December, 2008 which was finally disposed off on

30th July, 2009. However, at no stage did the High Court or the Supreme Court order suspension of

the work at the project site.

5.7 While HLC took note of this submission, it is of the opinion that the entire risk of execution of

the project was on the Developer and transferring the onus to DDA merely exhibited its inability to

manage the project.

5.8 In February 2009, DDA finally took serious note of the developers financial situation and its

inability to complete the project within the stipulated time. At this stage DDA, in consultation with LG

and COS, agreed to explore the possibility of financing the project. The COS in its meeting on 17th

February, 2009 agreed that DDA could explore the option of purchase of flats with due approvals from

the competent authority.

Box: 8 Meeting of COS held on 17.02.2009

At the COS meeting held on 17th February, 2009 to review arrangements related to CWG 2010, it was noted by the

COS that the LG, Delhi had already given approval to DDA for making purchase of flats out of its own funds. Cabinet

Secretary observed that an out of box solution may have to be resorted to. It was inter alia decided that

Option of purchase of flats in the Games Village by DDA may be explored with due approvals duly obtained

from competent authorities, to help the private developer in overcoming working capital shortfall, as the

ongoing economic slowdown warrants unconventional options to be given consideration on merits. However,

proper valuation of flats should be arranged through an independent agency in a transparent manner.

It is worthwhile noting that the COS considered a decision already taken by the LG and correctly pointed out that in

such a transaction the proper valuation of flats in a transparent manner would be extremely important.

Unfortunately, this operational portion of COS decision was not ensured by DDA.


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5.9 Based on the decision taken by LG on 12th March, 2009, a Valuation Committee comprising of

representatives from HUDCO, NBCC, CPWD and DDA was formed on 18th March, 200932 to recommend

within 7 days the rate at which the flats could be purchased and the funding requirement of the

project. The Valuation Committee, in turn, engaged a Technical consultant (M/s Garg & Associates) and

a Financial consultant (M/s K N Goyal & Asso

Second Report of Commonwealth Games Village

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