Friday, 16 March 2018

Do Bhagtani's allotment letters have any real value?

Mumbai, 17th March, 2018: Some years ago, you gave Bhagtani lakhs of rupees in exchange for what you thought was a legally-enforceable contract. But is it a contract, or just worthless pieces of paper? Let us take a close look at your transaction. Possession, they say, is nine-tenths of the law, meaning that your ownership of something is easy to maintain if your have possession of it, and difficult when not. When your money was in your own bank account, it was entirely yours. It was your "today-money".

Then you put your money into JVPD Properties, Jaycee Homes or MD Devcon, and thereby renounced your possession and diluted your ownership of the money. In the company accounts, your money became aggregated with other people's and Bhagtani's money. It was treated by Bhagtani family as their own money, to lend or spend as they pleased, without any financial discipline. It flowed into places hard to track, such as unregistered partnerships and proprietorship accounts, and maybe bank accounts abroad. Much of it flowed to the accounts of other associated builders (such as Oyster Living) and it was money-laundered beyond recognition.

In exchange for your today-money, you were given an unregistered, cunningly-drafted document called allotment letter. It came in different flavours, namely Riyo, Sapphire, Serenity, Savannah, Horizon, Executive, etc. It stated that Bhagtani would give you a flat in Riyo, Sapphire, etc, if those  projects got built. It emphasized that the "if" was a big IF. In the event that the flats failed to materialize, it promised you refund with 15% rate of interest. In this way, your today-money became "tomorrow-money". Actually, it became "maybe-tomorrow-money", diluted with ifs-and-buts, but you chose to ignore the "maybe" part.

Yes, people paid money to Bhagtani, but did they get any valuable thing in exchange?

Those of you who had second thoughts demanded your money back, but Bhagtanis did not comply. Instead, they imposed more terms and conditions, forcing you to exchange your allotment letter for a cunningly-worded cancellation deed accompanied by post-dated cheques or a credit-note. Instead of refunding your today-money, Bhagtanis gave you "day-after-tomorrow-money".

When day-after-tomorrow came, Bhagtanis claimed they had a liquidity-crisis, and bounced the PDCs and pushed the day-after-tomorrows into the indefinite future. After many, many postponements, some of you figured out that in the Bhagtani universe, tomorrow never comes!

And that was why you started filing police complaints and taking legal actions.

And this brings us to our current situation, which has more question-marks than answers.

Some Inconvenient Questions:

Q1: Is allotment letter a legally enforceable contract? 
If your allotment letter is an enforceable contract, then enforcement should be a no-brainer! Just file a civil suit for specific performance and get a decree for execution!

Q2: If it is enforceable, then why is legal remedy such a big challenge? 
Why are different lawyers performing so many judicial gymnastics i.e. Adv Tanuj Lodha trying to get RERA directions to Xander, Adv Shraddha Dubepatil trying to get MPID at sessions court, Vigil Juris filing representative civil cases in High Court? 

Q3: If it is NOT enforceable, then is there any remedy at all?
Punishing Bhagtanis for giving you an empty piece of paper is absolutely necessary. However, if your allotment letter isn't a contract, then its terms cannot be enforced. Bhagtanis can be punished, but your money cannot be brought back. In this case, your today-money becomes gone-money.

Q4: Maybe some allotment letters are enforceable, and others aren't?
The allotment letter for Serenity is based on land that Bhagtanis actually owned, whereas that of Riyo is based on gurcharan (government-owned pasture) land. The legal definition of "contract" is "an agreement having a lawful object entered into voluntarily by two or more parties, each of whom intends to create one or more legal obligations between them". Constructing on privately-owned land is a lawful object and can be a "legal obligation"; constructing on gurcharan land is not a lawful object. Bhagtani's Horizon project is based on redevelopment of an existing cooperative housing society. This society has withdrawn the development rights from Bhagtani, and appointed another builder, arguably making the Horizon allotment letter a worthless piece of paper.

Q5: Is cancellation deed at par with allotment letter?
Commonsense suggests that a cancellation deed should confer the same right as an allotment letter. However, the law often defies commonsense. Till date, the difference between Bhagtani's allotment letter and cancellation deed hasn't been adjudicated by any legal forum. Until that happens, we don't know for sure.


Monetizing the allotment letter or cancellation deed is the key. Monetization can happen only by liquidating Bhagtani's properties, whether held in their personal names, or in the names of their companies.

But can it be monetized?

Yes, you paid pots of money for this piece of paper. But that in itself is no guarantee that it can be monetized by any legal process.

Krishnaraj Rao

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