SHARE
The Nation 2015/05/31

The Board of Investment (BOI) has written a lengthy response to a news article titled ‘Abans takes BOI to court’ and a comment titled ‘Land-grabbing yahapaalana style’ published in The Nation of May 31, 2015. The BOI sent this response late on Friday (the day we go to print) and moreover the response was of a length that could not be accommodated.  While reserving the right to further dissect the BOI’s contentions in the matter, The Nation, as agreed to by the BOI, published the detailed objections on its website.

Letter to the Editor:

Dear Sir,

We refer to the articles “Abans takes BOI to Court” and “Land grabbing – Yahapalanaya Style” dated 1/6/2015 which features a completely inaccurate account of a recent action of the Board of Investment of Sri Lanka relating to the recovery of an unutilized BOI land in Seeduwa.

However, the published article has merely been based on a one sided version without finding the veracity of the chain of facts connected to the matter.  Hitherto, the BOI policy has been to ensure that the lands allocated for investment projects are utilized for the purposes set out in the project application. Therefore, this is not in any way a discriminatory action targeting a specific company.

The land in question consists of approximately 18 acres and which was previously allocated to another investor to build 1210 housing units, but the agreement was terminated / cancelled by the BOI due to non implementation of the project.  Thereafter, the land was allocated to Crown City Developers (Pvt) Ltd. for a project to construct 100 housing units on 4th May 2000.  However, there were changes in the scope of the project on four occasions as well as four extensions granted due to delays in project implementation.  The BOI has over the years accommodated Crown City Developers (Pvt) Ltd. and permitted them to change the nature of the initial project to include warehouses, a hypermarket, shopping mall and a logistics center. As a result, the project implementation period was extended by the BOI during the period of 2004 to 2013. Accordingly, the BOI facilitated the signing of six supplementary agreements during the period of 2004 to 2014 to accommodate their change of scopes and extension of project implementation period.

However, the company has used only 10 acres out of the total land extent of approximately eighteen acres awarded to them only to build a warehouse and a logistic center.  The balance land remained unutilized and the BOI has been requesting the Company to return the same since 2009 to recover this land and to grant it to a prospective investor.

On 18th December 2009, BOI urged to release the unutilized portion of the land at Kadolkelewatte to the BOI to enable the Legal Department of BOI to make arrangements to sign the Supplementary Agreement as per several discussions Crown City Developers (Pvt) Ltd. stating that they are not agreeable to release a portion of the land back to the BOI as they intend to expand their project in the near future.

On 9th March 2010 the Legal Department of BOI responded stating that the signing of the Supplementary Agreement could be arranged only after releasing of the unutilized portion of the land leased to Crown City Developers (Pvt) Ltd. in terms of Clause (9) of the Indenture of Lease No.3992 dated 27th July 2000.

On 17th March 2010 Crown City Developers (Pvt) Ltd. Abans arrogantly resisted stating that they intend utilizing the entire land in the near future to construct a shopping mall and a hyper market and as such no portion of the land will remain unutilized.

On 7th May 2013 a letter was issued by the BOI urging Crown City Developers (Pvt) Ltd. to show cause as to why the Lease Agreement should not be cancelled taking away the unutilized leased area. On 08th May 2013 Crown City Developers (Pvt) Ltd. boldly communicated to the BOI stating that the land is currently being used for parking purposes which is in violation of the purpose for which the supplementary lease agreements were signed by the BOI with so many extensions granted.  Crown City Developers (Pvt) Ltd.’s  retention of unutilized land has denied providing it to other legitimate investors who have projects which can be economically beneficial to the country. The Company has been resisting to release this land by proposing various development options from time to time.

As the land remained unutilized until March 2015, the BOI issued notice of termination due to non-compliance with the Agreement and the letter of termination was issued on 26th March 2015.  As per the general policy mentioned above, BOI takes over lands reserved and allocated for projects but not utilized for the given purpose within a stipulated period of time. The BOI has periodically taken action to cancel projects which have not complied with the agreed terms and conditions of the BOI Agreement irrespective of whether they were located within the BOI Export Processing Zones or outside the Zones. Hence, we reiterate the position there was no political reasons or targeting of any particular company but BOI has acted in a bona fide manner in the best interests of the country.  Further, we wish to state that the enjoining order which was issued on 22nd May 2015 has now been vacated by the District Court of Colombo on 5th June 2015.

The manner in which Crown City Developers (Pvt) Ltd. has been accommodated is incomprehensible and illogical. The inconsistent and obscure position of the Company through out a period of 15 years does not stand to reason. The inevitable decision of the BOI canceling the agreement with Crown City Developers (Pvt) Ltd. has been overdue.  Consequent to the policy decision taken in February 2015 by BOI to take over lands reserved and allocated for projects but not utilized for the given purpose within a stipulated period of time the following lands were taken back by BOI.

The land was allocated to Crown City Developers (Pvt) Ltd. in the year 2000 and action was taken to take back portion of land unutilized for 15 years. It is significant that lands allocated as recently as 2010 have also been taken back to the BOI when the desired project implementation was not achieved. Example :

Names of Company withheld due to privacy

  1. XYZ Company  premises at KEPZ [Land in Extent of 3.56 Acres];
  2. XYZ Company  premises at SEPZ [Land in Extent of 9.33A];
  3. XYZ Company  premises at WEPZ [Land in Extent of 1.7 Acres]

In addition, action initiated to take over unutilized lands in other Zones such as BEPZ and MEPZ.

In the circumstances it is categorically stated that your news item carried under the heading “Land grabbing – Yahapalanaya style” is totally untrue and contains several malicious statements on several personalities which are defamatory. In the circumstances we shall thank you to publish the statement contained herein giving it the same prominence as given to the impugned news item.

 

Chronology of Events :

CROWN CITY DEVELOPERS (PRIVATE) LIMITED

On 14-05-1999 an Application was submitted to BOI by Dr. D. Venkateshwaran [former Director of Crown City Developers (Pvt) Ltd.] of No.307, George R. De Silva Mawatha, Colombo – 13 to set up a Project for the Construction of 100 Units of Semi Luxury Houses at No. 237/20, Kerawalapitiya, Wattala.

Letter of Approval was issued approving to set up a Project for the construction of houses subject inter alia to the following conditions:

  • Minimum investment committed to the project within a period of 2 years from the date of entering into the Agreement is not less than Rs. 500 Mn.
  • Minimum of 100 Housing Units should be constructed at maximum of 3 locations.

On 09/02/2000 BOI terminated/cancelled the Agreement entered into between the BOI and another investor company for a project to construct 1210 housing units at Kadolkelewatte, Seeduwa.

Thereafter, on 23/02/2000 18 acres of Land was allocated at Kadolkelewatte, Seeduwa by BOI to Crown City Developers (Pvt) Ltd.

On 04/05/2000 the Main Agreement was entered into between the BOI and Crown City Developers (Pvt) Ltd. to set up a project to construct 100 houses.

On 15/05/2000  Site Approval was granted by the BOI for the land of 18 acres at Kadolkelewatte, Seeduwa to set up 100 houses by Crown City Developers (Pvt) Ltd.

On 27/07/2000 the land at Kadolkelewatte, Seeduwa was leased to Crown City Developers (Pvt) Ltd. by BOI and a Lease Agreement No. 3992 was entered into between BOI and Crown City Developers (Pvt) Ltd.

On 11/09/2000 Crown City Developers (Pvt) Ltd. informed BOI that they have already commenced construction work in the above project and about 100 houses are under construction and requested a letter from BOI assigning the rights stated in the Lease Agreement No.3992 to Central Finance Company Limited.

On 15/09/2000 BOI informed Crown City Developers (Pvt) Ltd. that they could be allowed to mortgage the leasehold rights and interests in the land under Lease Agreement No. 3992 to any Bank or Credit Institution.

On 01/10/2002 a Letter was issued by the BOI requesting Crown City Developers (Pvt) Ltd. to submit a detailed implementation programme and issues which they have faced with non-implementation of the project within a period of 30 days and that failing which the BOI will take action to terminate the Agreement.

On 25/10/2002 Board of the BOI decided to cancel the Agreement entered into between the BOI and Crown City Developers (Pvt) Ltd. since the project has failed to get off the ground and to settle BOI dues amounting to Rs.1,071,905.39 despite several requests.

On 18/06/2004 Crown City Developers (Pvt) Ltd. made a request to extend the Project Implementation Period (PIP) by another 36 Months.

On 13/07/2004 Approval sought was granted by the BOI to Extend the PIP from 13/07/2004. Consequent to the said approval for the extension 1st Supplementary Agreement was entered into between the BOI and Crown City Developers (Pvt) Ltd.  to extend the PIP by 36 months from   13/07/2004.

On 16/03/2005 Crown City Developers (Pvt) Ltd. made a Request to Include additional activities and to change the scope of business to construct 40 houses, a shopping mall, a hyper market, a warehouse & logistics centre with a minimum investment of Rs. 750 Mn. Approval for the said request too was granted on 19/04/2005 by the BOI.

On 06/05/2005, 2nd Supplementary Agreement entered into between the BOI and Crown City Developers (Pvt) Ltd. defining the Project to mean and include : The business for the construction of for sale and/or lease of 40 houses and construction and operation of a shopping mall, a hyper market, a warehouse & logistics centre.

On 15/12/2006 3rd Supplementary Agreement entered into between the BOI and Crown City Developers (Pvt) Ltd.

  1. Lot No.A1 (Extent : A4-R0-P14) –For the construction of houses for sale and/or lease
  2. Lot No. A3 (Extent : A4-R3-P28.50) &

Lot No.A4 (Extent : A7-R1-P35.00)  – For the construction and operation of warehouse and logistic centre/shopping mall and a hyper market

  1. Lot No.A2 (Extent : A1-R3-P29.20)

Lot No.A5 : (Extent : A0-R1-P28.80) – Roads Ways

Total Extent utilized by the Company for the implementation of project on Lot Nos.A1, A3 and A4.

On 28/09/2007 Crown City Developers (Pvt) Ltd. (Abans) Requested to extend the Project Implementation Period (PIP) upto 31/12/2008. The Approval sought by Crown City Developers (Pvt) Ltd. / Abans was again granted by the BOI to extend the Project Implementation Period upto 31/12/2008. A 4th Supplementary Agreement was entered into between the BOI and Crown City Developers (Pvt) Ltd.  to extend the PIP upto 31/12/2008

On 10/04/2008 Crown City Developers (Pvt) Ltd. / Abans made a further request to amend the scope of the business of the Company by way of excluding construction of houses and consequently to construct and operate the project with a shopping mall, a hyper market, a warehouse and logistic centre at Kadolkelewatte, Seeduwa

This Approval too was granted by the BOI to amend the scope of the business of the Company by way of excluding construction of houses and consequently to construct and operate the project with a shopping mall, a hyper market, a warehouse and logistic centre at Kadolkelewatte, Seeduwa

On 30/11/2009 Crown City Developers (Pvt) Ltd. /Abans made a further Request to amend the scope of the business of the Company further by way of excluding for the construction and operation of hyper market and shopping mall at Kadolkelewatte, Seeduwa as the construction of hyper market and shopping mall at present is not feasible due to delay in construction of Colombo – Katunayake Expressway and accordingly the new scope of the business of the Company would be only to operate a warehouse and logistic centre.

This request too was accommodated by the BOI on 04/12/2009 with Approval granted to amend the scope of the business of the Company further by way of excluding for the construction and operation of hyper market and shopping mall at Kadolkelewatte, Seeduwa as the construction of hyper market and shopping mall at present is not feasible due to delay in construction of Colombo – Katunayake Expressway and accordingly the new scope of the business of the Company would be only to operate a warehouse and logistic centre. This was the basis of the assertions of the Crown City Developers (Pvt) Ltd.

On 18/12/2009 BOI urged to release the unutilized portion of the land at Kadolkelewatte to the BOI to enable the Legal Department of BOI to make arrangements to sign the Supplementary Agreement as per several discussions Crown City Developers (Pvt) Ltd. stating that they are not agreeable to release a portion of the land back to the BOI as they intend to expand their project in the near future.

On 09/03/2010 the Legal Department of BOI responded stating that the signing of the Supplementary Agreement could be arranged only after releasing of the unutilized portion of the land leased to Crown City Developers (Pvt) Ltd. in terms of Clause (9) of the Indenture of Lease No.3992 dated 27th July 2000.

On the 17/03/2010 Crown City Developers (Pvt) Ltd./ Abans arrogantly resisted stating that they intend utilizing the entire land in the near future to construct a shopping mall and a hyper market and as such no portion of the land will remain unutilized.

On the 25/03/2010 BOI responded stating that as per the BOI’s letter of 04/12/2009, the new scope of the business of the Company would be only to operate a warehouse and logistic centre on Lot A4 on the land at Kadolkelewatte leased to the Company and reiterating the contents of BOI’s Letter of 09/03/2010.

On the 10/11/2010 for the first time a letter was issued by Crown City Developers (Pvt) Ltd. informing BOI that they do not envisage expansion of other activities in the current location but require to consolidate and expand their logistic and warehousing centre in the said location at Kadolkelewatte.

On 5/01/2011 and 13/01/2011 Crown City Developers (Pvt) Ltd. / Abans requested for an extension upto 2 years to complete only the additional construction of warehousing and logistic centre with other ancillary facilities with an additional investment of 300 Min. under the Main Agreement excluding the construction of 40 houses, hyper market and a shopping mall.

On 26/01/2011 again Approval was granted by the BOI to extend up to 2 years to complete only the additional construction of warehousing and logistic centre with other ancillary facilities with an additional investment of 300 Min. under the Main Agreement excluding the construction of 40 houses, hyper market and a shopping mall.

On 28/02/2011, 5th Supplementary Agreement entered into between the BOI and Crown City Developers (Pvt) Ltd. to extend upto 2 years to complete only the additional construction of warehousing and logistic centre with other ancillary facilities with an additional investment of 300 Min. under the Main Agreement excluding the construction of 40 houses, hyper market and a shopping mall.

On 25/07/2012 Crown City Developers (Pvt) Ltd. / Abans made a Request to construct mezzanine floor & extended facility building within the existing warehousing site. Approval was granted by the BOI to construct mezzanine floor & extended facility building within the existing warehousing site. Consequently the 6th Supplementary Agreement was entered into between the BOI and Crown City Developers (Pvt) Ltd. to construct mezzanine floor & extended facility within the existing warehousing site.

On 07/05/2013 Letter was issued by the Executive Director (Engineering Approvals & Special Projects), BOI urging Crown City to show cause as to why the Lease Agreement should not be cancelled taking away the unutilized leased area.

On 08/05/2013 Crown City Developers (Pvt) Ltd. boldly communicated to the BOI stating that the land is currently being used for parking purposes which is in violation of the purpose for which the supplementary lease agreements were signed by the BOI with so many extensions granted.

On 20/03/2013 Crown City Developers (Pvt) Ltd. makes a further Request to extend the Project Implementation Period. However, this time Approval was granted by the BOI to extend the PIP by a further period of 2 weeks from 10/04/2013 to complete the construction work of the project.

On 14/05/2013 a further Letter was issued by the BOI requesting Crown City Developers (Pvt) Ltd. to submit their proposal for developing the vacant area (Lot Nos.2 & 3) together with its implementation program.

On 24/10/2014 a further Letter was issued from BOI requesting Crown City Developers (Pvt) Ltd. / Abans to submit a proposal for the utilization of the balance unutilized area of land at Kadolkelewatte within 14 days from 24/10/2014.

On 03/11/2014,  Crown City Developers (Pvt) Ltd. / Abans wrote to the BOI stating that they intend to develop the balance area as a Container Yard/Truck Parking Area (5 Acres) capable of providing services to the most discerning clients with laden handlers to cater to both empty and laden requirements and that they plan to construct another 150,000 Sq. Ft. of temperature controlled storage facilities (Cool Room) and the new structure will house an assembly plant for Hero Motorcycles along with warehouse space for customers.

11/03/2015                Notice of Termination was sent by the BOI due to Non-Compliance in respect of the agreement in force.

20/03/2015                Response from Crown City Developers (Pvt) Ltd.

26/03/2015               Letter of Termination issued by the BOI

30/03/2015                Appeal by Crown City Developers (Pvt) Ltd. re. the Termination/Cancellation of the   Agreement

05/08/2015     –         Letter sent by BOI stating that the BOI could consider reviving the Project only to the extent of the utilized land

Consequent to the policy decision taken in February 2015 by BOI to take over lands, reserved and allocated for projects but not utilized for the given purpose within a stipulated period of time the following lands were taken back by BOI, namely:

  1. XYZ Company  premises at KEPZ [Land in Extent of 3.56 Acres];
  2. XYZ Company  premises at SEPZ [Land in Extent of 9.33A];
  3. XYZ Company  premises at WEPZ [Land in Extent of 1.7 Acres]

In addition, action initiated to take over unutilized lands in other Zones such as BEPZ and MEPZ.