NAB ignoring lapses on part of DHA management

DHA City scam

ISLAMABAD: Although the National Accountability Bureau (NAB) has proceeded against the private parties involved in the DHA City (Lahore) scam, no action has been taken against the Defence Housing Authority (DHA) management against whom the Bureau also received innumerable complaints in the same case.

Sources in NAB said the Bureau has ignored the lapses and wrongs of the DHA management which resulted in the present situation. It is said that while one of the parties involved in the agreement is at the receiving end there are no questions being asked by NAB about the DHA’s decision-making, its oversight mechanism and role of the Authority’s boards and executive committees.

During recent years, the DHA has been involved in different controversies of a serious nature and at least there are four DHA cases included in the list of 150 plus mega scandals of NAB as produced before the Supreme Court. “The DHA management is acting as if it is a schoolgirl with whom every second person is committing fraud,” the sources said.

In the DHA City scam, the arrested accused and Chief Executive Officer of Orange Holding (Pvt) Ltd Hammad Arshad had told NAB in writing before his arrest that the agreement between the two parties had the in-principle approval of GHQ and approval of the secretary defence and commander IV Corps Lahore.

In a detailed letter written to the NAB chairman weeks before his arrest, Hammad Arshad though offered different options to settle the dispute, and pointed out that the NAB inquiry did not consider the violations and defaults of the DHA.

He said that his company had entered into a contract with the DHA for developing a real estate project on 25,000 kanals. He pointed out that all DHA presidents have remained intimately involved in the supervision of this project. As an example, he quoted, “Initially royalty of 1.3 lac per kanal was agreed which was enhanced o 1.4 lac at the time of signing of the MoU at the desire of the then DHA president.”

The letter added that the project was conceived that 100 percent investment and sweat will be of Orange Holdings whereas the DHA will be entitled to a monetary benefit for lending its intellectual property and the legal standing of the Authority with zero investment. He added that the legal standing was that the DHA approves and regulates its own projects; whenever land is transferred, it issues files which are legally saleable irrespective of whether the land is contiguous or has access etc.

Regarding the contract model, the letter said that the Orange Holdings transfers land to the DHA. In return, the DHA issues allocation letters in the name of Orange in an agreed ratio which Orange is at liberty to dispose of whereas the DHA will be entitled to a royalty of 1.4 lac per gross canal payable from sales and 30 percent residential plots to be sold to the DHA at concessional rates.

The Orange CEO, now the main accused in the scam, told the NAB chairman that the project was launched with great fanfare with the media budget alone exceeding Rs200 million in June 2010. He said the project was launched by the DHA without paying the down payment agreed for the 30 percent concessionary plots.

Orange took up the matter with the DHA management but the matter got delayed. “From time to time, as the management of DHA changed, DHA kept coming up with new ideas which Orange kept on agreeing in the spirit of cooperation and in the larger public interest.”

It was also highlighted that since in the market launch only land charges were being recovered from the applicants, Orange requested the DHA that a Development Reserve Account wasn’t required through letter dated July 28, 2010, but no response was received to date.

It added, “10% funds in the land reserve account were to be released and account to be closed once land required for files of first launch were completed as per Clause 2 & 3 of the MoU dated June 8, 2010.” 

Hammad said that this requirement was completed on June 30, 2011, but the DHA refused to abide by the agreed procedure. 

Due to delays on the part of the DHA, the letter said, certain changes were made in the agreement. He claimed that Orange kept transferring land to the DHA but in mid 2012 two important developments took place. As per contract, the DHA was obligated to issue allocation letters within five days of the land transfer. The DHA issued the last batch of allocation letters to Orange on March 8, 2012 and halted issuance of further allocation letters.

“Since 8th March 2012, around 4,000 kanals has been transferred to DHA but no allocation letters have been issued by DHA.” 

About the second development, the letter said, “On June 6, 2012, City District Government Lahore (CDGL) issued a letter requiring all public and private housing schemes to first get NoC from CDGL.” The letter further instructed sub registrars and Patwaris to not enter any mutations without an NoC.”

These two developments significantly hampered Orange’s ability and it requested the DHA many times to secure the required NoC and issue pending allocation letters. “In hindsight, it seems that DHA might have become worried about securing the NoC and didn’t want to increase its liability by fulfilling its obligations under the contract and issue further allocation letters to Orange.”

The letter said that while Orange was fulfilling its commitments, DHA kept on changing its position and most importantly DHA failed to secure an NoC from the government.

The NAB accused said that while the DHA delays were leading Orange delays, the latter filed a suit in a civil court on December 21, 2013, which directed parties to follow joint bank instructions. This enabled Orange to transfer 1,433 kanals on Jan 29, 2014 to the DHA, which blocked further transfer by cancelling authority letters in favour of Orange and instructed Orange in writing not to further purchase land for the project.

The NAB chairman was told that the DHA management (complainant) has approached the Bureau not because it has suffered a loss but because it wants to increase its profit in the project. “The complainant’s goal is to take over the project through NAB and usurp the share of Orange guaranteed under the contract. It is pertinent to point out that to-date the DHA has received more than Rs834 million against royalty without investing a single penny or providing a single marla of land in the project with a total expected benefit of around Rs40 billion from this project.”

Despite the alleged violations of the contract on the part of the DHA management, the Orange CEO had offered four options for an amicable settlement to NAB Lahore. These options were (i) the DHA and Orange jointly complete the project, (ii) DHA takes over the project, (iii) Orange takes over the project, and (iv) Orange undertakes project on land under the Eden brand.