The CAG Report on the functioning of NOIDA

1. The Performance Audit Report of the Comptroller and Auditor General (CAG) of India on Land Acquisition and Allotment of Properties in NOIDA laid on the floor of the Legislative Assembly of UP in December 2021 is the first Audit report of the C&AG since the jurisdiction of audit of Noida and three other development authorities was entrusted to the C&AG in July 2017.
2. This is the first Audit report of the CAG since the jurisdiction of audit of Noida and other industrial development authorities in UP was entrusted to the CAG in July 2017.
3. The CAG has drawn stakeholders’ attention to the wide-spread corruption, undue favoritism to private firms, arbitrariness, collusion between officials and builders in the functioning of Authority in allotment of plots during the period 2005-2018 leading to loss of thousands of crores of rupees to the Authority/Government, besides causing distress to thousands of homebuyers that has invited severe strictures from Hon. Supreme Court against NOIDA.
4. The CAG has pointed out rigging in bids by several developers/builders in collusion with the officials, major irregularities in processing of applications & allotment, allotment to ineligible parties, leveraging net-worth of an entity for multiple allotments, illegal sub-division of plots/transfer of ownership of allottees without ensuring payment of outstanding dues /timely completion of projects etc.
5. During 2005-06 to 2017-18, NOIDA allotted 2,761 properties measuring 188.34 lakh sqm under Group Housing – 37.72 per cent, Commercial-8.94 per cent, Sports City-17.07 per cent, Institutional-8.14 per cent, Farm House – 9.75 per cent and Industrial-18.38 per cent categories at the premium (cost) of Rs.39,443.41 crore excluding industrial plots cost.
6. NOIDA acquired 80 per cent of land under the Land Acquisition Act, 1894 applicable upto December 2013, providing a standard justification of industrial development for invoking the urgency clause, which enabled the Collector to dispense with the rights of landowners in respect of hearing on objections to proposed land acquisition.
7. Ironically on the one hand, NOIDA Authority claimed urgency in acquisition of land while on the other, made inordinate administrative delays ranging from 11 to 46 months in submission of the final proposals for land acquisition.
8. NOIDA allotted plots for Group Housing, Commercial and Sports city on competitive bid basis (63.73% of allotments) to the highest bidders against fixed Reserve Price (RP) while Institutional, FH and Industrial plots were allotted at the fixed administrative prices based on the interviews conducted by Plot Allotment Committee.
9. Further, Reserve Price of plots for Sports City and fixed price for Farm Houses, Institutional and Industrial purposes was kept significantly lower than the RPs kept for Group Housing or Commercial plots, i.e. after excluding many types of costs which the Authority themselves incur. Thus, NOIDA allotted only 46.66% plots through competitive bidding whereas 53.34 % plots were allocated on subsidised/administrative rates.
10. NOIDA allotted 67 Group Housing plots measuring 71.03 lakh sqm primarily during 2005-2011 at the cost of Rs 14,050.73 crore, which were sub-divided into 113 plots by the allottees with the approval of the Authority. Of these, 71 projects (63 %) were either incomplete or partially completed even after ten years of allotment as on 31.3.2020.
11. The outstanding dues of developers/builders have increased to Rs 18,633.21 crore as of 31^st March 2020, including Rs.7281.89 crores of Unitech Ltd, Rs.2276.67 crore from Amrapali group etc. after ten years of allotment of plots.
12. 49 out of 67 Group Housing plot allotments (73 per cent) were made during the period 2008-09 to 2010-11. In 42 out of 49 allotments, only two bids were received, of which in 15 pairs of applicants (for 15 plots valuing Rs 2611.36 crore), the participating bidders were the same or of the same group. In nine of these cases, one allotment was made to each bidder while in the remaining cases the allotments were made to one bidder. The CAG found that the bid prices in all 15 cases were very close to the Reserve Price fixed by NOIDA (Within 102 percent of the Reserve Price in 12 cases). Collusion between participating bidders could not be ruled out, more so in those cases where alternate allotments were made to each of the participating bidders. Moreover, these allottees did not pay the premium timely and have the dues of Rs1625 crores even after ten years of allotment.
13. The CAG suspected rigging of bids as NOIDA allowed two connected group companies i.e. Assotech Limited and Supertech Limited, to participate as lead members of consortium/company for three plots (GH-93/137 of 51000sqm, GH-04/78 of 61430 sqm and GH-01/74 of 249410 sqm Thus, the sanctity of the tender process was compromised.
14. The CAG brought out allotments of plots to ineligible companies has observed that in two cases, allotment of plots (GH 01 & 02, Sector-143) of more than two lakh sqm worth Rs 471.57 crore was made to Logix group of companies , who failed to even qualify the technical eligibility criteria of a turnover of Rs 200 crore from real estate development activities. In both cases, the turnover of bidder ranged between 52 to 60 percent of required turnover and therefore their bids should have been outright rejected.
15. NOIDA also allotted 3 commercial builder’s plots (A-1/124, C-03/105 and CC-04/32) of 143250 sqm to ineligible three Logix Group companies at the cost of Rs1680.93 crore in 2010-2011 as they failed to meet technical eligibility criterion because their consortiums lacked required minimum turnover of Rs. 200 crore from real estate activities. In addition, NOIDA allotted another much bigger plot of sport city of 225 acre in May 2011 to the ineligible Logix group for 1094 crores.
16. Thus, Logix group of companies with turnover of less than Rs.200 crores from real development activities were allotted 2 GH plots, 3 Commercial builders plots and a Sport city plot at the cost Rs 3246.50 crore during 2010-2011. Logix group had the outstanding dues of Rs 5840 crores as on 31^st March 2020.
17. In another case, Three C (3C) group of companies under the holding company Three C Infra Pvt Ltd, incorporated in July 2009, were allotted 3 GH plots of 3,84,295 sqm of Rs 860.66 crore, 4 Commercial builder’s plots of sqm at the cost of Rs 2095.45 crore and two Sport City plots of 20,32,747.72 sqm (502.29 acre) at the cost of Rs 3428.58 crore. Thus, 3C group of companies were allotted 3 GH plots, 4 Commercial builders plots and 2 Sport city plots at the cost Rs 6384.69 crore during 2010-2014. If this was not enough, a national newspaper has reported that the directors of 3C group of companies and their family members Nirmal Singh, Surpreet Singh Suri, Vidur Bhardwaj and wife Richa Bhardwaj were also allotted 8 farm houses plots of 10,000 sqm each in prime sectors of the Noida city at throw-away prices in 2010-11. The 3C group had the outstanding dues of Rs 4694 crores as on 31^st March 2020.
18. During the period 2005-2018, NOIDA made 320 allotments in the commercial properties including Sport Cities admeasuring 48,98,440.47 sqm at the cost of Rs.25,264 crore through 41 closed ended schemes. It includes allotment of 4 plots for sport city for 33,44,193 sqm (826.34 acre) at the lease premium of Rs 5597.92 crores.
19. Audit found that about 80 per cent of total allotments of commercial plots measuring 39,10,376 sqm were made to only three groups viz. Wave group of companies, 3C group of companies and Logix Group of companies during 2008-2011. Major defaults and deviations against each of these 3 groups and undue benefits extended to them have been detailed by the CAG.
20. The CAG has adversely commented on the allotments made for the Sports Cities in NOIDA area. . In three out of four allotments, plots worth Rs 4,500 crore involving area of more than 25 lakh sqm were allotted to ineligible entities who did not even meet the technical eligibility criteria of stipulated net worth, turnover or past experience.
21. With a vision to hold marquee sports events on the strength of international level sports infrastructure, NOIDA had allotted 4 Sports City plots admeasuring 33,44,193 sqm (826.34 acre) during May 2011-July 2015 at the lease premium of Rs 5597.92 crore to consortiums of Logix group , 3C group and ATS Home Pvt Ltd . In each plot, 70 per cent (578 acres in all) land was reserved for sports infrastructure including three golf courses of nine holes each, an international level cricket stadium along with tennis courts, swimming pools and other sports facilities. The terms and conditions of the allotment prescribed that sports infrastructure would be completed on priority and residential and commercial projects in the remaining 30 % plot would be completed in phases thereafter.
22. The allottees of the Sports City plots failed to develop the sporting infrastructure as envisaged by NOIDA, thereby defeating the whole concept of Sports City. Audit further analysed and noted that the developers did not take any initiative in developing the sporting infrastructure despite huge leverage given to them in pricing of the Sports City plots as discussed below:
    • The RP for the Sports City plots were fixed by taking a weighted average of the rates for the three categories of land uses viz. GH, commercial and recreational. In this fixation, the price for recreational land was calculated afresh by the Authority excluding the costs related to internal development, maintenance, future maintenance cost and interest cost. Thus, the rates of recreational land were kept on much lower side. Even the costs incurred by Authority were not recovered on 70 per cent of land in Sports Cities.
    • In order to incentivise the development of sports infrastructure by builders, the terms and conditions of the brochure provided a feature of fungible Floor Area Ratio (FAR) and Ground Coverage (GC), which allowed a total FAR of 1.5 (2010-11 scheme) and 2 (2014-15 & 2015-16 schemes) and GC of 30 per cent on the whole plot. In this connection, it is pertinent to mention that FAR of only 0.40 was allowable on recreational area as per Building Regulations. This extra FAR was allowed without any additional charge. After utilising the FAR and GC on sports and recreational categories, the remaining FAR and GC was allowed to be used for GH and commercial categories. Accordingly, the effective FAR and GC for GH/Commercial areas against the permitted FAR of 2.75 & 3.5 and GC 40 per cent as per prevailing Building Regulations ranged between 4.14 to 6 and 53 per cent to 55 per cent.
23. Thus, the CAG has determined that NOIDA had given a significant incentive of Rs.8,643.61 crore in terms of reduced pricing and allowance of extra FAR and GC to the developers for development of sporting infrastructure against the payment of Rs.5598 crores made by them for 33,44,193 sqm of land. Audit noted that after considering the development of GH/Commercial projects and the absence of corresponding development of sports infrastructure, the above incentive tantamounts to undue benefit of Rs.8,643.61 crore to three developers in respect of the four Sports City plots. NOIDA, while allowing the builders to pursue GH projects, abdicated its total responsibility towards completion of envisioned sports infrastructure.
24. Late Ponty Chadha group companies – Wave Infratech Ltd and Flora & Fauna Land Development Pvt Ltd were also allotted prime commercial properties/builders plots of 6,63,104 sqm (42 percent Builder plots of all commercial allotments) at the cost of Rs 6570 crores in heart of Noida (Sector 25A/32 sectors) in 2010-2011. However, most of these projects were not completed and they have either surrendered the land (454131.63 sqm) in December 2016 or the Authority has cancelled (108421.13 sqm) the allotment (February 2021) due to non-payment of the dues/installments. Wave Group of Companies had the dues of Rs.4425 crore as of 31^st March 2020.
25. Under the first sports city scheme, newly created the lessee Xanadu Estate Private Limited (DOI-10^th March 2011), a subsidiary of 3C group was required to spend Rs.410 crore mandatorily on sports infrastructure. Logix group and 3C group ` were required to complete the project in phases within five years from the date of execution of lease deed. Logix group was required to complete the construction of the international level cricket stadium in the first phase within three years and the remaining residential and commercial projects within five years from the date of execution of the lease deed.
26. The CAG has pointed out that plots for Sports Cities were allotted without preliminary consultation with national/international bodies and without fixing and prescribing the technical specifications etc required for different sports infrastructure -golf course, international level cricket stadium, Tennis centre, Multi-purpose Sports Hall for Gymnasium, Volleyball, TT, Basket Ball etc. They also didn’t do any due-diligence and analysed the reasonableness of the rates/bids quoted by the allottees. It was therefore no wonder that none of the envisioned sports infrastructure have been completed in last ten years though the construction of sports infrastructure was to be given priority in Sport City and completed first and only afterwards, other residential and commercial projects were to be taken up. However, the allottees took up the GH projects fist and two residential projects have not only been taken up but completed or partially completed
27. Though the terms and conditions prescribed in Brochures permitted sub-division of the plots meant for only residential and commercial use (30% of the port city plots), the Authority allowed sub-division of the entire plot (826 acres) of the 4 sport city projects into 81 sub-plots thereby destroying the entire concept of development of integrated Sport City.
28. The 578 acres of land earmarked for sport infrastructure in 4 sport cities was too sub-divided into 34 sub plots, thereby making the objectives of Integrated Sports infrastructure like nine hole golf course in three sport cities in sectors-78/79 and 150, international cricket stadium in Plot SC-02 in sector 150, unachievable.
29. Further, the CAG has determined that NOIDA had given significant incentives of Rs 8,643.61 crore in terms of reduced pricing of plots and allowance of extra Floor Area Ratio (FAR) and Ground Coverage (GC) to the 3 real estate developers for development of sporting infrastructure as against the payment of Rs 5598 crores made for 33, 44, 193 sqm (826 acres) of land.
30. Incidentally, most directors of all 4 SPCs at the time of allotment have since resigned and left. The decision of the Noida Authority to approve the use of increased FAR of the entire area of the sport city in residential/ commercial projects of allottees/sub-allottees without ensuring the construction of integrated sport infrastructure in 70 % area of each Sport city project is injudicious and highly improper. It would affect the future prospects of the home buyers of these residential projects as their flats can not be registered unless envisioned integrated sport infrastructure in 70 % area of each sport city project.
31. Keeping in view the ongoing development of group housing projects vis-vis little progress observed in development of sports infrastructure in these Projects in last ten years, it would tantamount to providing undue benefit of Rs.8,643.61 crore to these three developers. NOIDA, while allowing the builders to pursue group housing projects, abdicated its total responsibility towards completion of envisioned sports infrastructure.
32. Thus, the world class sports infrastructure envisioned by the Board in 2007 for holding national and international sports events failed to materialise even after a decade. Though the main objectives of establishment of sports city have not been achieved, these developers have grabbed nearly 800 acres of prime land in the city at one-third of the market rate.
33. The CAG Report has unearthed some facts that require immediate attention of UP RERA to safeguard the interests of homebuyers. RERA has not taken cognizance of caveats attached to land use of Sports City plots, endangering the interests of homebuyers. UP RERA has registered residential and commercial projects[1] of the allottees/sub-allottees without noting the limitations on the use of 70 percent of plot of land for sports infrastructure as mentioned in the lease agreement executed by the NOIDA. As none of the major Sport infrastructure has been undertaken till date and none of the 9 hole golf courses and International Level Cricket Stadium are likely to be completed in near future, the homebuyers of those residential projects being constructed are likely to face issues in getting their flats registered.
34. Incidentally, most directors of 4 SPCs have since resigned and left. The decision of the Noida to approve the use of increased FAR of the entire area of the sport city in residential/ commercial projects of 81 allottees/sub-allottees without ensuring the construction of integrated sport infrastructure in 70 % area of each Sport city project is injudicious and highly improper. It would affect the future prospects of the home buyers of these residential projects as their flats may not be registered unless envisioned integrated sport infrastructure in 70 % area of each sport city project is completed.
35. Discretionary allotment of Farm Houses at prime locations on throwaway prices has been questioned by the CAG.
36. In 2009-2011, NOIDA allotted 157 plots for farm houses of 10,000 sqm each aggregating 18,37,340 sqm in prime sectors of Noida at one-fifth of market rates in an arbitrary and discretionary manner mostly to big business houses, influential real estate developers/ builders, politicians, prominent lawyers and their family members without following any transparent bidding process under schemes which did not have any objective criterion for selection of the beneficiaries. Many companies, their directors, family members etc. cornered multiple plots at throwaway prices. There was no bidding and selection of allottees was done based on an “interview” by a committee.
37. The CAG has pointed out following cases of multiple allotments :

• Allotment of 11 plots (FH -3 & FH-19/164, FH-4 & FH-18/164, FH-2 & Fh-20/164, FH-5/164, FH-6/164, FH-17/164 and FH-1 & FH-20/165) was made on 30 March 2011 to the companies/entities of the same group (Anil Kumar and Company).
• Allotment of four plots (FH-2, 3, 4, 5 sector 131) was made on 27 July 2009 to a group of companies with the same promoter/director (Rajiv Kumar).
• Allotment of seven plots (FH-15 & FH-18/128, FH-25 & FH-26/128, FH-27, FH-28 & FH-29/128) was made on 30 October 2009 to four companies of the same promoters (Sanjeev J Aeren and Sunita S Aeren).
• Allotment of seven plots ( FH-16 & FH-17/128, FH-11 & FH 22/128, FH-23, FH-24 & FH-33/128 was made (two on 26 March 2010 and five on 30 October 2009) to three companies of same promoters (Ankur Chadha and Geetu Arora).
• In two cases it was observed that four plots ( FH-11 & FH-22/128, FH-12 & FH-21/128) of sector 128 of two companies allotted on 30 October 2009 were transferred to the same individual, Smt. Vichitra Lata, on 28 September 2010.

37. The CAG has stated that multiple allotments to applicants on a single date were given and front companies were used for allotment of plots through different applications. There is evidence of dereliction of duty by the members of the PAC whereby fraudulent actions have been permitted by the officials of NOIDA.
38. Thus, the land of farmers acquired at lower rate, invoking the urgency clause for industrial development was allotted on discretionary basis to affluent and influential individuals/companies for their personal/leisure use at a highly subsidised rate.
39. CAG also highlighted undue favour given by NOIDA to private firms. NOIDA allotted 134 plots ranging from 1000-5000 sqm each, covering an area of 2,41,072 sqm at the rate of Rs.7800 per sqm for the corporate offices of the private companies/firms in 2008-09 treating them as Institutions rather than commercial, profit-making firms. As these companies are run on commercial basis with profit motive, they should pay for the plot of land @ commercial rate. In fact, NOIDA used to charge commercial rate from them earlier. However, the Authority changed the status of these commercial companies to Institutional in October 2008 thereby giving undue benefit of Rs 6600 per sqm to these private companies.
40. Therefore, the decision of NOIDA to change the status of Private Companies to Institutional category was injudicious, selective and without basis. Thus, the land of farmers acquired at lower rate, invoking the urgency clause for industrial development was allotted at a highly subsidised rate on discretionary basis, thereby affording undue benefits of Rs 161.75 crore to 134 Private companies.
41. NOIDA kept relaxing[2] the eligibility conditions for consortium bidding from time to time, which led to financially weaker companies, who were ineligible and had not participated in bidding process, garnering bigger plots disproportionate to their capabilities. As a result, large plots allotted to qualified bidders were sub-divided between developers without any basis including to those who would have ab-initio not qualified to execute the project. As a result, numerous projects were lying incomplete causing untold distress to homebuyers who had invested their entire lifesavings in such projects and accumulation of huge debts towards the Authority.
42. NOIDA allowed transfer of sub-divided plots to third parties which further weakened the commitment of the builders to complete the projects. As a result, the 67 allotments made by NOIDA from 2005-06 to 2016-17 have been sub-divided into 113 properties.
43. The CAG has pointed out that in 12 cases, the allotted plots were sub-divided into 32 plots. Out of the 32 plots, in 24 cases the value of the sub-divided plots exceeded the net worth of the sub-lessees.
44. It is thus, evident that NOIDA’s decision to allow sub-division of plots without having any regulatory mechanism in place to ensure completion of projects, served effectively only as a backdoor entry for transfer of valuable property into the hands of ineligible builders.
45. Illegal Sale of plots (Transfers) through Change in Shareholding of Allottees was objected by Audit. NOIDA imposed charges for Change in Shareholding (CIS) of allottees in proportion to changes in shareholding pattern of the companies. NOIDA issued an office order on 27 October 2010 abolishing the CIS charges and the requirement of deed for registering changes in shareholding pattern of a company as it was stated that the changes in shareholding could not be considered as transfer of property of a company. This order was ostensibly based on GoUP order (11 October 2010). This order facilitated the allottee company to transfer the plot in favour of another set of shareholders, without any charges, who otherwise may not have been qualified for the allotment of plot.
46. The said order of GoUP was rescinded on 04 February 2020 after initial audit memos were issued to them, to stop tax evasion through this route.
47. There were instances of grabbing plots through web of subsidiaries/shell companies. Noida allotted a GH plot (GH-03/143) measuring 1,00,166.30 sqm to a consortium having Silverado Estates Private Limited (SEPL) as Lead Member and five Relevant Members in June 2011 for Rs 236.09 Crores. On 06 July 2011, the Authority granted permission for sub-division of the plot to two sub-allottees led by SPCs namely Three C Estates Pvt Ltd and Kindle Infra Heights Pvt Ltd both subsidiaries of Three C Universal Developers Pvt Ltd.
48. Fresh Allotments were made inspite of outstanding dues. The CAG has pointed out that NOIDA continued to make allotments despite knowing that the allottees had been defaulting in making payments in cases of previous allotments made to them. In a test check conducted, it was found that the officials of the Authority apparently connived and colluded with the allottees while making allotments to Amrapali and Unitech group of companies for the plots of land in Sectors 76, 120 and 144 during 2009-2011 even when there were significant outstanding dues against them. It was therefore no wonder that many if not the most projects of these allottees remain incomplete and there are thousands of crores of outstanding dues even after ten years of allotment. In its response, the State Government agreed (September 2020) to investigate and fixed responsibilities on those found responsible for omissions.
49. Mortgage permissions were granted even to defaulting allottees having outstanding dues. As per Rules, allottee of commercial plots can mortgage the property after making full and final payment and upto date lease rent. Audit observed that in 65 out of 76 cases where allotments had been made before 01 April 2010 (ten years prior to 31 March 2020), there were amounts outstanding against the allottees. Against the allotment value of Rs 9,302.22 crore, the outstanding amount was Rs14,817.89 crore (as on 31 March 2020). Thus, NOIDA had failed to take action against the builders even after lapse of the tenure of ten years for payment and in the meanwhile, the outstanding amount has increased substantially.
50. Discretionary allotments of Farm Houses were made at prime locations at throwaway prices. In 2009-2011, NOIDA allotted 157 plots for farm houses of 10,000 sqm each aggregating 18,37,340 sqm in prime sectors of NOIDA at one-fifth of market rates in an arbitrary manner mostly to big business houses, large real estate developers/builders, politicians, prominent lawyers and their family members without following any transparent bidding process under schemes which did not have any objective criterion. Several companies, their directors, family members etc cornered multiple plots at throwaway prices based on the recommendations of the Plot allotment committee (PAC) constituted by the Noida Authority. The C&AG has stated that multiple allotments to applicants on a single date were given and front companies were used for allotment of plots through different applications. There is evidence of dereliction of duty by the members of the PAC whereby fraudulent actions have been permitted by the officials of NOIDA.

[1] Ace Starlit of Star Landcraft Pvt Ltd; Lotus Yardscape Phase-1 of Three  C Green Developers Pvt Ltd; ATS Pictureshque Phase-1 &2 of ATS Home Pvt Ltd, NeoWorld Phase 1 & 2 of Logix Infradevelopers Pvt Ltd

[2] Share of the single largest shareholder, tenure of the Lead Member’s shareholding etc

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