Report of the Comptroller and Auditor General of India Performance Audit on Government land given on lease Government of Maharashtra Report No. 5 of the year 2013 REPORT OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA PERFORMANCE AUDIT ON GOVERNMENT LAND GIVEN ON LEASE FOR THE YEAR ENDED 31 MARCH 2012 GOVERNMENT OF MAHARASHTRA (REPORT NO. 5 OF THE YEAR 2013) www.cag.gov.in TABLE OF CONTENTS PARAGRAPH HEADINGS PARA PAGE Preface v Executive Summary vi-xi CHAPTER I INTRODUCTION General 1.1 1 Organisational set up 1.2 1 Audit objectives 1.3 2 Audit criteria 1.4 2 Definitions 1.5 3 Procedure of allotment in the Collectorates 1.6 3 Scope and methodology of Audit 1.7 3 Audit constraints 1.8 4 Acknowledgement 1.9 5 CHAPTER II GENERAL OBSERVATIONS Incorrect maintenance of lease records 2.1 6 Non-uniformity of norms for the leasing of land 2.2 6 Lack of transparency in grant of leases of Government 2.3 7 land Preparation of model lease agreement 2.4 8 Implementation of MLR Code 2.5 8 Non-renewal of expired lease cases 2.5.1 8 Absence of provisions in the MLR Code for levy of 2.5.2 9 premium (unearned income) for regularisation of breaches Recovery of lease rent, etc. through Government 2.5.3 11 Resolutions, etc. without drawing reference to MLR Code Non-revision of lease rent 2.6 11 Monitoring and control 2.7 12 Internal control 2.7.1 12 i Performance Audit Report on Government land given on lease PARAGRAPH HEADINGS PARA PAGE Internal Audit 2.7.2 14 Land revenue 2.8 14 Trend of revenue 2.8.1 14 Arrears of land revenue 2.8.2 15 Non-recovery of amount relating to lessor's interests 2.9 16 Instructions to local bodies to curb lessees from 2.10 16 misuse of Government land CHAPTER III COLLECTOR, MUMBAI CITY Non-execution/registration of lease deed 3.1 18 Incorrect application of Annual Schedule of Rates 3.2 19 Breach of lease agreements 3.3 19 Unauthorised auction of lease land belonging to 3.3.1 19 Collectorate to M/s Jainam Construction by MCGM Lease of land to M/s Eastern Chemical Co. Ltd. 3.3.2 20 Lease of land to Maharashtra Rajya Sahakari Sakhar 3.3.3 22 Karkhana Sangh Ltd. Lease of land to MTDC 3.3.4 23 Grant of building on sub lease by Ayurved Prachar 3.3.5 23 Sanstha Failure to take action against encroachment 3.4 24 Lease of foreshore land 3.4.1 24 Land leased to Mumbai Gymkhana 3.4.2 25 Non-recovery of lease rent 3.5 26 Lease of land to Sportsfield Co-operative Housing 3.5.1 26 Society Lease of land to Foreshore Co-operative Housing 3.5.2 27 Society CHAPTER IV COLLECTOR, MUMBAI SUBURBAN DISTRICT Grant of land on lease despite non-fulfilment of 4.1 28 mandatory conditions ii Table of Contents PARAGRAPH HEADINGS PARA PAGE Non-resumption of land on lease despite repeated 4.2 28 violations/breaches Encroachment on land 4.3 37 Non-revision of premium for utilisation of TDR 4.4.1 38 Short levy of premium (unearned income) 4.4.2 39 Recovery of licence fee for functions organised in 4.4.3 40 Gymkhana - regarding Non-fixation of lease rent 4.4.4 41 CHAPTER V COLLECTOR, PUNE Grant of land on lease without fulfillment of 5.1 42 mandatory conditions for education purpose Non-execution of lease agreement 5.2 43 Non-utilisation of land for the purpose of education 5.3 44 Utilisation of land for other than the allotted purpose 5.4 46 Unauthorised transfer of flats/plots 5.5 46 Other irregularities 5.6 47 CHAPTER VI MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY Acts and Rules 6.1 50 Organisational set up 6.2 50 System of allotment 6.3 50 Non-recovery of lease premium, lease rent, etc. 6.4 51 Monitoring and control 6.5 55 Failure to invoke Bank Guarantee 6.5.1 55 Irregular amalgamation of area leading to increase in 6.5.2 55 size of flats CHAPTER VII MAHARASHTRA HOUSING AND AREA DEVELOPMENT AUTHORITY Organisational set up 7.1 57 iii Performance Audit Report on Government land given on lease PARAGRAPH HEADINGS PARA PAGE System of allotment 7.2 57 Non-resumption of land 7.3 58 Violations of Act/Rules 7.4 59 Allotment of land in violation of regulations 7.4.1 59 Delay in execution of lease agreement in violation of 7.4.2 60 the provision of Act/Rules Lease premium, lease rent, etc. 7.5 60 Non-levy of interest on delayed payment 7.5.1 60 Short levy of lease premium 7.5.2 61 Non-recovery of lease rent 7.5.3 61 CHAPTER VIII MUNICIPAL CORPORATION OF GREATER MUMBAI Organisational set up 8.1 63 System of allotment 8.2 63 Non-resumption of land 8.2.1 64 Non-utilisation of land and non-execution of lease 8.2.2 64 agreements Financial gain made by lessees 8.2.3 64 Encroachment 8.3 65 Breach of conditions and encroachment of 8.3.1 65 Government land Lease rent 8.4 66 Non-finalisation of the rate of lease rent 8.4.1 66 Non-recovery of arrears of lease rent 8.4.2 66 CHAPTER-IX: CONCLUSIONS AND RECOMMENDATIONS Conclusions 9.1 68 Recommendations 9.2 68 APPENDICES 73-96 iv PREFACE This Report of the Comptroller and Auditor General of India containing the performance of the Government land given on lease has been prepared for submission to the Governor under Article 151(2) of the Constitution. The audit of the receipts of the State Governments and that of accounts of corporations and local bodies is conducted under Sections 16, 19(3) and 20(1) of the &RPSWUROOHUDQG$XGLWRU*HQHUDO¶V 'XWLHV3RZHUVDQG&RQGLWLRQVRI Service) Act, 1971. The audit was conducted between May 2012 and September 2012 through a test check of records of the Collectors at Mumbai City, Mumbai Suburban, Pune and development agencies viz. Mumbai Metropolitan Region Development Authority, Maharashtra Housing and Area Development Authority, Municipal Corporation of Greater Mumbai and Municipal Corporation of Pune. v EXECUTIVE SUMMARY Land is a premium asset and an important resource which contributes significantly to the economy of the State. Government lands not required for immediate use are given on lease to various individuals/institutions for various purposes such as residential, industrial, commercial and others. The leased lands also enable the Government to augment their revenue by levy of lease rent, premium/unearned income for change in use of the leased lands, development charges, transfer charges, etc. The Government leases the land for various purposes such as agricultural, residential, industrial, commercial, social, etc. In Maharashtra the land is allotted through the Collectors and development agencies such as Municipal Corporation of Greater Mumbai (MCGM), Pune Municipal Corporation (PMC), Maharashtra Housing and Area Development Authority (MHADA) and Mumbai Metropolitan Region Development Authority (MMRDA) dealing with Government land. Government land is granted either on lease basis or on occupancy price. Major findings during the course of Performance Audit on the lands leased by the Collectors and other development agencies are as follows: Chapter II: General observations x The data on leased land was not complete in the Collectorates. (Paragraph 2.1) x There was no uniformity in the procedures for allotment of land among the Collectorates and the development agencies. (Paragraph 2.2) x There was lack of transparency in grant of land on lease as publicity through advertisement in newspapers, etc., was not resorted to. (Paragraph 2.3) x Information received from the Collectorates at Mumbai City, Mumbai Suburban and Pune revealed that out of 1,766 lease cases, 757 leases had expired between 1940 and 2008; while in MCGM in 17 cases leases had expired. No action was taken for their renewal or eviction from leased land. (Paragraph 2.5.1) x Though Section 53 of MLR Code provides for eviction of the lessee after giving reasonable opportunity of being heard in case of breach of conditions of lease, the Department was regularising the breach by levying premium/unearned income as per the Government Resolution (GR) issued in November 1957 which was incorrect. (Paragraph 2.5.2) x Recoveries of various components of land revenue such as unearned income/premium, lease rent, additional lease rent, redevelopment charges, transfer charges were being effected through executive orders vii Executive Summary (GRs and memoranda) and the GRs and memoranda are issued without drawing reference to the codal provisions. (Paragraph 2.5.3) x GR of October 1999 provides for levy of revised lease rent on the basis of market value of land. Aggrieved by this GR, the lessees approached the Mumbai High Court claiming the revised lease rent to be high. The Court laid down certain parameters for fixing the lease rent in August 2004. However, even after a lapse of eight years no action for revision of lease rent had been taken. (Paragraph 2.6) x Monitoring, co-ordination and internal control measures were inadequate in the Collectorates as inspection of leased lands to ensure compliance to the conditions of lease as well as utility of land for the allotted purpose was lacking. Even in cases where breaches were detected, follow up mechanism was absent due to which action was not taken to its logical conclusion for evicting the erring lessees as provided in the MLR Code.