SIH transaction: CCoP allows Privatisation Commission to move ahead

ISLAMABAD: The Cabinet Committee on Privatization has allowed the Privatization Commission to proceed ahead for the conclusion of the Services International Hotel (SIH) transaction.

The Ministry of Privatization in a summary informed a recently-held CCoP meeting that on February 4, 2006,a decision was taken to privatise the SIH in a meeting chaired by the then prime minister and it was offered for sale by the Privatisation Commission through a public auction for construction of a 5-star hotel and the sale proceeds were to be distributed between the CCCL (75 percent) and PCBL (25 percent).

Subsequently, a tri-partite agreement was signed among the CCCL, the PCBL and the PC on April 5, 2006, wherein, the parties agreed to the 75/25 ratio of the CCCL and the PCBL respectively, for distribution of sale proceeds.

The property is part of the Lahore Development Authority (LDA) Upper Mall Scheme, which raised the claim of one-third of the sale proceeds for an exemption of their property. The meeting was further told that on August 26, 2021, an open public auction was held, wherein, M/s Faisal Town (Pvt) Ltd submitted the highest bid of Rs1,951,718,500 that was approved by the CCoP in its meeting held on 10th September 2021 and it was ratified by the federal cabinet on 27th October 2021.

The process was successfully completed and the Letter of Acceptance (LOA) was issued on 22nd November 2021 and the buyer deposited the full payment on 6th January 2022.

On 2nd December 2021, the PCBL filed a petition under the Punjab undesirable Cooperative Societies Act 1992, against the PC, the LDA, and the NICL/CCCL with the request to allow otherwise PCBL to sign sale agreement and sale deed as requested by PC. The issue of respective shares of the PCBL, the NICL/CCCL, and the LDA was also raised in the petition by the PCBL, and it is pending adjudication before the cooperative judge of the Lahore High Court, Lahore.

On February 17,2022, a stakeholders’ meeting was held at Lahore, wherein, it was agreed by all parties that sale proceeds will be distributed in the ratio of 75/25 to the NICL and the PCBL respectively, as per the Tripartite Agreement of April 2006 after deducting the PC transaction charges, applicable taxes and the LDA dues. The PCBL was directed to withdraw its adversarial petition and file an advisory application before the cooperative judge of Lahore High Court.

On the directions of the Prime Minister’s Office, the PC presented the details of the SIH transaction to the CCoP in its meeting held on June 24, 2022. The CCoP constituted a sub-committee under the chairmanship of the Minister for Privatisation with representatives from the Finance Division, Law and Justice Division, and secretary Privatisation Commission as members, to review the SIH transaction.

The sub-committee after detailed deliberations decided to conduct a fresh valuation of the property through an independent valuer from the Punjab-based valuers on the Panel-1 list of the Pakistan Banks’ Association.

The valuer submitted its valuation report on 15th August 2022 and assessed the fresh value of Rs1,951,076,000 adopting a market-value approach. The sub-committee after due deliberations concluded that the previous valuation was reasonable at the time the property was auctioned.

The report of the sub-committee was presented before the CCoP in its meetings held on 7th September 2022 and 13th September 2022, wherein, the PC was directed to re-submit the summary to the CCoP after seeking inputs from the Law and Justice Division.

Accordingly, comments were sought from the Ministry of Law and Justice, which suggested that a fresh valuation matter be referred to the Federal Investigation Agency (FIA) to deeply probe and determine that the valuation as per the prevailing market rate and in conformity with the proposed structure for construction. In the meantime, the buyer, M/s Faisal Town (Pvt) Limited also issued a legal notice on 4th October 2022 due to the delay in signing of sale deed, transfer of title, and handing over property to it.

The buyer has now filed a suit for declaration and specific performance in the Islamabad High Court against the PC which is pending adjudication.

The CCoP in its meeting held on December 26, 2022, decided the following which was also ratified by the federal cabinet and directed the Ministry of Privatisation to refer the case to the Law and Justice Division for its review and confirm whether due privatisation process of the SIH was carried out in accordance with prescribed privatisation laws/rules/procedure and submit a report thereon within a week to the CCoP for consideration.

The PC referred the CCoP decision to the Ministry of Law and Justice and the Ministry of Law and Justice reverted to the PC, wherein, it was stated that the record placed on the reference reveals that all the requisite steps/precedes and codal formalities required under the Privatisation Ordinance, 2000 have been complied with.

This Division is therefore of the view that the referring Division may proceed further in the matter, accordingly.

The CCOP was requested to allow the PC to proceed towards a successful conclusion of the SIH transaction with the completion of transfer/mutation process in the name of the purchaser and ratify the decisions made in the stakeholders meeting dated February 17, 2022 that(i) Tripartite agreement of 2006 is valid and binding agreement; (ii) approve LDA claim of one-third of the net sale proceeds and payments and; (iii) and net sale proceeds to be distributed after deducting PC transaction charges and applicable dues.

Copyright Business Recorder, 2023