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SC Declares Royal Palm Lease Deed Null And Void

Supreme Court on Friday declared void ab-initio the lease deed granted in favour of the Royal Palm management led by the Husnain Construction Group in 2001. The possession of the land along with all assets and infrastructure is to be handed over to the Pakistan Railways forthwith.

Pakistan Railways has to run the existing facility through its officials or a team of independent professionals till the lease for facility is auctioned in a transparent manner through an international tender in accordance with the law. An Implementation Bench set up by the apex court shall receive weekly progress reports from the Pakistan Railways.

Arguments on behalf of Pakistan Railways as well as the Husnain Construction Group were finally heard on 11.04.2019 when judgment was reserved. The reserved judgment was announced today, on 28.06.2019. The facts that have resulted in the Supreme Court determination that the original lease granted in 2001 was fundamentally tainted may be summarized as follows:

Railway property measuring 103 acres was advertised in the year 2000 for the establishment of golf club by a private sector lessee. The various terms conditions that were to apply to the lease, including the tenure of 33 years, were made known prior to the bidding date. Various interested parties dropped out of the process after assessing the terms and conditions as well as the area that was offered for lease. Eventually only two parties participated in the bidding and the Husnain Construction Group led consortium was declared successful.

Surprisingly, the Implementation Agreement that was executed with the Husnain Construction Group led consortium on 26.07.2001 contained fundamental departures from the terms and conditions on the basis of which bids were invited. Most significantly, these departures included enhancement of the lease area to 141 acres as opposed to the advertised 103 Acres.

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The term of the lease was also enhanced to 49 years. The revenue sharing arrangement that was fundamental to the lease was amended to exclude the revenue from the sale of food and beverages at the premises. The extra land that was surreptitiously included in the lease area allowed the setting up of multiple marriage halls and other spaces for the holding of functions with huge sales of food and beverage. The clause contained in the Implementation Agreement that excluded the sharing of the food and beverage revenue exposed the mala fides behind the entire deal.

During the hearing on April 11, Salman Akram Raja, ASC appeared on behalf of Pakistan Railways and relied before the SC on a long line of judgments holding that material departures from the terms offered for the sale or lease of state property through auction render the transaction void and non est. This position has been accepted by the court.

The Husnain Construction Group and the Royal Palm management were represented by Waseem Sajjad, Aitzaz Ahsan and Ali Zafar. Earlier, Makhdoom Ali Khan, ASC had also appeared on behalf of the Royal Palm management.

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