Why did the court agree to Bahria Town's settlement offer?

Schemes of this nature establish their legality through non-compliance in order to enforce formal recognition.
Updated 09 Apr, 2019 08:26pm

Last year, in a 2-1 majority decision, the three-member bench of the Supreme Court ruled against Bahria Town.

The apex court held that the grant of land by the Sindh Board of Revenue to the Malir Development Authority (MDA), and the MDA's subsequent exchange of land with Bahria Town for the Malir District Housing Project (Project), were all illegal and a result of collusion amongst all stakeholders.

Nonetheless, the apex court ruled that “since a great deal of work has been done by the Bahria Town and a third-party interest has been created in favour of hundreds of allotees [sic] [for the Project], the land could be granted to the Bahria Town afresh” through revised terms and conditions.

This year, the apex court accepted Bahria Town’s offer of Rs460 billion as payment for 16,896 acres it illegally acquired for the Project. Critics have rightly pointed out that the settlement is not a fair reflection of the market value of land allotted.

What happened and why?

It is evident that the development of the Project was always the end-game, and the means to accomplish it (legal transfers) were a mere afterthought, hence why the legal processes underlying the transfers were fraught with procedural lapses, along with blatant disregard for the law.

This whole incident is not novel, though. Often times, the legal framework is too cumbersome, regressive and even antithetical to a developer’s imminent drive for commercial gain.

In this case, the MDA was prohibited under the law from transferring the land, as the land granted to the MDA under the provisions of the Colonization of Government Lands Act, 1912 was in tenancy only.

The legislative rationale of MDA’s tenancy was that the land granted on lease by the government would become a perpetual source of income for the MDA, without loss of title. Instead, MDA “exchanged it with Bahria Town through its henchmen” at great financial loss to itself.

Editorial: Reprieve for Bahria Town

In the case of the Project, under the existing laws, the developer was at best empowered to coordinate with the MDA to launch an “incremental housing scheme” to facilitate low-middle income residents.

The developer would have had little autonomy, insignificant title/ownership and incentive to launch a massive commercial venture under the existing regulatory laws.

So what happened instead? The developer launched a housing scheme and started development work before even purchasing lands from the MDA (implied terms existed beforehand).

Subsequently, the MDA gave away its land to the developer at a favourable rate to the latter, and so began the development of commercial plots, under the thin veil of a “public purpose” (acquisition of land for developing a township or residential or commercial plots is a public purpose, as per the apex court).

The stakeholders realised, either consciously or subconsciously, that there simply did not exist favourable development laws to facilitate the Project, and the state lacked familiarity with both business and law-making to make the Project on the terms and conditions that benefitted the developer.

Facts on the ground

This all led to fait accompli: which is when a thing has already happened or been decided before those affected hear about it, leaving them with no option but to accept it (the apex court acknowledged that the same happened here).

Development schemes of this nature often attempt to establish their legality through a series of non-compliances and eventual adaption to the law in order to ultimately enforce formal recognition by the latter.

Who suffers? Private landowners, for one.

Since the whole Project has become institutionalised, any private owner wanting to challenge it will have little bargaining power, and legal rights to challenge would be fraught with legal, administrative, security-related and monetary challenges.

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Also, state organs suffer, not only because of losing their writ, but also because the whole Project has led to a "colossal financial loss to MDA", since the MDA has no title, ownership or interest left anymore and had it all exchanged for a paltry price.

The doctrine of fait accompli for wanton land acquisition extends universally, albeit more so with state actors. The United States’ federal government taking Native American lands as recently as 1949 was presented to the tribes as fait accompli as engineers began to construct dams before opening formal negotiations with tribal leaders.

Consequently, the tribes realised that resistance was futile and resigned themselves to making the most of whatever menial compensation was offered.

The International Court of Justice has also analogised Israel’s actions of constructing walls within settlements as creating a “'fait accompli' on the ground that could well become permanent.”

Market as true arbiter?

The idea that “market price” becomes a flagbearer for a standard of restitution is inherently flawed, as these kinds of lands are seldom assessed, exchanged or valued, therefore there is no real “market price.”

Records are often hampered, as records of sales and purchases of lands and registers of title are not kept accurate or up to date.

Furthermore, the assessment of the settlement can be a process that is adjudicated by those with vested interests anyway, doing little to ensure equity.

State housing development bodies, such as the MDA, have been grossly negligent in their obligation to plan, develop and execute housing schemes in their controlled area. Perhaps a vacuum spanning decades was going to be filled in this manner.

Private developers and business tycoons are here to stay. They are able to act quietly and quickly, as opposed to legislative bodies, which are often slow, unimaginative and corrupt.

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New laws and regulations that take into account fact-patterns such as the Project need to be drafted and enacted, in line with existing realities, to prevent such scenarios from happening again.

In India, the Right To Fair Compensation And Transparency In Land Acquisition, Rehabilitation And Resettlement Act, 2013 provides for a number of social development measures in the event of land being acquired by private entities for infrastructure projects such as housing and development.

The state adopts an administrative role in overseeing the just transfers of land (e.g., 80pc consent of affected persons prior to acquisition, compensation for loss of property and livelihood by the private company).

Similar measures need to be taken in Pakistan, not only to ensure that this form of exploitation is halted, but to also streamline the private sector within the legal framework, instead of outside it.

Equity, social welfare and commercial development can coexist — but for that, the legislature needs to wake up.

Are you involved in development and reform? Share your insights with us at prism@dawn.com


Author Image

Ali Chughtai is a lawyer and can be reached at chughtai@gsclaw.net

The views expressed by this writer and commenters below do not necessarily reflect the views and policies of the Dawn Media Group.

Comments (29) Closed

Apr 08, 2019 05:15pm
Money & Power always "WINS" in Pakistani Courts, Accept it !!!
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Dr Accountant
Apr 08, 2019 05:46pm
PKR 460 billion for 16,896, works out to around PKR 3,403,172 (a little under 0.35 million PKR) per Kanal. Surely the market rate is above that, what's the going rate of a kanal plot in this Bahria Town?
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Apr 08, 2019 06:13pm
Great analysis. Thank you.
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Sane Voice
Apr 08, 2019 06:50pm
@Dr Accountant, 0.35 million plus they also did a lot of development. It looks like a good deal. But the other side, the side which took the money, the officers, the politicians... if we let them go than its all a waste.
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Syed Ahmed, Canada
Apr 08, 2019 07:02pm
Malik Riaz CEO of Bharia township has taken the SC for a ride. The apex court has accepted Bahria Town’s offer of Rs460 billion as payment for 16,896 acres for it's illegally acquired land for the Project. The payment will be made in 7 years period. The settlement is not a fair reflection of the market value of land allotted. Those who did undue favour, gratis or for monetary benefits have been left scot free. Malik Riaz will not pay the money out of his resources, but get the money out of the pocket of members of the project.
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Apr 08, 2019 09:39pm
@Dr Accountant, only 60% can be used for plots. Rest is used for roads, parks etc
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Apr 08, 2019 10:20pm
Because of two set of standards.
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A shahid
Apr 09, 2019 01:50am
@Dr Accountant, check the price of original price Bahria launched this scheme, while keeping I'm view what the land worth without all the money spent on infrastructure..
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Apr 09, 2019 02:21am
@Dr Accountant, I doubt that you are an accountant when you cannot do simple maths. The price comes out to 3.4 million not 0.35 million. This price is for undeveloped land. Infrastructure (roads, parks, mosques etc) will take a good part of this parcel and will not yield revenue to the developer. Then there is the cost of development. A land without water, electricity, gas, roads, sanitation etc does not yield the same value as a developed land. A business also needs to be viable (i.e. profitable) to incentivize future investments. I think given the state of current economy, governance and laws of the land, it is a good deal.
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Must learn
Apr 09, 2019 07:15am
@Syed Ahmed, Canada, The decision of SC is perfect and in national interest, as thousands of common people related to BT got s sigh of relief. On the contrary if the bad governance of Sindh Govt is imagined in “ ORANGI TOWN COTTAGE INDUSTRY PROJECT “more than 20 years passed, the concern departments not handing over the mere 200 sy yds to the allottees, and all matter in limbo, stagnant position. Sindh High Court may please take suo moto action as many allottees are overseas Pakistanis.
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Apr 09, 2019 07:25am
No one got punished, specially Mr. Zardari who arranged it. Mr. Riaz Malik pays 460 billion in 7 year amounting to a net present value of 320 billion. The case started with 105 rupees to a dollar but he will pay at a price ranging 150-200 rupee a dollar. The market value of the land was calculated to be 762 billion rupees. Anyway we must move on and expect speedy justice done to Mr. Malik's Karachi tower scam and his cases regarding Bahria in Rawalpindi.
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Apr 09, 2019 08:41am
@Syed , good point - actually even less ~35% is ‘plots’. The rest are common areas, roads, parks, etc BUT the key is the deferred payment / time value of money has been ignored.
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Apr 09, 2019 09:19am
Why is NS in jail? Ask him to pay some money and let me be PM again. If Malik Riaz can pay and walk away scot free so can NS.
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Imran khan
Apr 09, 2019 09:51am
Might is always Right
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Apr 09, 2019 01:00pm
In this day and age all cities and regions offer incentives to large investors for development and future income through taxes. Demonizing investors will only lead to continued under development. If anything, the price should be compared to what the land would have fetched without development money poured in by BTK and this 460b is completely unfair and will lead to the demise of this project. If the land can be given to DHA at Rs.3 per sq. yd, how can you charge 600 rupees per yard from Bahria?
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ashraf Usman
Apr 09, 2019 01:01pm
The judgement did not punished the officials, the provincial government and the party leadership who handed trillions of rupees worth of land to Bahria town on a platter. Such a humongous level of corruption went Scott free. Mind boggling.
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Apr 09, 2019 02:20pm
@Dr Accountant, do you know how many zeros are there in a billion? Not a supporter of bahria town but atleast do the math correctly before criticizing. Its 460,000,000,000 / 16,896 = 27,225,378.79 or 27.23 m/ kanal.
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Apr 09, 2019 03:26pm
@Waleed, @ Dr Accountant it is 16896 acres @Rs. 4600000000; that is nearly Rs 27200/acre or Rs 3400/kanal not kanals, 1 acre = 8 kanals
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Syed Ahmed, Canada
Apr 09, 2019 09:07pm
@SAM, Good point. Can someone compare the output of both the developers.
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Pak Patriot
Apr 10, 2019 07:05am
Under Pakistan Justice ? The Rich are offered a " Deal ", the Poor are directed to Jail.
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Apr 10, 2019 07:22am
Yet again, I m surprised by so many of us coming out to support Bahria Town. Simple fact that it was acquired with malice should be sufficient to rule against Bahria Town. But again, we don't believe in Justice.
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Bilal Ch
Apr 10, 2019 08:39am
@Waleed, Bhaijan, an acre has 8 Kanal.
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Apr 10, 2019 08:43am
Will this decision be quoted and used by small scale (dubious) schemes? I think once again we have set an example that a rich man will always win
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Apr 10, 2019 10:34am
It is sad to see the highest court in the country succumbing to the power of the rich and powerful. All the guilty who benefitted immensely from the land grab went scotfree. What hurt most was the order to NAB not to pursue cases against any of the culprits. Truly a sad day for Pakistanis who believe in the rule of law.
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Apr 10, 2019 11:07am
PKR 460 billion is a lot money. But the critics are not happy. Why? Because they have to say something, otherwise, there would be no definition of 'fools.' Salams
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Apr 10, 2019 11:34am
Better and effective laws should be made to ensure that justice should prevail in future in such matters. However, in Bahria Town case it should be kept in mind that third party interest is the main driving force in the court settlement. Thousands of Pakistani most of them are expatriates have invested in Bahria Town. They invested in a very well advertised project by a well know and established developer. So either government should have stopped everything at the beginning or now think about thousands of people who have invested collectively billion of rupees in this project. They were not part of any conspiracy.and bought the plots and villas at the market price in a legal manner. Court has saved thousands of Bahria town plots/apartments buyers to become ultimate victims in these complications. Well done SC.
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Dr Accountant
Apr 10, 2019 05:30pm
@Waleed, aaah I don't know how many zeros are in a billion.. I can't count and I'm terrible with numbers.. but hey I know there are 8 kanals in an acre!!
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Dr Accountant
Apr 10, 2019 05:34pm
@Tamza, @syed be it 60% or 35%, the point is they did something illegal and got away with it, who is paying for all this? Firstly the MDA could have earned billions more in perpetuity, and secondly it's people who got the plots in Bahria that are contributing towards this repayment !
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Apr 11, 2019 02:17pm
The size of "third party interest" should not be the reason to make a deal.Justice should be "NEUTRAL" .BY MAKING A DEAL WITH THE DEVELOPER,we have: (a) condoned the established/standard strategy of the developers in Pakistan- to commit illegalities in connivance with the politicians/government officials and create "third party interest "ASAP,before somebody takes notice of the illegalities.The practice will continue due to previous& present precedent. (b)Let off the complicit politicians and government officials who sold precious public land for peanuts.Undoubtedly, they will do it again (c)Encourage the investors to become (indirect)accomplices in this malpractice without properly checking the bonafides of the project.In this case Malik Riaz just announced a housing project in Karachi(no land, no location)and asked the interested to deposit Rs.10,000 to become eligible. And lo! and behold! the investors thronged to the banks,stood in queues to become eligible for plot/bungalow.To the extent that majority of these so called investors are already house -owners or would not be interested to live on Super-highway,i would call them SPECULATORS.So the "third interest in this case is hardly an "public interest" Thus an opportunity to set the housing development right in private sector has been lost
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