MOD Land Lease scam: Prestigious Chennai Clubs Cheat the Nation

Gymkhana Club, Chennai
The then Madras Gymkhana Club was in occupation of 44.13 acres of Defence land in a prime part of the city from December 1977 to November 1986 on payment of annual rent of Rs 3,526. Though a formal lease agreement had not been entered into with the Club till then, the Ministry of Defence sanctioned, in October 1990, the continuance of the lease only in respect of 8.608 acres of land retrospectively from November 1986 onwards at the increased annual rent of Rs.8,608 based on agricultural rates. No lease agreement was concluded even thereafter.

The DEO, Chennai, recovered rent from the Club up to November 1991. Thereafter, he stopped accepting rent from the Club on the ground that it had resorted to unauthorised construction on the leased land and had also made alterations to the building thereon without the prior permission of the lessor and in violation of the lease agreement.

Audit scrutiny disclosed the following:
The Club had constructed 14 air-conditioned guest rooms, in respect of which rent ranging from Rs 900 to Rs 1,950 per day was levied, a beauty parlour, a Chinese kitchen, ice-cream parlour, etc. It had also sub-let a portion of the land to a bank without the prior permission of the lessor.
Keeping in view the Club’s commercial activities, the DEO had assessed that rent amounting to Rs 33.10 crore was recoverable for the period from November 1991 to June 2001, based on only 2.5 per cent of the land value, as against 5 per cent adopted for determining the rent payable by another club in the same station, that was also involved in similar commercial activities, which has been discussed in paragraph 2.6.2.2.
Government’s approval for revision of rent as proposed by the DEO had not been obtained even after the lapse of over 4 years as of March 2002.
The Directorate General of Defence Estates informed Audit in September 2002 that the draft lease for the period from December 1977 onwards and rate at which damages were to be recovered from the Club had not yet been finalised by Ministry.

Cosmopolitan Club, Chennai
The Cosmopolitan Club, Chennai, had been occupying 2.327 acres of land, in the heart of the city, since July 1962/July 1965 without renewal of the earlier lease agreement which was effective only up to June 1970. The Club also unauthorisedly occupied an additional area of 3.925 acres from April 1993.

Audit scrutiny of the case disclosed the following:
Though the lease in respect of the 2.327 acres of land expired in June 1970 itself, the DEO did not take any action till September 1975 when an application from the Club for renewal of the lease beyond June 1970 was received. The matter was taken up with the Directorate General of Defence Estates only in November 1975.
The DEO brought to the notice of the Directorate General in March 1997 that the Club had been functioning as a commercial organization and rent should consequently be charged on a commercial basis. Based on 5 per cent of the land value, rent totalling Rs 3.29 crore was determined as recoverable for the period from July 1970 to March 2000, which would increase to Rs 4 crore up to June 2001.
No Lease agreement had been concluded with the Club beyond June 1970 in respect of the 2.327 acres of land initially leased to it or in respect of the 3.925 acres that had been unauthorizedly occupied since April 1993. Recovery of rent at commercial rates proposed by the DEO had also not been effected as of March 2002.
The Directorate General informed Audit in September 2002 that the question of renewal of the lease and damages to be charged from the club was under examination.
Prestigious Chennai clubs owe Rs 50 Crore rentals to MOD

Comment:
This scam is perpetuated by Politicians, Bureaucrats in connivance with the MOD and AHQ. The Sukhna Scam fades into insignificance compared to revenue loss of over Rs 50 Crore to the exchequer for a period of over 2 decades as black money has been used by vested interests to evade legitimate revenue due to the Government!

A closer look at the clubs under scrutiny reveals:
The clubs have lease agreements for a period of 30 to 60 years. Defence lands— often huge tracts given to run the clubs to ensure "betterment of Members including the Garrison Officers". One needs to zero in on the terms and conditions of the lease agreements, which are grossly violated. These are: restricting public entry and use, discriminatory membership practices, non-payment of dues, non-submission of audited accounts and earning illegal revenue by letting out premises for weddings, parties, guest rooms and Guest fees. The Garrison Officers are relegated as second class members. The managements and Governing body owes an explanation to the nation for violating the Rules of the land. Even capital gains taxes are cleverly evaded.

Besides, the management and Governing Body are minting money by hiring out premises without paying a dime for tax. It's nothing but a robbery of citizens' resources, If these conserves of the privileged governing body can be brought to the negotiating table to renew their leases at reasonable rates and made to follow terms, the bigger battle of fighting corruption in high places can be won!