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Shaw Wallace land sale falls prey to India - China politics

22 August 2012 03:13 am - 0     - {{hitsCtrl.values.hits}}

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Recent reports about a prime block of land in Colpetty belonging to a listed company in the island being sold off to a Chinese state-owned aviation company, has sparked off controversy, though it’s purely a private deal between the two companies.

According to Indian media reports, although the plot on the Galle Road was said to have been promised to the Indian High Commission (HC), it turns out that the same plot has been allotted to the Chinese company, CATIC (China National Aero Technology Import and Export Corporation), which also maintains close links with Pakistan, leading India to strongly take up the matter with the Sri Lankan Foreign Ministry.

These reports claim that the Indian HC had completed all formalities and was in touch with the Sri Lankan Foreign Ministry, which has to clear such purchases by any foreign mission, for the sale of the plot as it wanted to build a cultural centre there.

According to local media reports, for several weeks, Indian High Commissioner in Sri Lanka, Ashok Kantha and his senior officials had been negotiating with S. Richard Vamadevan, Chairman of the 162-year-old listed local entity, Shaw Wallace and Hedges PLC, to purchase the property.

Negotiations had ended with India agreeing to pay Rs.7 million per perch for a part of the land for this purpose. The Indian position is that the deal was concluded, reports stated.

Since foreign diplomatic missions wanting to purchase land are required to obtain permission from the External Affairs Ministry (EAM), these reports claim that the HC had written to the EAM for clearance.

“India protests that for more than one and a half months, the EAM remained silent. There had been no response from it,” the reports said.

In the meantime, Indian media reports noted that Indian authorities were surprised when they learnt that the plot was sold to China National Aero Technology Import and Export Corporation (CATIC), China’s aircraft manufacturer.

The Sri Lankan High Commissioner, Prasad Kariyawasam, had also been summoned and India’s displeasure over the deal had been made known to him, the Indian report stated.

In a corporate disclosure dated July 31, 2012, Shaw Wallace stated that it would be selling the 264.65 perch land called ‘Colpetty Mills’ together with buildings standing on the land.

Furthermore, in a disclosure dated August 2, 2012 the company revealed that it had entered into a sales agreement to sell the above land for Rs.1.85 billion to Avic International Hotels Lanka Ltd., a locally incorporated unit of CATIC.

It also stated that the reason for the sale was to finance the ongoing 30 storied development project in the adjoining land, where the piling and substructure work has been completed. The intention of the purchaser, according to the disclosure, is to develop the land to be purchased, into a mega hotel project.

Meanwhile, in a circular to its shareholders, Shaw Wallace stated that the Extraordinary General Meeting, also mentioned in the disclosures referred to above, would be convened and the shareholder approval for the sale of this land would be obtained.

Shaw Wallace owns the land at Colpetty which is 542 perches which extends from Galle Road frontage to the edge of the parallel R.A. de Mel Mawatha (Duplication Road) and it had plans to develop two 30 storied luxury apartment buildings on 181.5 perches of this land called ‘Mayfair City’.

However, due to certain economic and financial constraints, the project was interrupted and efforts to finance it through a joint venture or any other forms of funding proved unfruitful.

Now Shaw Wallace plans to secure, on a 99-year lease from the Urban Development Authority, a 52.9 perch land in front of the Colpetty property on the Galle road side, which, according to the company, would enable them to amalgamate both lands and go in for a meaningful development.
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