If the MMRDA senior management has any doubt that the proposed surrender of plots by two private sector banks - in effect buyback at the high prices they were sold - is financially and legally unsound, it should refer to the legal advice available in its records. It strongly advises the MMRDA against buyback primarily because such a decision would not stand legal scrutiny.

The legal advice note issignificant now that the new dispensation in MMRDA - under Ajit Warty who took over as metropolitan commissioner last fortnight - has indicated that the proposals will be discussed at a formal level. The high-level executive meeting scheduled last week to discuss and probably approve these buyback proposals as well as the controversial Rs 100 crore package for renovating and upgrading Mantralaya was postponed.

Indications are that the meeting will be rescheduled before June-end. The MMRDA board is under intense pressure to approve these proposals. But doing so could land MMRDA in a legal mess.

A copy of the advice made available to Express Newsline states, ``Shorn of its smokescreen, the demand is a proposal for the discharge simpliciter of the concluded agreement and refund by MMRDA to the Bank of the premium and interest paid by it. It is the disinclination of the High Court to lend its judicial aid to the Bank to wriggle out of the agreement, having turned financially unviable in the teeth ofacute recession in the real estate market, that the Bank has moved itself to persuade the MMRDA to consent to the discharge of the agreement and to refund to it the paid premium and interest.''

The MMRDA ``owes a Constitutional duty to steer clear of the taint of arbitrariness and is forbidden to enter into a contract for an improper or oblique purpose.... the Authority (MMRDA) owes no contractual obligation in law or equity to discharge the agreement and to refund the moneys to the Bank'', states the legal advisor KN Patel, company secretary, in his detailed note of May 26, 1999.

Here's the most crucial part of the advice: ``the Authority (MMRDA) cannot overlook the stark fact that in deciding upon the refund to the Bank, to relieve it of the consequences of its commercial venture or misadventure, the Authority will inflict upon itself financial loss of considerable enormity and will be thereby dispensing largesse or bounty. The Supreme Court has, in AIR 1983 SC 848, held that the grant of largesse bythe State and its instrumentality should fulfil the twin test of reasonableness and public interest. The Authority is bound to assess whether the proposal of the Bank would promote public interest of the interest of the Bank and private share-holders.''

The bank referred to is Vyasa Bank, which negotiated for plot C-12 at the Bandra-Kurla complex and has been lobbying hard at the highest levels of government for MMRDA to buy back the land. Former metropolitan commissioner Man Mohan Singh had sought the legal advice when asked to consider the proposal by the state Urban Development Department (UDD). Both Singh and the UDD Secretary K Nalinakshan were recently transferred to other positions but the advice forms part of the official correspondence on the issue.

The advice could also be extended to the second party, Global Trust Bank, which wants to surrender plot C-29 in the complex. The Bandra-Kurla complex was promoted as the city's second Nariman Point in 1994-95 when several corporate houses bought landto house their headquarters and offices. The multi-crore Bharat Diamond Bourse was also planned here as Asia's largest diamond exchange-market but the complex did not develop along expected lines. Real estate values have crashed phenomenally and internal MMRDA assessments show that it would lose nearly Rs 120-140 crore if it accepts the proposals of Vyasa and Global Trust banks.

The legal advice is explicit on this aspect. Referring to Section 4 (A) of the MMRDA Act, that ``the Authority shall not and shall not be required to carry out any of ts operations under this Act at a loss'', Patel points out the thrust of this Section denies MMRDA ``the power to act out of considerations of philantrophy....(it) is bound to exclude from its mind the consideration of financial distress facing the Bank. In fact, the recession in the real estate market has inflicted upon the Authority no less adversity''.