Maharashtra cabinet clears path for HUL to launch bakery operations near Aarey

MUMBAI: Hindustan Unilever Ltd (HUL) will commence bakery operations near Aarey colony where the Centre-owned Modern Bakeries (India) Ltd once operated.
Eight years after the proposal was first mooted in 2015, the state government has allowed an agreement to be signed between the two companies after HUL offered to pay a non-refundable Rs 5 crore up front.
The government had held the transfer of 22,264sqm of collector's land by Modern Bakeries to HUL as illegal as the latter did not pay 50% of the land cost to the government as unearned income.
The state cabinet on Tuesday approved the signing of a business conducting agreement between Modern Bakeries and Everstone Capital, an arm of HUL, for expansion of bakery operations. The matter went before the cabinet as there was no policy to allow a business conducting agreement between two companies on government land by paying money.
In 2000, the collector had raised a demand for Rs 37 crore in unearned income with interest. Subsequent revenue authorities upheld the decision and in 2014 HUL challenged the collector's decision through a writ in the Bombay high court, where the matter is pending. In 2004-05 the Comptroller and Auditor General in its remarks said the land must not be transferred to HUL without recovering the unearned income with interest.
In 2015, HUL deposited the sum sought by the collector through a bank guarantee and moved a proposal before the Bombay high court to allow the expansion of the bakery and an agreement to be signed with Everstone Capital. The court had directed the government to take a decision within eight weeks. The proposal was rejected.
HUL once again approached the government to allow bakery operations without transferring the land and even offered to pay Rs 5 crore up-front, which will not be returned irrespective of the outcome of the court case.
Since the state government had no policy to accept money and allow a business conducting agreement with a sick company for expansion of bakery operation, the proposal was brought before the cabinet. The law and judiciary department opined that there were no legal impediments to the agreement as the land was already in possession of HUL and it had deposited the amount due to the government as bank guarantee with the court.
In 1966, the state had allotted 18 acres near Aarey colony to the Centre to set up Modern Bakeries (India) Ltd to commence operations at Re 1 lease rent. For the next 10 years it was leased after obtaining 8% of the market value.