During the recent National Council’s (NC) discussion on the report of Public Accounts Committee (PAC), I argued that the case of Trowa Theatre is one of policy corruption. Although both the print and broadcast media covered the deliberations in NC, I wish to further highlight why in my view this is a case of policy corruption.
This is not the first time that the case of Trowa Theatre has been raised in Parliament. Last year, the issue was raised during the presentation of PAC report. The Parliament passed a resolution asking the government ‘to resolve the issue as per the relevant laws.’ Amongst others, the Land Act 2007 is one of the relevant laws. However, the Ministry of Works and Human Settlements (MoWHS) proposed to sell the leased land to the owner of the theatre.
Selling leased government land to private ownership violates section 307 of the Land Act, which states, “Under no circumstances shall a land on lease from the Government land or Government Reserved Forests land be converted to ownership right.” Therefore, the proposal to sell the land was certainly not a means to resolve the issue as per relevant laws.
The proposal to sell the land was first made by the owner of Trowa Theatre in 2007. In order to address the issue, the owner had proposed three ways of resolving the issue: i) pay the lease rent at Nu.2 sq. ft per annum instead of the revised Nu.42, ii) the government buy Trowa Theatre or 3) the government sell the land to the owner.
A MoWHS report states that ‘a lot of discussion took place between the MoWHS and Mr. Kuenlay Wangchuck [the owner of Trowa Theatre] but a common ground was not found.’ In turn the Ministry explored the possibility of outright sale of land to the owner at a mutually acceptable price, procure the theatre at an assessed value carried out by an independent property assessor, continue on lease at a rent of Nu.20 per sq ft and request National Land Commission (NLC) to approve the sale of land at a price negotiated between National Housing Development Corporation (NHDC) and the owner of the theatre. In the end, the Ministry had decided to sell the land and requested NLC to approve the sale at a negotiated price. In other words, the Ministry had endorsed the proposal of selling the land, which was initially made by the owner of the theatre. A private proposal and a government endorsement to sell the land, which violates the law, is in my view a case of policy corruption.
The proposal to sell the land intends to benefit the owner of the theatre in addition to the economic returns he had generated when he had not paid any chetrum as revised lease rent. As of 31st May 2012, the outstanding lease rent was Nu.5, 237,074.92. Rental dues have definitely increased by a month and half now. The MoWHS report states, “In the meantime, Mr. Kunley Wangchuk continued refusing to pay the lease rent while the entertainment complex continued to generate income.”
Not only had lease rent not been paid, the owner had been allowed to operate the business entity and generate financial returns without signing any lease agreement with the government. What has happened is that a private business entity had been allowed to operate commercially on a government land without signing a lease agreement for six years, and yet allowed to generate income without paying any rental fee.
Although the former Honorable Minister of Works and Human Settlement approved the transfer of the leasehold from the former to the present owner on 17 February 2006, it took four and half months for the Secretary to instruct the Managing Director (M.D) of NHDC to draw up new lease agreement with the new owner. The M.D took more than three months to write and request the new owner to finalize the formalities. Such delays are questionable.
In the many correspondences with the owner, the Ministry had only requested that the owner come to sign the lease agreement. What is noteworthy is that an agency of the Royal Government of Bhutan was requesting a private businessman to come and sign the agreement for six years without issuing any warning or stating consequence of non-compliance except for indicating a penalty of 24% for late payment of rental fees. The letters or correspondences did not instruct or require the owner to come. They only requested.
An example of the request sent by the M.D to the owner reads as follows; “The National Housing Development Corporation (NHDC) would like to request you to finalize the execution of Lease agreement for the Lease of Entertainment premises at Changjiji complex.” A note sheet states, “Despite several requests to settle the case, Mr. Kunley Wangchuk did not agree to draw up the agreement…” Another letter from the M.D to the Ministry’s legal officer seeking legal advice states; “…despite our repeated request Mr. Kunley Wangchuk has never agreed to enter into lease agreement at revised rate although he is currently making use of the leased land for commercial activities.”
It is very sad and disturbing that a government agency had to request a private businessman to come and sign the lease agreement instead of instructing or ordering him. Rather than the government agency, it looks as if it was the private businessman that was calling the shots. Besides these requests to him, one option of solving the issue that was considered by MoWHS was to procure the theatre at an assessed value carried out by an independent property assessor only if the assessment was agreeable to the owner. Why should not the assessment be agreeable to the government as well? Another proposal later suggested slashing the lease rent to Nu.20 per sq ft from Nu.42, a new rate fixed by NLC. It is reported that the owner was unwilling to pay even this slashed rent. Who is in control of the issue?
One justification provided by the owner of Trowa Theatre is that the lease rental fee was agreed at Nu.2 with the previous owner when the lease was transferred in his name. He reasoned, “Keeping in mind that the lease amount is Nu.2 per sq. foot annually for long term lease and for permanent structure we had taken this project from Sangay Dorji” [the former owner]. He had argued that the increase to Nu.42 was arbitrary. It is impossible that he would not have read the lease agreement signed by the government with the previous owner, when he had agreed to buy the theatre.
Indeed Clause 3.1 of the agreement states that the annual rent shall be Nu.2 per sq. ft but the next clause makes it clear that the rent payable shall be subject to revision as per government rules from time to time. The agreement was signed on 1 July 2001. The transfer of lease was agreed on 17 February 2006. This means that the rental fee was revised after more than four years and seven months based on the rate that Thimphu City Corporation was charging in similar cases. The owner would certainly have been aware that according to the first lease agreement, the government could revise the rent within the lease period of 25 years.
The Ministry had decided to sell the land more than two years ago, i.e. as early as March 2010. On the letter that the Trowa Theatre owner submitted to Hon’ble Zhabto Lyonpo, the approval note reads, “Please process immediately for sale of the land as per govt. rules,” and on the same letter, the Secretary instructs M.D of NHDC to ‘process for sale for land to Mr. Kunlay Wangchuk as directed…” On 1st June 2012, the Hon’ble Minister for Works and Human Settlement wrote a letter ‘requesting the Land Commission to kindly approve the sale of the Trowa Theatre land measuring 19500 square feet to Mr. Kunley Wangchuk…”
After deliberations on the PAC report, the National Council has passed a resolution stating amongst others that the land should not be sold and that the ACC should investigate the case.
The writer is the Deputy Chairperson of the National Council.