DTA and Becamex ITC are both investors who have received the transfer of a portion of the investment project to build and operate the VSIP Bac Ninh urban and service area, which is invested and developed by VSIP Bac Ninh Co., Ltd.
The VSIP Bac Ninh urban and service area is the largest urban, service, and industrial complex in Vietnam with a total scale of 700 hectares, invested and developed by Sembcorp Group and Becamex IDC (HOSE: BCM).
On January 13, 2022, the Bac Ninh Provincial People’s Committee issued a decision approving the adjustment of the investment policy for the VSIP Bac Ninh urban and service area. In this decision, DTA received a transfer of 20,580 square meters, while Becamex ITC received 31,649 square meters. At the time of inspection, the transfer of both companies was basically completed.
From the time of the investment policy adjustment to the time of the inspection, the transfer documents for a portion of the project by the two companies were received and reviewed by the Department of Construction. The two companies also fulfilled their financial obligations to the state budget.
The two companies also conducted surveys and issued project commencement notices to the competent authorities as prescribed. At the time of the inspection, the townhouses in the project had been constructed and the exteriors had been completed by the two companies.
 Raw construction and completed exterior of townhouses in the VSIP Bac Ninh urban and service area. Source: DTA
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Noted Violations
However, the provincial inspection agency reported that the two companies still have many existing limitations and shortcomings in the implementation of the project. First, in terms of project transfer, the decision of the Provincial People’s Committee dated January 13, 2022 has not been adjusted regarding the project completion schedule.
The initial investment policy stipulated that the investor must “complete the construction of the infrastructure within 2021,” but the two companies did not make the necessary adjustments as required.
Prior to that, VSIP Bac Ninh Co., Ltd. had signed 8 transfer contracts with DTA in 2018 and signed a transfer letter of intent with Becamex ITC in 2011 even without the consent document from the Chairman of the Provincial People’s Committee of Bac Ninh. Subsequently, the contracts related to the transfer were re-signed by the Chairman of the Provincial People’s Committee in 2019.
Nevertheless, VSIP Bac Ninh Co., Ltd. had transferred the land to the two companies before the provincial authorities issued the decision to revoke and transfer the land.
In the construction process, the inspection agency pointed out that the raw and completed exterior townhouses of DTA violated the regulations on the minimum height of railings on balconies; the road shoulder was not designed with ramps for people with disabilities; some acceptance records of construction work did not include the names of participants or were signed without clear names; and although the basic construction was completed, the completion drawings were not prepared.
Of note, after recalculating, the inspection team found that DTA had lower construction costs than the design estimates provided by VSIP Bac Ninh Co., Ltd., amounting to over 10 billion VND. DTA explained that the reason for the discrepancy was that the estimate did not take into account the connected units, resulting in some duplicated quantities. Therefore, the company made adjustments during the construction period.
As for Becamex ITC, the provincial inspection concluded that the company did not assess or evaluate the capacity of the organization or individuals in charge of the construction drawing design, nor did it conduct a review of the design estimates for the raw and completed exterior townhouses.
In addition, the company used incorrect material unit prices and quantities for certain tasks. After recalculating, the inspection team found that the actual costs were lower than the company’s estimates by nearly 1.5 billion VND.
Finally, in terms of real estate business violations, in 2019, DTA signed 27 memorandums of understanding (of which 4 were liquidated) under the form of capital mobilization to prioritize the right to purchase land lots for the mobilized parties, which violated regulations as there was no decision from the Department of Construction.
In 2022, Becamex ITC transferred 155 land lots without fulfilling the full financial obligations. In 2023, the company was guaranteed by BIDV’s Hanoi branch for 91 land lots, but the guarantee decision was made before the formation of the future residential houses.
Based on the above violations, the provincial inspection of Bac Ninh requested that both companies, DTA and Becamex ITC, accelerate the completion progress and hand over the project items in accordance with regulations; contact the Department of Planning and Investment to complete the investment extension procedures; declare and pay taxes in full; and strictly implement all conclusions and recommendations of the state authorities.
In addition, DTA and Becamex ITC need to deduct over 10 billion VND and 1.5 billion VND respectively when settling the transfer of the project. DTA must also reconstruct the railings and provide accessibility features for people with disabilities.
DTA sued for violating deposit regulations
Before the Bac Ninh Provincial Inspection announced its findings, DTA was ordered by the Bac Ninh People’s Court to refund 100 million VND in deposit money in a dispute with a customer at the mentioned project (trade name: DTA Garden House).
The court stated that in October 2018, based on advice from Mland Real Estate JSC (now Mland Real Estate JSC North), Ms. Nguyen Thi Phuong believed that the DTA Garden House project had met the conditions for selling assets formed in the future and deposited a total of 100 million VND with DTA to be given priority in signing a sales contract for a house with an area of 75m2, a floor area of 205.4m2, and 4 stories high.
Later, Ms. Phuong claimed that DTA had violated the capital mobilization regulations and filed a lawsuit requesting the invalidation of the deposit agreement, as well as the refund of 100 million VND.
After reviewing the case, the Bac Ninh People’s Court declared the deposit agreement between the two parties null and void, and DTA had to compensate as requested by Ms. Phuong.
The reason was that the court found that at the time of signing the deposit agreement numbered LKBM20-06/2018/TTDC-DTA, DTA was not yet the investor of the VSIP Bac Ninh urban and service area at the land lots with the code LK-B14-LKB21. Based on the documents collected by the court of first instance and the submitted documents by the parties, the decision 2632/UBND-TNMT dated July 19, 2018 of the Bac Ninh Provincial People’s Committee approving the proposal to allow VSIP Bac Ninh Co., Ltd. to transfer a portion of the project to secondary investors, in which DTA received 20,580 square meters. Therefore, this is not a legal document to determine that DTA has the right to use the land and is the project owner.
On January 16, 2019, according to the decision 22/QD-UBND of the Bac Ninh Provincial People’s Committee, DTA became the owner of the VSIP urban and service area at the land lots with the code LK-B14-LKB21. And on June 10, 2020, DTA was officially granted a letter 1173/SXD- QLN by the Bac Ninh Department of Construction approving DTA‘s project for the transfer of a portion of the VSIP urban and service area project, which meets the conditions for capital mobilization through the business of future residential houses.
Based on the above evidence, the Court determined that until January 16, 2019, DTA became the owner of the VSIP urban and service area at the land lots with the code LK-B14-LKB21, and until June 10, 2020, DTA met the conditions for capital mobilization through the business of future residential houses.
However, on October 21, 2018, DTA signed a deposit agreement with Ms. Phuong. Therefore, at the time of signing this deposit agreement, DTA did not have the right to do business in the project, and the project did not meet the conditions for business operations. Therefore, the signing of the deposit agreement was in violation of the law, and the deposit agreement was null and void from the time of signing. The cause of the void contract lies with both DTA and Ms. Phuong, as DTA did not have the right to use the land or raise capital for real estate business in accordance with the law, while Ms. Phuong signed the contract without thoroughly researching the project or the project’s investor. Due to the invalid contract, the parties must refund what they have received.
Therefore, DTA‘s appeal requesting the dismissal of Ms. Phuong’s lawsuit is without merit. From the above analysis, it can be seen that DTA made an appeal but failed to provide any evidence to support its appeal, so the entire appeal of the company should be rejected. However, Ms. Phuong withdrew her request regarding the interest, but the trial court did not properly suspend the enforcement of the decision regarding the withdrawal of the interest claim by Ms. Phuong, so the trial court’s decision needs to be amended to suspend the enforcement regarding Ms. Phuong’s request for interest.
Due to the rejection of the appeal, DTA must bear the appellate court costs in accordance with the law.
