MUMBAI - Indian billionaire Gautam Adani's property unit has formed a joint venture with Mumbai's slum rehabilitation authority to redevelop the Dharavi, a key step towards rebuilding one of Asia's biggest slums that is mired in legal controversy.

A spokesperson from Adani Group confirmed the formation of the entity, Dharavi Redevelopment Project Pvt Ltd, without elaborating further. Redevelopment of Dharavi, where 1 million people live, has been delayed for decades.

The setting up of the JV is a critical step and assumes significance as it comes as Adani faces an ongoing legal challenge from a rival bidder, Dubai-based SecLink Technologies Corporation.

SecLink alleges Mumbai's Maharashtra state improperly cancelled an original 2018 bidding process and restarted it so that Adani could win. The state and Adani deny any wrongdoing, and say SecLink's case should be thrown out.

SVR Srinivas, who heads the state-run Dharavi Redevelopment Authority, told Reuters in an interview in August that the state will appoint the chairman of the new 80:20 Adani Properties-state government JV, while the CEO will be from Adani's camp.

The next step would be the submission of a master plan by the Adani group which will have key details including planning on infrastructure, rehabilitation and public amenities, he said.

The Dharavi slum, about three-quarters the size of New York's Central Park, featured in Danny Boyle's Oscar-winning 2008 movie "Slumdog Millionaire".

Adani group won the Dharavi rebuilding project in July by bidding $610 million for the project.

Apart from the legal challenge by SecLink, Reuters reported in August that Dharavi residents are concerned about billionaire Adani's capacity to deliver amid high-profile financial setbacks post allegations by U.S. short seller Hindenburg of improper dealings in January, which he denies.

(Reporting by Dhwani Pandya; Editing by Aditya Kalra and Chizu Nomiyama)