New Delhi/ Mumbai: The Delhi high court asked the New Delhi Municipal Council (NDMC) on Tuesday to respond to Tata group’s plea seeking to restrain the civic body from auctioning the property on which Taj Mansingh Hotel is located.
Judge M.L. Mehta sought the civic body’s response in two weeks before the court decides on the plea by the Tata Group, whose affiliate Indian Hotels Co. Ltd runs the luxury hotel in the heart of Delhi. The judge said he will consider the application for an interim stay on the auction on the next date of hearing.
“If there is any threat of coercive step against it, the plaintiff (Indian Hotels) is at liberty to approach the court,” the judge said.
Senior advocate V.P. Singh, appearing for NDMC, said that according to the NDMC Act, the land has to be put up for auction after the lease period ends.
Countering his argument, senior advocate N.K. Kaul, appearing for Indian Hotels, submitted that under the contract between the two parties, the extension of the lease has to take place on the basis of a mutual understanding.
Kaul also argued that the lease of the land has been with Indian Hotels for more than 33 years, the company has built a permanent structure on it, spent a huge amount of money on development of infrastructure in the area and therefore has the right to seek an extension of the lease.
A Taj Hotels spokesperson said that business will continue as usual at the Delhi property.
After hearing the submissions by the lawyers, the court posted the matter for further hearing in July.
The 33-year-old lease agreement between Indian Hotels and NDMC ended in September 2011 and was extended by a year twice—once in 2011, and then again in 2012. The current extension is set to expire on 12 October.
“NDMC will continue with the auction process of the property as scheduled,” said Arun Kumar Mishra, director of public relations at NDMC.
The municipal body is likely to convene a meeting on Wednesday to discuss the issue, Mishra added.
“It seems that Tatas will have to follow what NDMC has laid down in order to resolve the issue as soon as possible which will be better for both the parties,” said Timmy Kandhari, an independent hospitality analyst, managing director and founder of financial advisory firm Sapphire Professional Services Pvt. Ltd and former leader of the hospitality and leisure practice at PricewaterhouseCoopers.
“However, the company will not let Taj Mansingh go this easily as it is one of its flagship properties and very profitable,” he said. “Hence, losing it would be a loss to the brand as well future profitability.”
A person close to the development, requesting anonymity, said an open bidding process would be completely flawed and unfair as Indian Hotels’ right to a lease extension has been recognized by NDMC by giving it the first right of refusal.
NDMC has received Rs.293.32 crore from the hotel property since 1978 on an investment of Rs.6.26 crore, this person said.
In July 2011, Indian Hotels reached an agreement with a committee of NDMC to consider its request for a 30-year extension of the licence under which they agreed to increase the annual licence fee to 17.25%, 18.25% and 19.25% of sales with a minimum guarantee amount for each 10-year cycle as against 10.5% in the first term, the person said.
“But still NDMC wants to go for public auction,” the person said.
Shares of Indian Hotels fell 1.73% to Rs.54.05 on Tuesday on the BSE, while the benchmark Sensex lost 1.15% to close at 18,226.48 points. Neha Sethi contributed to the story.