The land on which it stands was transferred to the Tourism Corporation of Gujarat Ltd (TCGL), a state entity, by the government.
TCGL has entered into a contract with an event management firm to operate Tent City-1, said a release by the Statue of Unity Area Development and Tourism Governance Authority on Thursday.
During a recent visit to Tent City-1, officials found that without seeking any permission the firm had started construction of 16 new tents and a swimming pool on government land close to a lake, the release alleged.
The firm had also encroached on a tract of forest land near the main gate of Tent City-1 and was using it as a parking area, the release alleged.
The mamlatdar (a revenue officer) of Garudeshwar taluka on Thursday served a show-cause notice to the company and asked it to immediately remove all the encroachments at its own expense.
The mamlatdar also asked the company owners to remain present at his office on May 29 for inquiry, said the release.