Jaipur palace hotels to see change in shareholding

Taj group may have to recognise Jagat Singh's children as legal owners of Jal Mahal, Rambagh Palace and Sawai Madhopur Lodge following a SC order last week

The Supreme Court order last week might have settled the dispute whether the descendants of Jagat Singh, the deceased son of Jaipur's erstwhile king Sawai Man Singh, have any right to the three premier heritage properties - Jal Mahal, Rambagh Palace and Sawai Madhopur Lodge. But the order would now require the Taj group, which manages the three hotel properties, to reconcile to the idea of a new set of shareholders in these properties.

Although the Supreme Court has ruled that Jagat Singh's children have the legal ownership of their father's stake in these properties, the matter is still with the Company Law Board. Once the Board gives its final orders, the Taj group will have to recognise the new owners of the three hotels.

Making sense of who gained what and how from the long-standing dispute in the royal family will require understanding of the family tree of Maharaja Sawai Man Singh, who ruled the city of Jaipur. The Maharaja had three wives - Marudhar Kanwar, Kishore Kumari and Maharani Gayatri Devi - from whom the Maharaja had four sons. Bhawani Singh was born to Kanwar, Kumari gave birth to Jai Singh and Prithvi Raj Singh, and Gayatri Devi was the mother of Jagat Singh.

Although the royal family had many properties and businesses, the current dispute between the stepbrothers and now their offspring is about four companies - Jai Mahal Private Ltd, Rambagh Palace Hotels Pvt Ltd, Sawai Madhopur Lodge Pvt Ltd, and S M S Investment Corporation Pvt Ltd. The first three companies were formed to turn two ancestral palaces and one lodge into heritage-cum luxury hotels.

All the four stepbrothers held a certain percentage of shares in each of the four firms. However, a dispute broke out in the royal family following the death of Jagat Singh, who had married a Thai princess, in 1997. The couple gave birth to Rajkumar Devraj and Rajkumari Lalitya before they opted for divorce. Jagat Singh's stepbrothers refused to recognise Devraj and Lalitya as legal heirs of the deceased, who had held significant stakes in the four mentioned companies.

For instance, Jai Mahal Hotel Private Ltd, incorporated in 1981, was set up to turn Jai Mahal into a hotel. Jagat Singh had nearly 99 per cent stake and the remaining was with his stepbrother Prithivi Raj and his son Vijit Singh. Currently the Taj group runs this property, which is spread over 18 acres and has 100 rooms. The agreement between the Taj Group and the Jai Mahal Hotel Private Ltd is for 75 years. The Taj Group is to pay one per cent of the operating profit to Jai Mahal Hotel Private Ltd or a minimum assured sum every year, according to the information available with the ministry of corporate affairs.

While Business Standard could not confirm the actual market value of Jai Mahal, its worth is estimated to be around Rs 1,000 crore. According to the balance sheet for the year ended March 31, 2009, Jai Mahal Private Ltd had earned a profit of Rs 86.5 lakh, of which Rs 21 lakh had come from the hotel business. However, it declared Rs 11 lakh as value of land and Rs 15.9 lakh as value of building, which is the original cost of acquisition.

Abhishek Rao, attorney for Devraj and Lalitya, says since the court has declared his clients as legal heirs of Jagat Singh, he would now approach CLB against the decision of Prithvi Raj for allegedly diluting the shares of Jagat Singh in Jai Mahal Hotel Private Ltd. He says a few years after the death of Jagat Singh, Prithvi Raj and his son Vijit Singh's shares went up from less than one per cent to more than 90 per cent. Jagat Singh's stake was reduced from 99 per cent to 7.65 per cent.

Rambagh Palace has a similar story. It was home to Jaipur's Royal family till it was converted into a luxurious hotel in 1957. The Taj Group took over its management in 1972 and the hotel currently boasts of 72 rooms and suites. This heritage hotel is considered to be one of the most expensive hotels in India. All the four stepbrothers hold stakes in Rambagh Hotels Private Ltd, but the majority is with Jai Singh (46 per cent), his brother Prithvi Raj (10 per cent) and nephew Vijit Singh (45.96 per cent). Jagat Singh owned 4.74 per cent shares and Bhawani Singh's share is 3.29 per cent.

The company is doing better business than Jai Mahal Private Ltd, according to the latest balance sheet available with the corporate affairs ministry. The gross fixed assets (including intangible assets) were worth Rs 64.82 crore, whereas depreciation and amortisation were calculated at Rs 35 crore. The net worth was declared at Rs 28.9 crore.

Jai Mahal and Rambagh Palace are said to be the main source of income for the royal family.

Sawai Madhopur Lodge, the only heritage hotel in Ranthambore, was built as a hunting stop for Maharaja of Jaipur. Taj Group's brand Vivanta by Taj runs this property. Rao said his clients were only fighting for transfer of the stake of their father Jagat Singh (22.25 per cent) in Sawai Madhopur Lodge Pvt Ltd.

Unlike the other two hotel companies, Sawai Madhopur Lodge Pvt Ltd is not a performer. Its balance sheets for the year ended March 31, 2014 and March 31, 2013 reveal although the value for gross fixed assets (including intangible assets) remained at Rs 10.7 lakh, the depreciation and amortisation increased from Rs 5.95 lakh to Rs 6.51 lakh. The net worth of the company was in the negative for both years. Business Standard could not find the details of S M S Investment Corporation with the corporate affairs ministry, but Rao says Jagat Singh's shareholding in the company is 6.13 per cent.