 "Indian Hotels against Taj Mansingh auction order")
Indian Hotels Company Ltd (IHCL) filed its arguments on Thursday before a division bench of the Delhi high court, against a single-judge order declining requests of the company to renew its agreement with New Delhi Municipal Council (NDMC) for operation of Taj Mansingh hotel.
The agreement between the company and NDMC for the 35-year hotel expired in 2011, but the operator of the property had been allowed several extensions to continue business.
The present dispute arises out of a decision by NDMC to auction the property to the highest bidder at the end of the current extension period, which ends on September 30 (next Friday).
IHCL had challenged NDMC decision before a single judge of the high court, who dismissed the petition on September 5, allowing the property to be auctioned. IHCL then appealed against the decision before a division bench the next day.
While admitting the appeal, the court directed the NDMC not to take any precipitative action against the operators of the hotel, until further determination of the issue.
In Thursday’s hearing, advocate Harish Salve put forth the company’s grievances, stating that the single judge had failed to recognise the agreement between IHCL and NDMC was a joint venture to collaborate on building a five-star hotel in the nation’s capital way back in 1976.
Salve attempted to distinguish the venture from broader commercial agreements. He stated that the arrangement had involved significant costs to the company, as well as the investment of the Taj brand name, whose continuing goodwill eventually turned the property into a landmark.
Salve mentioned that an amount of Rs 1 crore had been factored into the agreement at the time of inception.
According to Salve, under traditional English common law, such agreements must usually be renewed, unless there had been major violations of pacts.
“We are not claiming any demise over the land; just the extension of an agreement on assured terms,” said Salve.
The senior counsel also negating the applicability of Section 141(2) of the NDMC Act 1994, which had been used to justify the auction process in the earlier proceedings. As per the relevant provision, the rate for any property transferred by the corporation, should not be lower than what can be obtained through natural and fair competition.
According to the senior counsel, the NDMC Act came into force only in 1994, much after the formation of the collaboration agreement. As such, “the existing contractual right (of the company) does not get extinguished by a subsequent change in law,” said Salve.
On an ending note, Salve implored the court to consider the identity of the property as inalienable from the ‘Taj’ name, a fact that in his opinion had to be considered while determining the issue of its renewal.
The agreement between the company and NDMC for the 35-year hotel expired in 2011, but the operator of the property had been allowed several extensions to continue business.
The present dispute arises out of a decision by NDMC to auction the property to the highest bidder at the end of the current extension period, which ends on September 30 (next Friday).
IHCL had challenged NDMC decision before a single judge of the high court, who dismissed the petition on September 5, allowing the property to be auctioned. IHCL then appealed against the decision before a division bench the next day.
While admitting the appeal, the court directed the NDMC not to take any precipitative action against the operators of the hotel, until further determination of the issue.
In Thursday’s hearing, advocate Harish Salve put forth the company’s grievances, stating that the single judge had failed to recognise the agreement between IHCL and NDMC was a joint venture to collaborate on building a five-star hotel in the nation’s capital way back in 1976.
Salve attempted to distinguish the venture from broader commercial agreements. He stated that the arrangement had involved significant costs to the company, as well as the investment of the Taj brand name, whose continuing goodwill eventually turned the property into a landmark.
Salve mentioned that an amount of Rs 1 crore had been factored into the agreement at the time of inception.
According to Salve, under traditional English common law, such agreements must usually be renewed, unless there had been major violations of pacts.
“We are not claiming any demise over the land; just the extension of an agreement on assured terms,” said Salve.
The senior counsel also negating the applicability of Section 141(2) of the NDMC Act 1994, which had been used to justify the auction process in the earlier proceedings. As per the relevant provision, the rate for any property transferred by the corporation, should not be lower than what can be obtained through natural and fair competition.
According to the senior counsel, the NDMC Act came into force only in 1994, much after the formation of the collaboration agreement. As such, “the existing contractual right (of the company) does not get extinguished by a subsequent change in law,” said Salve.
On an ending note, Salve implored the court to consider the identity of the property as inalienable from the ‘Taj’ name, a fact that in his opinion had to be considered while determining the issue of its renewal.