In a blow to Tata group’s Indian Hotels Company, the Delhi High Court on Thursday cleared the auction of the iconic Taj Mahal Hotel in the capital. It dismissed the plea by the chain challenging the verdict of a single judge Bench of the high court allowing the New Delhi Municipal Council (NDMC) to auction the hotel. The company is likely to file an appeal with the Supreme Court.
The Bench of judges Pradeep Nandrajog and Pratibha Rani negated the arguments put forth by Indian Hotels and upheld the decision of a single judge delivered on September 5. “The appeal is dismissed,” said the division Bench, paving the way for the auction. The stock price of Indian Hotels Company closed at Rs 115 on the BSE Sensex on Thursday, down 5.27 per cent, after hitting an intraday low of Rs 106.
The dispute relates to a 1976 collaboration agreement between Indian Hotels and NDMC for the development and operation of the five-star property. Though the initial agreement expired in 2011, the Taj group was given extensions.
An NDMC decision to auction the property at the end of the last extension period, which expired on September 30, lead to Indian Hotels challenging the move before the high court.
After hearing arguments by both sides, the high court had on September 5 declined the chain’s requests for renewal of the agreement. Indian Hotels appealed the decision before a division Bench of the court the very next day.
While admitting the appeal, the court had directed NDMC not to take any precipitative action against the group until further determinations were made.
Appearing on behalf of Indian Hotels, senior advocates Harish Salve and Rajiv Nayar pleaded against the decision of the single judge bench, stating their agreement with NDMC was similar to a joint venture and had required the company to undertake significant costs in developing the property. They also said the undertaking involved the investment of the Taj brand name, which could not be dissociated from the hotel.
Additional Solicitor General Sanjay Jain, representing NDMC, refuted Indian Hotels’ submissions saying the group had benefited greatly, both monetarily and in terms of its reputation, from the agreement. Jain also said according to Section 141(2) of the NDMC Act 1994, the rate for any property transferred by the government, should not be lower than what could be obtained through fair and natural competition.
“We are studying the judgment and will take necessary legal action,” said an Indian Hotels spokesperson. Taj Mahal, also known as Taj Mansingh Hotel, is a 294 room property, located in Lutyens’ Delhi. It is a key asset operated by the company and is estimated to bring annual revenues of Rs 150 crore.
| Timeline of the Indian Hotels and NDMC saga |
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