The book is an account of the city's thriving music scene between the 30s and 60s.
"We decided on Taj Mahal Foxtrot, not just because of the original subject matter, but also because of the huge talent that is Naresh Fernandes. He writes with warmth, humour and a great deal of perception about a city he clearly loves," novelist Tishani Doshi, one of the judges, said.
Fernandes has co-authored 'Bombay Then and Mumbai Now', a historical narrative, and was the co-editor of 'Bombay Meri Jaan'. There was initially confusion about whether his book could qualify for a first book prize.
Longlist judges, poet/author Jeet Thayil and writer/arts consultant Sanjay Iyer went through a record 96 books to come up with the final six.
Thayil said in a note, "Bombay Meri Jaan was co-edited by Fernandes, so it doesn't count. Bombay Then, Mumbai Now was billed as being co-authored, but Fernandes only wrote an essay. It's a coffee-table book of photos.
"Would it have been eligible for a first-book prize? Yes, but the photographer would have been the author. Technically (and intuitively), Taj Mahal Foxtrot is Fernandes' first book," he clarified.
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The 2012 panel of judges include literary agent and author David Godwin, poet, dancer and novelist Doshi, and author Basharat Peer.
"This year's shortlist for the Shakti Bhatt Prize was strong and diverse, ranging from an account of the fall of the last King of Burma to a contemporary exploration of womanhood in Chennai," Doshi said.
The prize will be presented on December 20 at the British Council Auditorium, New Delhi. Last year's winner was Jamil Ahmad's 'The Wandering Falcon'.
The shortlisted books this year are 'Tamasha in Bandargaon' by Navneet Jagannathan, 'The Purple Line' by Priyamvada Purushottam, 'The King in Exile' by Sudha Shah, 'The Inexplicable Unhappiness of Ramu Hajjam' by Taj Hassan and 'Calcutta Exile' by Bunny Suraiya.
The prize was set up in memory of talented writer and editor Shakti Bhatt, who died tragically at the age of 27.