Delhi High Court refuses to stay Taj Mahal Hotel auction

Written by feBureau | New Delhi | Updated: Apr 10 2013, 07:36am hrs
The Delhi High Court on Tuesday refused Indian Hotels' plea to stay the auction of its prime property, the Taj Mahal Hotel, on Mansingh Road in New Delhi. However, it said that the Tata Group company was free to approach the court if any coercive action was taken by the civic body till the next date of hearing on July 18.

The HC also asked NDMC to explain in two weeks as to why the hotel's lease should not be extended.

Last week, the country's largest hotel chain, Indian Hotels Company (IHCL), moved the Delhi High Court seeking to restrain NDMC from going ahead with public auction plans for the Taj Mahal Hotel.

The move was to preempt the NDMC from conducting any auction of the Rs 2,000-crore hotel, which in September last year got one-year extension of lease till October 10, this year. While the lease given by NDMC to IHCL had ended in October 2011, IHCL got two extensions.

The latest lease extension for the Taj Mahal Hotel at Mansingh Road was given by the NDMC on September 2012. However, the NDMC stated at the time that at the end of the lease, an auction would be conducted, but IHCL would be given the first right right of refusal. This meant that if any other firm outbid it, IHCL would have the option to match the highest bid and retain management control of the hotel.

During the latest extension of the lease, NDMC did not revise the revenue share, which remained at 17.5% of the gross revenue. This was revised in the extension given in 2010 before which Taj paid NDMC 10.5% of the gross revenue.

The NDMC board is likely to meet soon to finalise the terms and conditions of the auction process.

IHCL, while seeking an injunction against such auction, had in its petition, evinced interest in both land and the building. It said that the provision for extension of agreement between the parties cannot be rendered 'superfluous'.

The original licence agreement of 1976 for a period of 33 years (ending on October 10, 2011), entered into between IHCL and NDMC, contained an extension clause; thus, the civic body has no option of conducting auction, IHCL stated in its petition before the HC.

An appeal filed by one Mithilesh Kumar Pandey against the HC order of October 17 that dismissed his petition for termination of the extension of licence by NDMC to IHCL in respect of the hotel is pending before the Supreme Court. The apex court had last month sought a reply from IHCL and the NDMC on the appeal.