Indian Hotels moves HC to prevent Taj Mansingh auction

Written by feBureau | New Delhi/Mumbai | Updated: Apr 5 2013, 22:00pm hrs
The Tata Groups Indian Hotels Company (IHC), which operates the Taj Mahal hotel in New Delhi, sprang a surprise on Thursday by filing an injunction suit in the Delhi High Court to restrain the New Delhi Municipal Council (NDMC) from auctioning the rights of managing the hotel after its extended lease expires in October.

NDMC owns the land on which the hotel stands while IHC manages the property and pays a revenue-share fee to the former.

IHC contends there is no clause in the agreement between the two sides which stipulates that after the expiry of the 33-year lease, NDMC has the right to conduct a public auction to decide who gets to manage the hotel, which is located at Man Singh Road in tony Lutyens Delhi.

IHC has held that the lease should be renewed for another 30 years on revised commercials for which it is agreeable and even approached NDMC.

Indian Hotels Company Limited on behalf of Taj Mahal Hotel Delhi, has filed an injunction suit in the High Court in order to protect its position. As the matter is now sub judice, we are not in a position to comment on this any further. We would like to reassure our guests, employees and business partners that we are committed to delivering the highest quality of service at all times and it is business as usual, a company spokesperson said.

IHC move comes at a time when NDMC is preparing to invite requests for proposal (RFP) for the auctions. According to an NDMC official, the RFP will come up for discussion at the council meeting on April 10.

We have no idea why IHC has filed the injunction suit. The only possibility could be that they must be eyeing automatic renewal of the lease. The RFP is being prepared and the process will begin as soon as the proposal is approved by the council, an NDMC official said.

Interestingly, the IHC move to file an injunction comes within days of the company securing a 25-year lease renewal for another of its prime hotels in the capital, the Taj Palace Hotel, from another civic agency, the Delhi Development Authority.

The 33-year lease of IHC ended in October 2011 and was extended by a year by revising the revenue share licence fee. However, in September 2012, NDMC once again granted a one-year extension to the company, stating that at the end of it, an auction would be conducted but IHC would be given the right of first refusal. This meant that if any other firm outbid it, IHC would have the option to match the highest bid and retain management of the hotel.

In the newly-extended period, NDMC did not revise what the company would have to share with it, which is 17.5% of gross revenue. This was revised in 2011 when the lease expired and was extended by a year. Prior to it, IHC paid 10.5% of its gross revenue to NDMC.

Industry groups like the PRS Oberoi-led EIH, which owns the Oberoi Group of hotels, and the Sahara and Accor groups have shown interest in the property should there be an auction.