The Delhi High Court on Thursday allowed the New Delhi Municipal Council (NDMC) to proceed with the auction process of the Taj ManSingh Hotel.
The Delhi High Court dismissed the plea by the Indian Hotels Company ltd, (IHCl), a subsidiary of Tata Group, to renew its licence and upheld NDMC’s decision to go for auction. The company said it will move the Supreme Court against the HC ruling. Recently, Cyrus Mistry, the ousted chairman of Tata Sons, had sent a letter to the company’s board of directors saying that Indian Hotels had written down the net worth of the property because of poor acquisition strategies.
A Bench of justices Pradeep Nandrajog and Pratibha Rani dismissed the appeal but without any order as to costs, filed against a court order passed on September 5. Justice V Kameshwar Rao had said Indian Hotels did not have the right to automatically extend its licence to run the hotel in question. The court had ruled in favour of the New Delhi Municipal Council and granted it permission to auction the property.
The Bench observed that NDMC was “within its power” to secure maximum consideration for grant of licence for the property at the prime location of 1, ManSingh Road in lutyen’s Delhi.
“To put it pithily, IHCl has no right under the licence for a renewal thereof and therefore no further issue needs to be considered and decided. It being settled law as per said judgment that unless there is a social or a welfare purpose or any other public interest which is served an asset held for the benefit of the public, if commercially exploited should be by way of an auction or an open competitive bidding because it would then fetch the maximum revenue,” the judgement said.
“As regards contention of the IHCl that even if the fair consideration is determined at a public auction it must be with right of first refusal to it. It overlooks that it would obviously have an adverse impact on the bid amount for the reason the right of the highest bidder would be subject to a right created in favour of IHCl and common sense and logic dictates that why would a person bid for something which he is told is to be his subject to somebody else not matching his bid price. Thus, NDMC would be entitled to the stand that it is entitled to determine the value of its property for purposes of grant of a licence by way of a fair competition,” it said.
In its verdict, the division Bench referred to a Supreme Court judgement and said, “...Unless there is a social or a welfare purpose or any other public interest which is served, an asset held for the benefit of the public, if commercially exploited should be by way of an auction or an open competitive bidding because it would then fetch the maximum revenue.”
The property, owned by NDMC, was given to IHCl on a lease of 33 years as per the license Deed dated December 18, 1976, which commenced on October 10, 1978, expired on October 10, 2011. The original agreement expired in 2011, but the Tata group subsidiary has been running the hotel on extensions. The company was given nine temporary extensions since then on various grounds, with three of them granted last year itself. The NDMC had in January this year said it was in the process of assessing the assets of the hotel in preparation for the much-delayed auction of the property.
The Bench also dealt with IHCl’s contention that even if the fair consideration was determined at a public auction, it must be with right of first refusal to it. The division Bench had on October 24 reserved the verdict on IHCl’s plea in which they have challenged the single judge order dismissing their suit seeking to restrain NDMC from auctioning the property.
IHCl had earlier approached the single judge bench of high court seeking a decree of permanent injunction restraining the NDMC from interfering in any manner with the possession, right to operate, run and maintain the hotel premises.
On September 25, a single judge had dismissed the suit by the current operator, IHCl , to renew its licence and upheld the NDMC’s decision to go for auction. Next day, the IHCl filed an appeal before the division Bench against this order.