Business Line 09.04.2013
High Court declines to stay auction of Taj Mansingh property
Hotel, has failed to stop New Delhi Municipal Corporation from
auctioning the land on which the hotel stands.
Declining to stay the auction process set off after the lease of the
Tata group company expired, the Delhi High Court issued notice to the
civic body to respond to the company’s plea seeking to restrain NDMC
from auctioning the property.
The court, however, said that NDMC cannot dispossess Taj from the
property till it delivers its final verdict. It has also said that
Indian Hotels is free to approach the court if the civic body takes any
“coercive” step.
While the corporation needs to respond to Taj Hotel’s plea within the next two weeks, the next hearing has been set for July.
NDMC Counsel Madhu Tewatia said the civic body is free to go ahead with
the auction procedures and take decisions on the terms and conditions of
the auction as it is looking for more revenue from the property.
She added that the auction process will anyway take two-three months by which time the next hearing may take place.
NDMC officials said that as there is no stay on the auction process, the
civic body will take up the Request for Proposal for the auction and
its terms and conditions at its next board meeting, scheduled for
Wednesday.
Revenue share
The property in the heart of ‘Lutyen’s Delhi’ reportedly contributes nearly Rs 150 crore to the hotel chain.
Analysts believe the increased revenue share during the extension period
impacted the hotel’s profit margins. Any sharp increase in the fees may
render the property unviable, they say.
Rashesh Shah, analyst at ICICI Securities, said, “The bidding process is
likely to see the licence fee increase to 20 per cent of the gross
revenues, beyond which it will make the property unviable for
operations.” Indian Hotels will have the first right of refusal and will
need to match the highest bid to retain the property. IHCL had earlier
sought restraint on NDMC from auctioning the property and had asked the
court to pass a “decree of permanent injunction” and prevent the civic
body from conducting auction to run the hotel in its injunction suit.
Meanwhile, a Taj Hotels spokesperson said: “During the course of hearing
the Delhi High Court today asked NDMC to respond to Indian Hotels
Company on the injunction suit filed on April 4, 2013. The court has
given them two weeks to do so. The Court will consider IHCL’s plea
seeking an interim injunction on the next date of hearing… As the matter
is now sub judice, we are not in a position to comment on this
any further. We stand committed to the city of Delhi, all our guests,
employees and partners and business continues as usual.”