Legal blow: Supreme Court clears auction of Taj Mansingh

In a setback for the Tata Group’s Indian Hotels Company (IHCL), the Supreme Court on Friday rejected its plea to stay e-auction for operations and management of the iconic Taj Mahal Hotel on Mansingh Road in the capital. The firm had wanted some weightage in the e-auction process for its unblemished record in the running the hotel for around 40 years.
A bench led by justice L Nageswara Rao dismissed IHCL’s appeal against the Delhi High Court’s May 22 order that upheld the NDMC’s tender procedure and gave a nod for the proposed auction of the hotel. “We don’t find any reason to interfere with the order already passed… If we give you any weightage then the other bidders won’t participate… You can come later after the bid is opened,” the apex court said.

The HC while refusing to intervene said that it is “apparent that the complex nature of eligibility conditions that NDMC has insisted upon, while considering tenders for the hotel plot, are based on thought and deliberation”. Challenging the New Delhi Municipal Council’s (NDMC) April 25 tender document that set out the terms and conditions of licence, IHCL said that the tender conditions were contrary to the SC order which had also asked the municipal body to take into account the capability of IHCL.

The apex court on April 20 last year had allowed the e-auction of the rights to manage the hotel. However, it had asked NDMC to take into account the unblemished character, track record and capability of the IHCL, which runs the Taj chain of hotels. Stating that the impugned document doesn’t reflect the intent of the SC order, senior counsel AM Singhvi, on behalf of IHCL, said that the tender was to give due weightage to IHCL’s unblemished track record and capability in successfully running the five-star hotel for nearly 40 years and this is “clearly missing” from the impugned document.

The civic body wants to get a higher revenue share for the land which belongs to it and had been given to IHCL on a 33-year lease in 1978, which ended in 2011. Since then, it has been running the hotel on extensions. After expiry of the IHCL’s licence in 2011, a committee of senior government officials was set up to look into the company’s proposal for a 30-year extension to manage the hotel.

However, the council decided to opt for a public auction of the hotel, hoping to fetch a better price for granting the lease of the property. In the extended period the NDMC’s revenue share is at around 17.5% of the gross revenue. Prior to it IHCL paid 10.5% of its gross revenue to NDMC. The Taj group has maintained that it was willing to pay the prevalent market price to renew the lease but was not in favour of an open auction, arguing that it would artificially drive up the property’s price.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.