Taj Mansingh auction: Tatas have no right of first refusal, rules HC

28 Oct 2016


The Tata Group's Indian Hotels Company Limited (IHCL) has no right for renewal of the license of Delhi's iconic Taj Mansingh Hotel, said the Delhi High Court on Thursday.

Further, it will also not get the benefit of right of first refusal (ROFR) when its owner, the New Delhi Municipal Council (NDMC), auctions it, the court said.

Right of first refusal would have entitled IHCL to enter into negotiations with NDMC for a fresh contract for the luxury hotel, a landmark of Lutyens' Delhi.

The 3.78-acre property was leased to IHCL by NDMC on 10 October 1978 for a period of 33 years. It was a joint venture between the two, wherein land and construction cost was borne by NDMC and operation and maintenance was with IHCL.

The lease expired on 10 October 2011, following which IHCL went to court challenging the hotel's proposed auction by NDMC.

A bench of Justices Pradeep Nandrajog and Pratibha Rani observed that NDMC was within its power to secure maximum consideration for grant of licence for the property at the prime location of 1, Man Singh Road.

It said, "To put it pithily, IHCL (which runs the hotel) has no right under the licence for a renewal thereof and therefore no further issue needs to be considered and decided."

It further said, "In exercising its right / discharging its duty to secure maximum consideration for grant of licence in relation to property bearing No1, Man Singh Road, New Delhi, NDMC is within its power to ensure that such measures are adopted by it which fetch the maximum revenue.

"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 bench added.

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.

"It overlooks that such a negative stipulation qua the right of the highest bidder 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," the bench said.

It was reported early this year that NDMC was in the process of assessing the assets of Taj Mansingh Hotel in preparation for its much-delayed auction. The consultant hired for the auction by NDMC, SBI Capital Markets, was ironing out the finer details.

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