Tata Group’s The Indian Hotels Company (IHCL) can continue to run the Taj Mahal hotel located on Mansingh Road in Lutyen’s Delhi by extension of the lease agreement if the New Delhi Municipal Council (NDMC) goes by the legal opinion submitted by Solicitor general Mohan Parasaran.
Responding to the NDMC’s query on whether the lease can be extended by mutual consultation or whether it should call for bids by giving IHCL the right of first refusal (RoFR), Parasaran in his 60-page opinion, has categorically ruled out the bidding route along with the RoFR since it violates the Central Vigilance Commission’s guidelines of post-tendering negotiations. The solicitor general has held that any bidding process that comes along with the RoFR is tantamount to post-tendering negotiations.
He has also ruled out a third option — public auction and termination of existing arrangement between IHCL and NDMC because it would neither serve the “common good” nor completely safeguard the interests of NDMC. If this option is pursued, the ensuing litigation would ensure that NDMC is not able to realise fair revenue.
In gist, the solicitor general’s opinion states that since the agreement between the two is in the nature of a joint venture and in the last more than 30 years NDMC has benefited in terms of revenue share earning the best course would be to extend the lease; however, it should be done in a manner that NDMC realises the fair market value. “...in my view, subject to all the safeguards..., the option to renew the licence in favour of IHCL provided that a fair, market value is arrived at, the NDMC’s decision cannot be termed as unfair and would be within the requirements of statutory and constitutional parameters,” Parasaran has stated.
He has also suggested that apart from evaluating the offer of IHCL as to whether it would safeguard interests by maximising revenue share, NDMC should get the offer verified by a reputed and independent expert valuer.
“...if the NDMC chooses to go ahead with this option of negotiating the licence with IHCL and arriving at a revenue-sharing model at market value which will best serve the financial and revenue interests, it cannot be termed as unlawful or arbitrary”.
The land on which the hotel is located belongs to NDMC which was leased to IHCL for 33 years for running the hotel on a revenue-sharing basis, with IHCL paying 17.5% of the