IHG, Shiva Satya to settle dispute via arbitration

Shiva Satya is now allowed to either manage the hotel on its own or enter a fresh management contract with another hospitality group

This is a modified version of the story. Changes were made after the author spoke to the concerned parties

In the ongoing legal dispute between Shiva Satya Hotels Pvt. Ltd. and InterContinental Hotels Group (IHG) for the erstwhile Crowne Plaza hotel property in Ahmedabad, the latter will be seeking relief via arbitration even as it has withdrawn the special leave petition (SLP) filed in the Supreme Court.

Shiva Satya Hotels had alleged that IHG had provided flawed designs and concepts that required repeated re-designing due to inefficiency and incompetency of the IHG Team, leading to losses running in crores of rupees.

However, in its response, IHG denied Shiva Satya's allegations on flawed designs and has attributed the delay in opening the hotel on Shiva Satya, as well as the contractor appointed by it, and that it will filing for arbitration against Shiva Satya for damages and other reliefs for the for the wrongful premature termination of the HMA.

"The hotel wrongful termination and related issues would thus remain subject matters of legal dispute between the parties and the Hotel is required to maintain its accounts, limiting other operators to look at this property till then, limiting other operators to look at this property," the company stated.

Early in April 2013, Shiva Satya Hotels had terminated the management agreement with IHG to manage the hotel as 'Crowne Plaza', following which the hotel came to be known till today at Shiva Hotel. According to the UK-based hospitality player, it was due to several delays in the opening of the hotel by IHG.

It was IHG which had moved the trial court, followed by the Gujarat High Court and then the Supreme Court against Shiva Satya in its application for an injunction on for the wrongful termination terminated of the agreement.

As part of its grievances, Shiva Satya had alleged that IHG did not make any value addition to the concept, design and other aspects of the hotel. Instead, IHG have provided flawed designs and concept that required repeated re-designing due to inefficiency and incompetency of the IHG team. Further, several changes within the staff of IHG team in India, both in their design and engineering team and top management created further confusion and delays with the opening of the hotel in a timely manner.

According to sources close to the development, Shiva Satya also suffered financial losses and ongoing delays in the opening of the hotel. "As a result, Shiva Satya had totally lost faith and confidence in IHG managing the Hotel. The hotel was incurring a monthly expenditure of around Rs 1 crore for over 12 months without earning any revenue," said sources.

Apparently, Shiva Satya Hotels Pvt. Ltd. had already passed all of the tests and secured the Building Use Permission as well as fire, life and safety (FLS) approvals; elevator and escalator licenses and police department approvals and all other licenses and permits needed to open and operate the hotel as early as December 2012 and January 2013.

"After receiving these necessary permits and approvals required to open and operate the hotel, from the city of Ahmedabad and also from the state of Gujarat, Shiva Satya Hotels. Pvt. Ltd. was free to open the hotel immediately in January or February 2013," sources added.

Besides several requests by Shiva Satya Hotels to IHG to assist them in opening the hotel immediately, IHG allegedly continued to delay the process and had no intentions in helping the ownership of the hotel. Then finally Shiva Satya was forced to take an extreme step and terminate the agreement with IHG.

Shiva Satya Hotels Pvt. Ltd., which invested over Rs. 200 crore to develop and build the 200 room five-star luxury hotel in Ahmedabad, now owns and manages the property with hardly any occupancy rates.