Taj Mansigh: Ministry asks NMDC to cancel refusal right

NDMC has sought opinion of Solicitor General, urban development ministry and home ministry

In a move that could upset Indian Hotel Company's plans to hold on to Taj Mansingh hotel,  the home ministry has written to the New Delhi Municipal Council (NDMC) to cancel the first right of refusal to the company in an open bid for the impending auction of the property.

In its council meeting held today, NDMC decided to step back and seek the opinion of the Solicitor General, the urban development ministry and the home ministry on the matter. “There were a lot of views on this matter. So we decided to get fresh views from everyone,” said Archana Arora, chairperson, NDMC. The civic body had earlier sought the opinion of additional solicitor general R K Khanna on the Taj Mansingh auction last year, after which it decided to go for an auction.  

Until now, NDMC officials had maintained that the first right of refusal safeguards the interest of IHCL in the property. IHCL did not respond to the e-mail query sent by Business Standard.

The council is also supposed to reply to IHCL’s plea for a stay order on the auction of the hotel in Delhi High Court on July 18. Court will pass its order on the injunction suit after listening to both the parties.

IHCL in its plea has claimed to have equity in the property because of which it cannot be treated as any other lessee. Indian Hotels, in its plea, has cited its long relationship with NDMC to grant a stay on the auction process.

It has also said that the company shares its revenue with NDMC as rent every year for managing the property built on NDMC’s land. Indian Hotels said that it has a right to seek an extension of the lease because it "built a permanent structure" and invested in development of the area.

The 33 year lease agreement ended in October 2011, post which NDMC decided to go for an auction instead of renewing the lease of IHCL. Thereafter the civic body had given one year’s lease extension to the company.    

The Taj group pays NDMC 10.5 per cent of its gross revenue annually as rent and it is expected the proposed auction could result in a substantial increase in the figure. The NDMC had appointed Ernst & Young as consultant to advise on the future course of action on the lease renewal.