First, the partner — a private company — and the partnership shared the name. Then, the partner gave up its name. After this, the partnership gave up its structure and changed into a limited company and took the name vacated by the partner.
This head-spinning restructuring was part of realty major DLF’s business dealings with Robert Vadra, son-in-law of Congress President Sonia Gandhi.
Saket Courtyard Hospitality, the joint venture (JV) between Robert Vadra’s Sky Light Hospitality and the DLF group, has taken three different avatars in the past three years. According to the annual report for the year 2010-11, there were two entities by the same name. The first was Saket Courtyard Hospitality Pvt Ltd, a 100 per cent subsidiary of DLF. (The 2009 annual report says this company was originally known as DLF Saket Hotels.) The second entity was Saket Courtyard Hospitality, a partnership firm.
|A SHIFTING COURTYARD|
|Source: Annual reports 2009 to 2012|
It is to this partnership firm that DLF transferred the Hilton Inn property in the Saket area of South Delhi, for Rs 150 crore. According to the balance sheet, Saket Courtyard the company, had invested Rs 1.4 crore in Saket Courtyard the partnership firm, by virtue of which it had a two per cent profit share in the partnership. The other partners were DLF, entitled to eight per cent profit share, DLF Home Developers (40 per cent) and Sky Light Hospitality (50 per cent). "The company was initially incorporated with the name ‘DLF Saket Hotels Pvt Ltd’ in August 2007. Then, the name of the company was changed to Saket Courtyard Hospitality Pvt Ltd in February 2009 to reflect the location of the hotel atop the Courtyard Mall in Saket. The name was again changed to Saket Holiday Resorts Pvt Ltd once it was decided that the JV format is not appropriate. Once we switched over to a partnership format, the same name was adopted there to reflect its true sense," a DLF spokesperson said in an emailed response.
Legal experts said a company was a more evolved form of enterprise and came with several regulatory obligations. "A partnership is governed largely by the partnership deed between the partners, whereas a company has larger regulatory obligations, including disclosure of names of shareholders, directors and, at the end of the year, filing of balance sheet, etc. It needs to be registered with the Registrar of Companies. The entities may have found the partnership structure more suitable in the initial stages and vice versa," said a legal expert who did not want to be identified.
Also, since the partnership structure comes with unlimited liability on the partners, they’d have preferred a company structure when the entity chose to go for bank funding, key for the hotels business.
In May 2011, Saket Courtyard Hospitality Pvt Ltd was renamed Saket Holiday Resorts Ltd. After the renaming, Saket the partnership was converted into a JV company. This came to be known as Saket Courtyard Hospitality Pvt Ltd with effect from May 26, 2011, according the annual report for the year ended March 2012. While the DLF group owns 50 per cent in the company, Vadra’s Sky Light hospitality owns the rest.
The restructuring does not end here. Two Delhi-based entities, Prowess Buildcon and Cleva Builders, become related parties of DLF on March 31, 2010, almost six months after Vadra entered the JV. They do not figure in the related parties list of the group in the previous year (FY09). The DLF group owned 50 per cent in these Delhi-based construction companies. It is not clear who owned the rest. In 2011-12, DLF had sold development rights to Prowess Buildcon for Rs 161 crore. Prowess owed DLF Rs 132 crore against “trade receivables” on the same date.
The FY12 DLF annual report says that on March 26, 2012, the board of directors had given approval to merge two other DLF joint ventures, Prowess Buildcon and Cleva Builders & Developers Pvt Ltd, into Saket Courtyard Hospitality Pvt Ltd. Both these are listed as construction companies engaged in development of residential projects. The DLF group has 50 per cent ownership interest in these JVs, the annual report said.
In a note to the consolidated financial statements, DLF said these companies “have also filed amalgamation petitions…before the Hon’ble High Court of Delhi at New Delhi and Hon’ble High Court of Punjab and Haryana at Chandigarh as per the respective jurisdictions. The orders for sanction from the respective High Courts are awaited and, hence, no effect thereto has been given in the consolidated financial statements.” If approved, the merger will take effect retrospectively from June 1, 2011.