Govt opposes Delhi hotel's freehold move

Another divestment carried out by the former NDA government has run into litigation.

The urban development ministry has opposed the bid of Hotel Excelsior Private Ltd, which runs the five-star Shangri La Hotel in the Capital, to get its property converted from leasehold to freehold.

The company took over Kanishka Hotel during the disinvestment scheme under the NDA regime.

According to government policy, the hotel was given to the company on a 99-year lease. However, the company had approached the Delhi High Court two years ago, seeking conversion of the property from leasehold to freehold, thereby confirming its ownership rights of the land as well.

This permission was granted by a single-judge Bench. The ministry has now challenged the singe judge's order and filed an appeal before the Division Bench of the high court.

With crores of rupees at stake, this will be a heavily contested litigation for the government because at the time of disinvestment, the government had not taken into account the market value of the hotel land while fixing the reserve price.

Only the business was sold and not the land. The land value assessed at that time was also much lower than the pre-determined commercial rate.

The government's appeal came up for hearing on Tuesday before Justice MK Sharma and Justice Hima Kohli. The hotel was represented by senior advocate Jayant Bhushan, who accepted to file the reply to the petition by March 21, 2007.

Bhushan, however, opposed the government's plea to stay the implementation of the single judge's order. This contention was accepted by the Division Bench, which issued notice on the stay application.

According to the petition, conversion into freehold of divested hotels, including Kanishka Hotel, was not in public interest and the hotel was not eligible for conversion according to the government's conversion policy framed in June 2003. Further, the government had never envisaged granting freehold rights to bidders and its conversion policy was not applicable to the divested hotels.

The ministry has claimed that conversion policy is applicable to just residential and commercial plots. If the conversion was allowed without recovery of the actual premium of land, the whole process would result in a huge financial loss worth hundred of crores to the exchequer, it added.

The divestment was apparently made on the specific condition of giving the property only on leasehold basis as allowing conversion would have given unintended benefits to the bidders. The government has claimed that disinvestment had not passed the land's ownership to the company.

The government had leased premises of Hotel Kanishka covering 12,790 square metres to Hotel Excelsior Pvt Ltd under its divestment policy for operation and management in October 2002.

The hotel had not paid the cost of the land and was only entitled to run the business. Ownership of the land was still with Land and Development Office, the ministry said.

It said Hotel Excelsior had also failed to clear encroachments on the government land. The company had also failed to deposit the required conversion fee of Rs 4.44 crore and had asked the Land and Development Office to adjust the security deposit of Rs 4.6 crore in this regard.