Indian hotels company-NDMC dispute: Experts share the legal implications

The order by Supreme Court noted that while holding the auction NDMC had to “take into account the unblemished track record of the petitioner hotel as well as its capability”. Experts share the legal implications of this observation:

‘SC’s appreciation can buy Indian Hotels Company more time’

The NDMC wanted to auction the lease, as was the mandate under the New Delhi Municipal Act, 1994. IHC unsuccessfully sought an automatic extension and a right of first refusal before the Delhi High Court and the Supreme Court. What it ultimately got was a pat on the back from the Supreme Court, which asked the NDMC to “take into account the unblemished track record of the petitioner hotel [IHC] as well as its capability” while auctioning the lease. 

It is probably unprecedented that in a direction calling for fresh unbiased auctions, the court gives a window to one party, more so, for the reason that the party concerned has contested the auctions. When the bidders are eyeing to claim stakes on the property from all corners of the globe, such a small window may (or may not) make all the difference.

‘Must have strong qualification criteria for bidders’

The Delhi High Court has held that IHC does not have the right to a renewal of the licence for the Taj Mansingh hotel. The High Court has also rejected IHC’s contention of the right of first refusal to match the bid price of the highest bidder, as it felt it would adversely affect the bid process. In this order, the Supreme Court has not interfered with the Delhi High Court judgment, which has directed auctioning the property. 

The Supreme Court has only added that given the peculiarities of this case, namely the iconic nature of the property and its brand value, the NDMC should exercise its powers in a manner that ensured that the selected bidder was capable of taking forward the goodwill of the hotel. The rationale behind this addition by the Supreme Court was to ensure the selection of a bidder who enhances the value of the property just as IHC has done over the years.