Travel and tours company Cox & Kings and hotels major Indian Hotels Limited (IHL) are bound by an unusual business arrangement that has been questioned by the Tatas. The agreement obliges IHL to let Cox & Kings manage the travel counters at all its hotels in India for the next 75 years.
Under the pact signed in June 1996, the Rs 110-crore Cox & Kings will advise, operate and manage all the existing and future travel counters of Taj Trade and Transport Company Limited (TTT) , which is a subsidiary of the IHL.
The agreement is seen by the Tatas as being heavily biased in favour of Cox & Kings, which is virtually controlled by the Kerkar family. Peter Kerkar, chief executive officer of Cox & Kings, however, told Business Standard that the management contract between the two was a fair and transparent one and results in synergistic benefits to both the parties.
The Tatas have objected to the clause for the termination of the long-term contract, which, they say, is one-sided, in favour of Cox & Kings, and to the entire detriment of TTT. It has been argued that the business arrangement is virtually non-terminable and TTTs travel business is at the mercy of Cox & Kings for the next 75 years. The business arrangement is renewable only at Cox & Kings option for a period of 50 years after the expiry of the initial 25-year period.
Significantly, TTT has undertaken that during the tenure of the agreement it will not engage, invest or participate in, or provide assistance or support, directly or indirectly, to any entity which competes with similar travel related business.
The Tatas see the agreement between the two companies as being one-sided for other reasons too. For instance, Cox & Kings is not required to pay any consideration to TTT or Indian Hotels to gain access to the travel counters and supporting offices which provide a virtually captive business from clients of Indian Hotels. Also, while Cox & Kings manages the business, bad debts become the responsibility of TTT.
