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The iconic Taj Mansingh likely to be auctioned

Last updated on: September 27, 2012 19:55 IST

The iconic Taj Mansingh likely to be auctioned

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BS Reporters in New Delhi


T
he Taj Mahal hotel, popularly known as the Taj Mansingh, the iconic five-star hotel in Lutyens' Delhi, was at the centre of attention, with senior sector representatives lobbying hard ahead of the crucial NDMC (New Delhi Municipal Council) meeting.

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Photographs: Kind courtesy, Taj Mahal Hotel

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Thursday's meeting, to decide the fate of the hotel operated by the Tata group, is expected to firm up plans on how the property should be auctioned, at what deposit and reserve price and the terms of lease.

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Image: The Emperor's Lounge.
Photographs: Kind courtesy, Taj Mahal Hotel

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The iconic Taj Mansingh likely to be auctioned

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It is fairly certain that Taj Mansingh, whose 33-year lease agreement with NDMC expired last year and extended for a year, will not get another lease extension, sources close to the development say.

"At this point, not allowing an auction will be like repeating a 2G scam," said one of the sources.

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Image: Deluxe Room.
Photographs: Kind courtesy, Taj Mahal Hotel

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With agencies such as the CBI, CAG and CVC watching the development, an auction is the only option before the council, headed by Delhi Chief Minister Sheila Dikshit.

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Image: The Taj Club Room.
Photographs: Kind courtesy, Taj Mahal Hotel

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While the Tata group is learnt to be of the view that it has the first right of refusal, many in the legal fraternity argue there is no such provision for the incumbent in the lease agreement.

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Image: The Taj Club Lounge.
Photographs: Kind courtesy, Taj Mahal Hotel

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First right is the "natural expectation" of the incumbent, but there is no automatic right in law, points out Diljeet Titus, managing partner, Titus & Co.

However, the council may allow the Tatas to match the highest bid in the auction, says another lawyer, who does not want to be named.

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Image: Lobby features.
Photographs: Kind courtesy, Taj Mahal Hotel

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The right of first refusal is a contractual right that gives its holder the option to enter a business transaction with the owner of something, according to specified terms, before the owner is entitled to enter into that transaction with a third party.

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Image: Longchamp.
Photographs: Kind courtesy, Taj Mahal Hotel

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While Tata group of hotels bigwigs, including managing director Krishna Kumar, are here, a source says the group has decided the property must be retained "at all reasonable cost".

But it's hard to assess at this point what that "reasonable cost" could be, as it would depend on the bid amounts of other players.

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Image: The Grand Presidential Suite.
Photographs: Kind courtesy, Taj Mahal Hotel

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The probables looking at managing the property include the Oberoi group, Sahara, Accor and ITC, among several others, who will present their revenue-sharing bids.

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Image: The Grand Presidential Suite Study Area.
Photographs: Kind courtesy, Taj Mahal Hotel

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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.

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Image: The Grand Presidential Suite Bedroom.
Photographs: Kind courtesy, Taj Mahal Hotel

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For the extended period, Indian Hotels Company, which runs Taj Mansingh, has been asked to pay 17.5 per cent of gross revenue as rent.

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Image: Tanjore Suite Living Area.
Photographs: Kind courtesy, Taj Mahal Hotel

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The lease issue has acquired a political colour, with Congress and the BJP countering each other. Karan Singh Tanwar, BJP MLA and a member of the council, pointed out Sheila Dikshit was of the view the lease should be extended.

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Image: Wasabi.
Photographs: Kind courtesy, Taj Mahal Hotel

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"But it will be illegal because there are no terms and conditions to extend the lease," Tanwar said. He also touched upon the current sentiment of maximising value through the process of auction.

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Image: Spa.
Photographs: Kind courtesy, Taj Mahal Hotel

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The latest advice from Additional Solicitor General Rakesh Kumar Khanna is NDMC must go for auction.

"Any extension would be a case of fresh grant" as there is no clause in the agreement - between NDMC and Indian Hotels Company Ltd (IHC) - for extension of lease, he observes.

The auction will determine the "fair market price", according to the advice.

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Image: Oriental Suite.
Photographs: Kind courtesy, Taj Mahal Hotel

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Council members include Dikshit, Union sports minister and Delhi MP Ajay Maken, Tanwar and Congress nominee Tajdar Babar. The NDMC had appointed Ernst & Young as consultant to advise on the future course of action on the lease expiring in October.

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Image: Varq.
Photographs: Kind courtesy, Taj Mahal Hotel

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It recommended the Tatas had the right to match the highest bid in an open auction. Harish Salve is the legal counsel for the case.

NDMC was not available for comments. The Tata group has maintained it does not want to talk on the matter.


Image: Villa Medici.
Photographs: Kind courtesy, Taj Mahal Hotel

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The Taj Hotel near India Gate will remain with the Tatas for one more year and will have the first right of refusal in an auction to be conducted within this period.

The breather for the Tata-owned Indian Hotels Company Ltd (IHCL) came at New Delhi Municipal Council meeting, which saw BJP MLA Karan Singh Tanwar strongly objecting to the decision and demanding a CBI probe against the whole affair.

The NDMC decision to extend the lease for one year came even as Additional Solicitor General Rakesh Kumar Khanna has reportedly adviced the civic body to go for auction as it will determine the "fair market price".

The IHCL had entered into a 33-year lease for using the property in 1978 which ended last October and was extended by another year till October ten this year.


Photographs: Courtesy, tajhotels.com

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"It has been decided by the council that the lease will be extended by one year, within which there will be a new bidding process. The IHCL has been allowed to keep the first right of refusal so that they can match the highest bid.

"This has been done to ensure that the existing owner has no problem in operations during this one year period and that the NDMC gains the maximum revenue out of the operations," NDMC spokesperson Amit Prasad said.

The NDMC will continue to get the current 17.25 per cent share from revenue or around Rs 29 crore (Rs 290 million) per year from the hotel, a senior NDMC official said.

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Photographs: Courtesy, tajhotels.com

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The meeting was attended by Delhi Chief Minister Sheila Dikshit, NDMC Chairperson Archana Arora and others.

The Urban Development Ministry has earlier suggested that NDMC should go for open bids for the property in which the Taj Hotel is situated following which an independent consultant was asked to prepare a report on the road ahead.

Tanwar said he opposed the decision to extend the lease. "I opposed it in the meeting and instead suggested that the lease be extended for maximum two months, within which the  new bid can be made," he said.

Demanding a CBI probe, he alleged that in the last one year the NDMC did not do anything to ensure that a bidding takes place.


Photographs: Courtesy, tajhotels.com

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