DELHI: The union home ministry has said that the Tatas should not be allowed the right of first refusal in the upcoming auction of the Indian Hotels Company-operated Taj Mansingh hotel, opposing the proposal of the New Delhi Municipal Council, which owns the building that houses the luxury hotel in central Delhi.
In a letter to NDMC on May 10, the home ministry said "that the proposal to allow IHCL to have the 'first right of refusal' in the public auction has not been provided for in the lease deed. A provision of 'first right of refusal' will result in lower bids in the public auction. Therefore, the ministry of home affairs is of the opinion that 'first right of refusal' should not be allowed to IHCL in the proposed auction and fresh lease should be granted by open public auction." ET has reviewed a copy of the letter.
The home ministry's views are important since it is the administrative ministry for the municipal body, which has to find a new operator for the hotel by October this year.
Following the development, the civic body has decided to seek the opinion of the Solicitor General of India. "We will seek his opinion through the ministry of home affairs and the urban development ministry, on how to move forward with respect to the lease, considering there are cases pending in the Delhi High Court and Supreme Court," the spokesman for NDMC, AK Mishra, said.
A spokeswoman for the Indian Hotels Company LtdBSE 1.27 %, which runs the Taj hotels and operates the Taj Mansingh hotel under a lease with NDMC, declined to comment as the matter is sub judice. The 33-year lease ended in October 2011 after which the civic body decided to extend the lease with the existing operator for one more year. During this period, the civic body had appointed Ernst & Young to value the property and to find a way forward. E&Y, in its report, suggested auctioning the property, with the first right of refusal resting with Taj.
In its meeting in last September, NDMC had decided to opt for an auction giving the right of first refusal to Taj, while extending the company's lease by another year up to October 2013.
BJP legislator Karan Singh Tanwar, who is a member of the council, blamed the government for the mess. "An open auction should happen in this case but it looks like council members are trying to take another route. The ministry of home affairs has said that first right of refusal will mean loss of revenue," he said .
In April this year, IHCL had filed an injunction suit in the Delhi High Court ahead of a possible auction of the property's lease by the government agency in order to protect its position. The company had claimed part ownership of the Taj Mansingh hotel, which is contrary to NDMC's claim that was also verified by consultant firm Ernst & Young. IHCL claimed that it too had invested in the property when it was built in the late 1970s and, therefore, is a rightful joint owner.
On January 15, IHCL's chief executive officer, Raymond Bickson had told ET: "It was a bare shell project that was stopped (by NDMC), and we had put in all the money to build it. I guess over the long term, we will get it straightened out."