Delhi HC revives ₹1,063 crore demand from Bharat Hotels; upholds termination of LaLit Hotel licence deed

The Delhi High Court has reinstated the New Delhi Municipal Council (NDMC) demand for over ₹1,063 crore in pending licence fees and upheld the termination of the licence for the land housing the LaLit Hotel and the World Trade Center [New Delhi Municipal Council v. Bharat Hotels Ltd & Anr].

A Division Bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela allowed an appeal moved by NDMC against a single judge's 2023 decision to set aside the demand for arrears of licence fee and termination of the lease deed executed in 1982.

The Court found that Bharat Hotels had breached the terms of the licence deed by executing documents for sale and transfer of shop/office space in the World Trade Center to Indian Wind Power Association (IWPA). It refused to accept the claim that Bharat Hotels was unaware about it.

"The Collector Stamps in his order dated 26.06.2018 has clearly recorded that the transfer effected by Ms. Ghazala Shameem and Mr. Owais Usmani through the said documents in favour of IWPA were all with confirmation by the respondent no.1," the Bench said.

In 1973, the Union Ministry of Housing and Urban Affairs had allotted the land to NDMC. In 1982, the municipal body granted a 99-year licence to Bharat Hotels to build and operate a five-star hotel on the land.

The Central government subsequently raised the annual ground rent, which was to be paid by NDMC. Consequently, NDMC in 2020 demanded ₹1,063 crore arrears of licence fee from Bharat Hotels. It also terminated the licence deed for breach of contract, alleging illegal sale and sub-licensing land to a third party without prior approval.

Bharat Hotels then moved the High Court with a writ petition challenging the decisions. Justice Yashwant Varma in 2023 quashed the demand and also set aside the termination of the licence. Against this order, NDMC filed an appeal before the Division Bench. 

In the judgment delivered on April 22, the Court said that the Clause 48 of the licence deed executed in 1982 permits maximum annual licence fee of ₹2.90 crore from Bharat Hotels. However, the Ministry of Housing and Urban Affairs, demanded an annual sum of ₹98 crore per annum towards the ground rent.

The Court observed that the difference would ultimately have to be borne by the public, who are residents of New Delhi and are paying taxes in various forms to the NDMC.

“There cannot be any doubt that land in New Delhi is one of the scarcest natural resource which has been put to management by the owner of the land, namely, L&DO [Land & Development office], to the NDMC and accordingly, if any transaction in respect of such a land is resulting in such a huge loss to NDMC, the burden gets transferred to the tax payer, who are the residents of New Delhi," the Court added.

Further, the Court stressed that such alienation or parting of natural resources should always be guided by public interest. It added that the alienation of scarce resources such as land for commercial purpose without any welfare purpose may be arbitrary.

“While we acknowledge that alienation of natural resources is a policy decision, as held in Presidential Reference (supra), however, when such a policy decision is not backed by a social or welfare purpose and precious and scarce natural resources are alienated for commercial pursuits of profit maximizing by private entrepreneurs, adoption of means other than those which are competitive and maximise revenue may be arbitrary and violative of Article 14 of the Constitution of India.”

Senior Advocate Malvika Trivedi with Advocates Sriharsha Peechara, Ashish Tiwari, Bani Dixit, Soumit Ganguli, Shailendra Slaria, Sujal Gupta, Ravicha Sharma, Shruti Agarwal, Sahib Patel, Akash Sharma and Anurag Tiwari appeared for NDMC. 

Senior Advocates Sandeep Sethi, Darpan Wadhwa and Shyel Trehan, with Advocates Amer Vaid, Manmilan Sidhu, Ankit Tyagi, Gyanendra Singh, Anubhav Yadav, Bhumika Bhatnagar, Sonali Jaitley Bakhshi, Jaiyesh Bakhshi, Ravi Tyagi, Mayank Mishra, Rohan Poddar, Riya Kumar, Shreya Sethi, Vidhi Jain and Krishna Gambhir appeared for Bharat Hotels.

[Read judgment]