Taj Mahal and The Connaught hotels move Delhi HC against ₹46 crore licence fee, cites revenue fall during COVID

The Indian Hotels Company Limited (IHCL), which operates the Taj Mahal and The Connaught hotels in Delhi, has approached the Delhi High Court seeking relief from payment of license fee amounting to over ₹46 crore, citing force majeure (act of God) due to the COVID-19 pandemic and prolonged pollution-related restrictions in the national capital. 

Both hotels are owned by the New Delhi Municipal Corporation (NDMC) but operated by the IHCL, which is a part of the Tata Group.

Justice Subramonium Prasad heard the matter on Thursday and issued summons to the civic body. 

The Court also asked the parties to try to settle their disputes through mediation. The case will be heard next on April 23.  

IHCL has filed two separate commercial suits against the NDMC seeking a declaration that in terms of the agreement between the two parties, it is excused from its obligation to pay ₹38.35 crore in licence fees in relation to the Taj Mahal hotel.

According to IHCL's plea, the COVID-19 pandemic between 2020 and 2022 led to extended closures, severe restrictions on operations and an unprecedented collapse in revenues. The hotel was also requisitioned by the State to accommodate COVID-19 patients linked to Sir Ganga Ram Hospital, further preventing commercial operations.

IHCL has argued that between 2020 and 2022, its turnover declined by over 95%. Yet, it continued to pay full employee salaries and incurred over ₹75 crore on community outreach and pandemic relief initiatives as part of the Tata Group’s response. 

The second suit concerns the Connaught-IHCL SeleQtions on Shaheed Bhagat Singh Marg. In this case, IHCL is seeking exemption from paying ₹7.84 crore in licence fees. 

In both cases, IHCL argued that the pandemic and the pollution restrictions qualify as force majeure under its agreements with the NDMC and therefore, it must be excused from paying the license fee. 

Senior Advocates Saurabh Kirpal and Gautam Narayan appeared for IHCL in the Taj Mahal hotel case.

Kirpal argued that the company was badly crippled during the pandemic years and that the present suit is for a declaration that they are excused from paying the license fee during this period. 

Standing Counsel Saurabh Seth appeared for the NDMC and stated that the suit is beyond limitation. He said that payment for March 2020 was due in April 2020, and the cause of action arose in April 2020. 

Seth added that the suit is merely for declaration and is, therefore, hit by Section 34 of the Specific Relief Act. 

Along with Saurabh Seth, advocates Sumer Dev Seth, Neelam Deol, Abhiroop Rathore, Kabir Dev and Sukhvir Singh represented NDMC.