New Delhi, Apr 22 (PTI) The Delhi High Court on Wednesday upheld New Delhi Municipal Council (NDMC)'s decision to terminate its licence agreement with Bharat Hotels Ltd for land housing 5-star hotel The Lalit at Barakhamba Lane, and demanding over Rs 1,063 crore from it as arrears of licence fees.
A bench of Chief Justice D K Upadhyaya and Justice Tushar Rao Gedela set aside a single judge's December 2023 order that quashed the NDMC's demand notice and communication of termination dated February 13, 2020, as it allowed the civic body's appeal.
"We do not find ourselves in agreement with the impugned judgment of the learned single judge whereby, the aforementioned writ petitions have been allowed and the notice of demand dated 13.02.2020 as also the communication dated 13.02.2020 terminating the Licence Deed dated 22.04.1982 have been quashed," the bench said.
Resultantly, the appeals are allowed and the judgment and order dated December 6, 2023 passed by the single judge is set aside, it ordered.
The land in question was allotted to NDMC by the government of India in 1973 as part of a plan to redevelop the area and it was envisaged that a portion of it would be used for the construction of a 5-star hotel.
On April 22, 1982, a licence deed was executed between the NDMC and the Bharat Hotels for construction and commissioning of a 5-star hotel and two commercial towers for a term of 99 years, with the licence fee fixed at Rs 1.45 crore per annum.
Considering that the licence agreement provided for a revision in the licence fee after 33 years, the NDMC ordered a valuation of the hotel property and accordingly issued the notice of demand seeking Rs 10,63,74,59,852 from Bharat Hotels in three equal instalments within 90 days.
On the same day, a communication of termination of the licence deed was also made by the NDMC and Bharat Hotels was directed to handover the peaceful possession of the premises within 90 days.
In the judgement, the bench noted that after the single judge granted relief to Bharat Hotels, the Land and Development Office under the government of India issued a demand notice requiring NDMC to pay a revised ground rent of over Rs 162 crore as such a revision became due in 2013 as per their allotment agreement.
Noting that as per a decision of the Supreme Court, the NDMC was obligated to adopt the procedure by which it can get maximum possible return/consideration for immovable property, the court held that a clause in the licence deed which stated that the increase shall not exceed 100 per cent of the licence fee was inconsistent with the existing law.
"What we find is that Clause 48 of the Licence Deed dated 22.04.1982 permits maximum licence fee of Rs 2.90 crores annually, whereas, the L&DO has demanded from the appellant a sum of Rs 98 crores per annum towards the ground rent. "Obviously, the huge difference between the licence fee permissible under Clause 48 of the Lease Deed dated 22.04.1982 and the ground rent being demanded by L&DO by the appellant will have to be ultimately borne by the public at large, who are residents of New Delhi and are paying taxes in various forms to the NDMC," the court observed.
"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, 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 payers, who are the residents of New Delhi. Such a transaction, in our opinion, cannot be approved of, else it will be violative of the Article 14 of the Constitution of India," the court concluded.
It also held that Bharat Hotels was rightly found to be in "fundamental breach" of certain clauses of the licence deed with respect to sub-licensing and therefore, the licence agreement was rightly terminated.
Senior advocate Malvika Trivedi and standing counsel Sriharsha Peechara appeared for NDMC.