The Lalit in New Delhi faces existential crisis worth Rs 1,063 crore. Here's why

The Delhi High Court has upheld the New Delhi Municipal Council (NDMC)’s decision to terminate its licence agreement with Bharat Hotels Ltd, the parent company of The LaLiT and to recover over Rs 1,063 crore in arrears of licence fees.

A bench comprising Chief Justice DK Upadhyaya and Justice Tushar Rao Gedela set aside a December 2023 order of a single judge that had quashed the 2020 NDMC notice.

“We do not find ourselves in agreement with the impugned judgment of the learned single judge whereby the notice of demand and the communication terminating the 1982 Licence Deed have been quashed,” the court said.

The land at Barakhamba Lane was allotted to NDMC by the Government of India in 1973 for redevelopment, with a portion earmarked for a five-star hotel. In 1982, NDMC executed a 99-year licence deed with Bharat Hotels for construction and operation of a hotel and commercial towers, with an annual licence fee of Rs 1.45 crore.

The agreement provided for revision of licence fees after 33 years. Following a valuation exercise, NDMC issued a demand notice on February 13, 2020, seeking Rs 1,063.74 crore in three instalments within 90 days. It also terminated the licence and directed Bharat Hotels to hand over possession within 90 days.

The court noted that after the single judge’s ruling, the Land and Development Office (L&DO) issued a demand notice to NDMC seeking revised ground rent of over Rs 162 crore. It observed that the disparity between the licence fee under the agreement and the revised ground rent would ultimately be borne by taxpayers.

The bench held that land in New Delhi is a scarce public resource and any transaction causing financial loss to NDMC cannot be sustained. It further observed that such arrangements would be contrary to Article 14 of the Constitution.

The court also held that Bharat Hotels was in fundamental breach of licence conditions relating to sub-licensing, justifying termination of the agreement.

It ruled that Clause 48 of the licence deed, which limited the increase to not exceed 100 per cent of the licence fee, was inconsistent with the existing law. The court ruled that public authorities are required to ensure maximum return on public assets.

"Clause 48 of the Licence Deed permits a maximum licence fee of Rs 2.90 crore annually, whereas, the L&DO has demanded from the appellant a sum of Rs 98 crore per annum towards the ground rent," the court said.

The court concluded that the NDMC’s demand and termination were valid and that the single judge’s order could not be sustained.

With this ruling, the licence cancellation and the Rs 1,063 crore demand stand restored. NDMC is now entitled to proceed with recovery and related actions, while Bharat Hotels retains the option of approaching the Supreme Court.

(With inputs from PTI)

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