Of the three iconic hotel properties owned by the Tatas that have been embroiled in legal disputes for the last year, Taj Palace's lease worries came to an end, at least for the time being, as the Delhi Development Authority (DDA) has renewed its lease for another 25 years provided the Indian Hotels Company continues share 17.25 percent of its annual gross revenues.
Taj Palace’s lease with DDA was set to expire on March 31, 2013. The two parties have been in arbitration since 1997 over rent-related issues and the main point of contention had been calculation of licence fee as a percentage of gross receipts.
According to media reports, DDA was of the view that the hotel chain’s accounts did not show revenue earned from various streams such as the shopping arcade, telephone recoveries, banquet income and other service charges in overall gross receipts in order to artificially keep the licence fee low and minimising its payouts.
A report in the Business Standard last week said that the Tatas have paid the principal amount of Rs 60 crore, including interest, that was due to the DDA so that the property is not auctioned.
"The only reason why the lease won't be renewed is if we find any violations in the terms of the lease agreement. No such violation has been found yet," a Delhi Development Authority official was quoted as saying by the Economic Times.
The renewal for the marquee property in Chanakyapuri, New Delhi, comes at a time when the original lease for two IHCL prime properties —Taj Mansingh in Delhi and Taj Mahal Palace in Mumbai — expired recently.
While the lease for Taj Mansingh hotel expired in October, the 99-year lease for Taj Mahal Palace in Mumbai, which stands on land owned by the Mumbai Port Trust (MPT), ended in 2001-02. The government bodies are yet to extend the two leases.