New twist in Delhi's Taj Mansingh lease tangle

Just a month before the lease period for the Taj Mansingh Hotel in Delhi expires after being extended for a year, Union urban development minister Kamal Nath has added a new twist by saying “There’s a provision in the lease agreement to renew the lease with the existing operator, Indian Hotels Company (IHCL),” the Economic Times reported today.

The New Delhi Municipal Corporation (NDMC) had extended for one year thelease agreement with the Tata-owned IHCLin October 2011, when the earlier lease ended.

A clause in the licence deed provided that “the licensor shall have the option to grant the licence for a further period on such terms and conditions as may be mutually agreed upon between the licensor and the licensee… if the licensee shall be desirable of obtaining the licence for a further period after the expiry of the present licence…”

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In August 2011, the Union Ministry of Urban Development suggested that fresh bids should be invited for the property while giving right of first refusal to IHCL.

During this period, the civic body was to decide on the way forward. The private consultant, Ernst & Young, hired by the NDMC has, reportedly, submitted its final report, listing the pros and cons of both an open auction for the property and extension of lease with the company. The NDMC’s final decision, however, is awaited.

It remains to be seen whether NDMC will give another temporary extension to Taj until it takes a final call on the property. Another Times of India report says with only 22 days left for the lease to expire, NDMC is left with no option but to “extend the lease till the bidding process is complete”.

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Incidentally, the lease for IHCL’s Taj Palace Hotel on Sardar Patel Marg in Delhi also expires on 31 March 2013. Even though the hotel chain has expressed its interest in extending the 30-year-old lease for another 25 years, it looks like IHCL will have to fight for the two landmark properties if the Delhi Development Authority (DDA) decides to put Taj Palace up for auction too.