Shimla: The Himachal Pradesh High Court Friday directed EIH Limited, an Oberoi Group company that operates the iconic Wildflower Hall hotel in Shimla’s Chhabra, to hand over its possession to the state government.
Dismissing a review petition filed by the Oberoi Group, the bench of Justice Satyen Vaidya directed EIH to hand over the hotel to Himachal Pradesh Tourism Development Corporation within two months, and sought a compliance report on 15 March, 2024.
The legal tussle between the Himachal Pradesh government and EIH dates back to 2002, seven years after the two parties entered into a Joint Venture (JV) agreement to construct and run a “five-star hotel” in Chhabra. Since the land on which the hotel stands belongs to the state, the JV tasked EIH with bearing the construction cost.
Differences arose when the Himachal Pradesh government proposed to terminate the JV, while allowing EIH to continue operating the hotel with all its rights and liabilities on a leasehold basis. EIH opposed this redrawing of the agreement and took the matter to court.
The EIH first raised a legal dispute with the state government before the Company Law Board, a quasi-judicial body, and the Himachal Pradesh High Court, where it opposed the state’s move to end the JV and replace it with a lease agreement.
The tribunal in July 2005 concluded that the state could have called off the JV to let EIH run the property under a land-lease agreement. It directed the state to facilitate the transfer of all its shares to EIH on payment of a consolidated sum of Rs 12 crore.
Among a slew of directions, the tribunal ordered that deviations in the construction of the hotel should be compounded — excused — by the director for town and country planning on the payment of a “lump sum amount of Rs 5 lakh”.
The EIH was given three months to act in accordance with the law, and in case of failure to do so, the tribunal gave the state liberty to take a fresh decision and action to take over Wildflower Hall hotel and run it.
EIH chose to challenge the award before a single-judge bench of the Himachal Pradesh High Court, and lost in February 2016. An appeal against the single-judge’s decision was also dismissed in October 2022 by a division bench, which held that EIH’s failure to make the hotel fully commercially operational by March 2002 resulted in automatic reversion of the property to the state government.
On 18 November last year, the state government sent an IAS officer flanked by three dozen policemen to execute an order signed by the principal secretary of tourism, Devesh Kumar, to take over possession of the hotel.
The state could, however, hold the possession for merely seven hours as the high court stayed the government action.
Justice Vaidya stated in his 18 November stay order: “Award of the arbitrator had to be executed on the directions issued by it and not by the parties themselves.”
“While deciding the objections of the parties vide its orders on 17 November, the court had specifically asked the state to reveal its option that whether it intended to resume the possession in terms of the award of the arbitrator or not and granted time till 15 December, 2023, for this purpose,” the judge added.
Delivering a judgment in the matter on 17 November, the high court had said EIH had not completed the necessary formalities outlined in the arbitration award to continue with its lease-hold rights.
Director (tourism) Manasi Sahay Thakur was posted as administrator of the property on 18 November.
Speaking to the media the same month, Chief Minister Sukhvinder Singh Sukhu asserted that the state wanted to take back the property.
“We have been contesting this case for 22 years and now the court has decided in our favour. We took over possession of the hotel on the morning of 18 November but the court stayed the action. Our officers were there from 8.30 am to around 3 pm. This is our right and we will claim it. We will fight it legally as well as politically,” he said, adding that “the hotel (EIH) owed Rs 120 crore to the state”.
A senior bureaucrat had told ThePrint in November that the state should not have surrendered the possession on 18 November.
“If the court had ordered a stay, the government should not have left the possession,” he said. “This is Himachal government’s property and the hotel has not paid money to the state. Even after the court’s decision in the state’s favour, the hotel is delaying our rights.”
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The case over the decades
The tribunal in its July 2005 order directed the state to facilitate the transfer of all its shares to EIH on payment of a consolidated sum of Rs 12 crore.
This amount included the cost of land — Rs 7.5 crore — and Rs 1 crore for using the land despite the termination of the JV.
The tribunal said the lease shall initially be for 40 years from the date of its award, renewable thereafter with the consent of the parties. In case of a disagreement, the parties were allowed to approach the court.
The lease rent to be paid by EIH was also fixed in the tribunal’s order. For the first five years, it was to be Rs 1.25 crore annually, with an increase suggested every four years. By the end of the 40th year, EIH would be paying Rs 4 crore annually as lease money to the state, the tribunal said.
The state government, in its petitions in the high court over the years, has contested the EIH’s assertion of having paid money in terms of the arbitration award. It has accused EIH of dragging the litigation for years after the tribunal pronounced its award.
Even after the dismissal of its appeal, EIH never performed its part of the obligation under the award within three months, it said.
The state has also demanded an 18 per cent compound interest on the lease amount fixed by the arbitral tribunal. It said the state should be “compensated for undue delay caused at the end of EIH in implementation of the award”.
Speaking to ThePrint last month, a Himachal government official said the settlement in the case was not easy. “The state government has worked out its share to be around Rs 400 crore and the EIH may object to it. It would result in a prolonged legal battle,” he added.
Justice Vaidya in his Friday order agreed that EIH had failed to comply with the terms of the arbitration award within the mandated period of three months.
“The state is entitled to take possession and management of ‘Wildflower Hall Hotel’ along with the entire property that was the subject matter of the JV,” reads the order.
(Edited by Nida Fatima Siddiqui)