The Supreme Court on Thursday gave the green signal for the New Delhi Municipal Council (NDMC) to e-auction its 3.78 acre property hosting the national capital’s iconic Taj Mansingh Hotel.

A Bench of Justices P.C. Ghose and Rohinton Nariman agreed with the NDMC’s argument that the first right of refusal is in-built in the very process of e-auction as the highest offer is open before the bidders.

This way, the NDMC convinced the court that there was no need to provide Tata Group’s Indian Hotels Company (IHCL), which had “collaborated” with the NDMC in the latter half of the 1970s to construct and run the five-star hotel, the first right of refusal to match the highest bid at the auction.

The court, however, said the NDMC should keep in mind the unblemished manner in which the Tatas had run the hotel for over three decades, and this legacy should feature the foremost at the auction.

The court observed that in case the Tatas lose out in the auction, they should be gracefully given a period of six months to wind up their commitments at the hotel and leave.

With this, the Supreme Court has in a way confirmed the conclusions arrived at by the Delhi High Court in the latter’s 52-page judgment on October 27, 2016.

The High Court judgment had held that “unless there is a social or a welfare purpose or any other public interest which is served, an asset held for the benefit of the public if commercially exploited, should be sold by way of an auction or an open competitive bidding because it would then fetch the maximum revenue.”

Besides, the High Court had considered the grant of right of first refusal to IHCL as a “negative stipulation qua the right of the highest bidder would obviously have an adverse impact on the bid amount.”

Even the Supreme Court, on January 12, 2017, wanted IHCL to have the first right of refusal in the auction process.

In that order, the Bench had asked the NDMC to re-consider IHCL’s case in the light of a resolution the civic body had made on September 29, 2012.

The 2012 resolution had laid out two options – one, NDMC would grant extension for a further period on the terms and conditions as may be mutually agreed upon with IHCL, and two, the Council would go for a public auction with first right of refusal to IHCL.

The Supreme Court had pointed out on January 12 that even legal opinions rendered by the Attorney General and Solicitor General were in favour of giving a first right of refusal to IHCL.

However, the NDMC, on March 3, said it had opted for e-auction.

Perpetual lease

The Taj Mansingh land was allotted on a perpetual lease by the Centre’s Land and Development to the then New Delhi Municipal Committee on July 13, 1976 for the purpose of setting up a hotel.

IHCL’s offer to construct a hotel building was accepted by the NDMC on April 2, 1976. The 33-year-period of licence for IHCL commenced on October 10, 1978 with the occupation of the hotel by its first paying guest. The 33-year licence period commenced on October 10, 1978, and had expired on October 10, 2011.