Delhi HC revives ₹1,063 crore dues, upholds termination of The LaLit licence in NDMC case

In a setback to Bharat Hotels, which owns The LaLit Suri Hospitality Group, the Delhi High Court on Wednesday revived the New Delhi Municipal Council's Rs 1063.74 crore license fee demand and also the termination of licence for The LaLit, a five-star hotel in the Capital, for breach of 1982 licence deed.

Upholding the civic body's communication to terminate the license deed with Bharat Hotels and handover the peaceful possession of The LaLit premises in New Delhi to the NDMC within 90 days, a division bench (DB) comprising Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela said that Bharat Hotels had rightly been found to be in fundamental breach of the clauses of the licence deed signed with the municipal body in 1982 and therefore, the licence of the hotel had been rightly terminated by the civic body.

​"There cannot be any doubt that land in New Delhi is one of the scarcest natural resource which has been put to management by the owner of the land, namely, Land and Development Office (L&DO), to the NDMC and accordingly, if any transaction in respect of such a land is resulting in such a huge loss to NDMC, the burden gets transferred to the tax payer, who are the residents of New Delhi. Such a transaction, in our opinion, cannot be approved of, else it will be violative of the Article 14 of the Constitution of India," the DB said, while setting aside its single judge's order that had quashed both the demand notice and also the communication of February 13, 2020 terminating the Licence Deed.


The civic body had claimed that as per the terms of the license agreement Bharat Hotels had only been conferred a right to create a sub-license with the prior consent of the municipal council and that it could not have, in any case, sold or transferred the property. It said that the nominees of sub-licensee of Bharat Hotels had executed various documents in 2016 in favour of various companies, including Indian Wind Power Association with respect to shops and offices spaces, which were agreements of sale, purchase and transfer. This was in clear breach of the clause of the license deed and Bharat Hotels had knowledge of this sale, purchase and transfer agreement, it said.

The court noted that Clause 48 of the Licence Deed of April 22, 1982 permitted maximum licence fee of Rs 2.90 crore annually, whereas, the L&DO had demanded from Bharat Hotels Rs 98 crore per annum towards the ground rent. "Obviously, the huge difference between the licence fee permissible under Clause 48 ... and the ground rent being demanded by L&DO will have to be ultimately borne by the public at large, who are residents of New Delhi and are paying taxes in various forms to the NDMC," the judgement stated.

In 1982, the civic body had signed a license deed with Bharat Hotels for construction and commissioning of a five star hotel and two commercial towers. The license fee of Rs 1.45 crore per annum was to be paid by Bharat Hotels. The term of the license period was for 99 years with effect from 1981. Thereafter, the civic body quantified the enhanced license fee on valuation reports obtained from property consultancy firms and accepted the SBI Capital Markets' report, fixing the license fee consequently at Rs 98 crore per annum with effect from March 11, 2014 till the remainder period of the license.

In 2020, the NDMC asked Bharat Hotels to pay Rs 1063.74 crore towards arrears of licence fee with enhanced rate, along with interest, arrears of outstanding license fee with interest. The civic body had simultaneously sent another communication whereby the licence granted to the hotel group in April 1982 in respect of land admeasuring 06.058 acre at Barakhamba Lane, New Delhi, was terminated with immediate effect. The five-star hotel, The Lalit, is situated on this land. Bharat Hotel was also required to handover the peaceful possession of the premises to NDMC within 90 days. The company had challenged both the communications in the court

However, Bharat Hotels had argued that Cause 48 provided that the determination of the increased licence fee, though, would depend on the market value of the plot in question, but such enhancement cannot exceed 100% of the amount of licence fee which is due immediately before the enhancement. The agreed licence fee for first 33 years was Rs 1.45 crore which could be enhanced to the maximum of Rs 2.90 crore in terms of Clause 48, the company argued, adding that the determination of the enhanced licence fee to be paid by it as per the demand notice was absolutely illegal, being contrary to such a stipulation.