Shimla, March 15
The dispute over the Rs 100-crore
Wildflower Hall here today took another turn with East India Hotels
Ltd. (EIH) of the Oberois invoking arbitration in accordance with
Clause 17 of the joint venture agreement with the Himachal Pradesh
Government and returning the cheque for Rs 9 crore which was paid to
them at the time of termination of the agreement last week.
It is
learnt that in reply to the notice of termination of the agreement by
the state government, the EIH has asked the state government to concur
in the name of Justice R.S. Pathak, former Chief Justice of India, to
act as the sole arbitrator in accordance with Clause 17 of the joint
venture agreement.
In a letter to the Secretary (Tourism), the EIH
has said that none other than Justice Pathak was acceptable to them to
act as the sole arbitrator and in case the state government did not
agree on his nomination, he should be their arbitrator and the
government should appoint its own arbitrator within 30 days.
The EIH
has said that the grounds on which the government has terminated the
joint venture agreement were “baseless and an afterthought”. They
have denied that the commissioning of the hotel was unduly delayed and
Mashobra Resorts (joint venture of the EIH and the state government)
was burdened with escalation of more than 100 per cent. The Board of
Directors was kept informed of the progress of the project in every
meeting and the members approved the project costs from time to time.
It has been pointed out that the termination of the agreement on the
plea that the EIH had failed to make the hotel commercially
operational within four years of the allotment agreement, was a
“misreading” of the joint venture agreement. The period for making
the hotel commercially operational has not yet expired as the
possession of the premises was handed over to the company on May
3,1996 and, moreover, the period was extendable by two years on
payment of penalty.
Even then the hotel was made fully operational
well within the stipulated period by April 18,2001.
The EIH has
denied that they unauthorisedly changed the equity ratio without
obtaining the permission or consent of the state. At the time of
incorporation of the company, it was stipulated that the EIH or its
associate companies shall subscribe 36 per cent to 55 per cent and the
government shall contribute the share capital of at least 35 per cent.
Subsequently, the share capital of the company was increased from time
to time with the approval of the Board of Directors without objection
from the representatives of the government who were present at the
meetings of the board.
The EIH has pointed out that the change in
the distribution of equity in the capital was due to the failure of
the government to subscribe to the fresh issue of equity.
The
letters of the state government dated January 16, 1999, and September
12, 2000, have been quoted by the EIH in which the state government
had expressed its inability to subscribe to the shares. They have also
denied that they made certain payments to their associate companies
without the approval of the Board of Directors.
