Saturday, March 16, 2002, Chandigarh, India


M A I N   N E W S

Pathak sought as arbitrator
Wildflower Hall dispute takes new turn
S.P. Sharma
Tribune News Service

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.Back

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