Kerkar: Eye of a storm

New Delhi, Aug. 18: The government today promised an investigation into the manner in which Centaur Hotel, Juhu, was sold at a price below that recommended by valuers to a company floated by Ajit Kerkar, a former director on Air-India’s board.

The airline board had taken the decision to sell the property soon after Kerkar resigned from the board to float Tulip Hospitality Services — a company that eventually bought the prized hotel in the heart of Mumbai for Rs 153 crore, despite failing to pay instalments in time.

Finance minister P. Chidambaram made it clear he tended to “agree” with the demands for “an inquiry” but said he would await for a report of the Comptroller and Auditor General of India on the issue.

The man in the eye of the storm, former disinvestment minister Arun Shourie told The Telegraph outside Parliament that he felt “vindicated” as the government had come out with a “fair statement”, which showed how he had insisted on full payments due from the sale.

Chidambaram, who spoke after CPM MP Dipankar Mukherjee and Shiv Sena MP Sanjay Nirupam raised the issue in the Upper House today, expressed “discomfort at the valuation” of the property and said the hotel’s financial position was not so desperate that the government had to pursue a single bidder or to go in for an unusual meeting with bankers to see that overdue instalment payments came in.

He said the asset valuers had recommended a price of Rs 214 crore and Rs 246 crore, based on different methods of asset valuation. The global advisers to the issue, for reasons known to them, decided this should be adjusted to Rs 134 crore.

However, even this amount was not accepted as the reserve price; instead a depreciated cash flow method, was followed. A range of prices, from Rs 81.7 crore and Rs 121.7 crore, was arrived at. Ultimately, the committee of advisers agreed on a reserve price of Rs 101.6 crore.

Of some 20 bidders, three were disqualified and 16 chose not to respond. Tulip was the sole bidder left and was asked to pay 10 per cent of the amount by December 21, 2001, and the remaining 90 per cent into an escrow account on the same date.

However, Tulip made a series of representations seeking extensions. Three such extensions were given. Inadequate guarantees were also offered but not accepted.