The Oberois have been able to stymie an attempt by the Himachal Pradesh government to grab possession of Wildflower Hall — for now.
Last Friday, officials from the Himachal government swept into the five-star hotel property near Shimla run by the Oberois, through a subsidiary called Mashobra Resort Ltd (MRL), and tried to take control of it on the strength of an executive order dated November 17.
The sudden stealth operation was mounted just days after the death of the Oberoi group patriarch PRS (Biki) Oberoi — and in violation of the terms of an arbitration award handed down in 2005 that neither of the parties accepted in its entirety.
The 77,000 square metre property — which once served as the residence of Lord Kitchener, then commander-in-chief of the British army in India — has been at the centre of a raging legal battle between the Oberois and the Himachal government for over two decades.
The Oberois were able to seek a stay from the Himachal Pradesh high court, which effectively spiked the executive order that the government had drawn up.
The high court has asked the state government to indicate by December 15 whether it is ready to abide by the terms of the arbitral award of May 23, 2005.
The award gives the state government right to the land but also obliges it to lease it out to Mashobra Resort for a period of 40 years.
The Oberois turned the property into a five-star hotel after signing an agreement in October 1995 with the state government to form a joint venture called MRL. Under the terms of the deal, the state government received shares that gave it a 35 per cent stake in the venture. The value of the land had been assessed at Rs 7.5 crore at that time, which was set off against the shares given to the Himachal government.
Things started to turn sour several years later as the hotel could not begin commercial operations within the stipulated four years. Soon, both sides were locked in a legal dispute with the state government trying to scrap the deal and regain possession of the property.
In 2003, a division bench of the Himachal Pradesh high court appointed retired Justice R.P. Sethi as sole arbitrator to settle the dispute.
It permitted the termination of the joint venture agreement with effect from December 17, 2003 but ordered the state government to give out the land on lease for 40 years with an option for renewal on mutually agreeable terms.
The state government would have “no right or liability in MRL except to the extent of the right of a lessor in the land”, the tribunal said.
There were a number of objections raised about the extensions that the Oberois had made to the original property in violation of the sanctions.
The tribunal laid down terms for the payment of lease for the 40-year period with the lease rent rising from Rs 1.25 crore annually in the first five-year period to as much as Rs 4 crore in the final five-year period.
The dispute could not be resolved as neither side accepted the award in totality — a logjam that the state government tried to break with its executive order last week.
In his order dated November 18 granting the stay, Justice Satyen Vaidya said the state government “shall not interfere in the day to day management and possession of the hotel”.
The matter has been listed for Tuesday (November 21) for further hearing.
“Since the execution petitions filed by both the sides are still pending before this court, the Award passed by the learned Arbitrator has to be executed in terms of the directions passed by this court and not by the parties themselves. In this view of the matter, further execution of order dated 17.11.2023 shall remain stayed till further orders,” the order issued on November 18 said.