The Union Government’s recent decision to revise the annual ground rent for several prominent five-star hotels in New Delhi has ignited a legal storm. The hefty increases, from thousands or lakhs of rupees to crores, have prompted at least two hotels, The Imperial and The Claridges, to challenge the move in the Delhi High Court. The Land and Development Office (L&DO) under the Union Ministry of Housing and Urban Affairs issued demand notices in March this year to The Imperial and Claridges, demanding Rs 177.29 crore and Rs 69.37 crore, respectively.
These amounts were recalculated from 2002 and 2006, up to the present day. According to the L&DO, the revised rates were calculated at Rs 8.13 crore annually for The Imperial and Rs 3.85 crore annually for Claridges. This represents a substantial increase from the previous rates of Rs 10,716 and Rs 8.53 lakh per year, respectively. These new rates were determined to be 5% of the property value of the plots as of 2002 and 2006. The lessees of both plots have challenged the retrospective application of the revised rates, terming it arbitrary, and have taken the matter to the High Court. The cases, heard in May, have been scheduled for a subsequent hearing on July 22.
The historical context of these leases dates back to the British era when New Delhi was being developed as the capital. The 7.938-acre plot on Janpath Lane, housing The Imperial, was leased perpetually to S B S Ranjit Singh from April 8, 1932. The current joint-lessees argue that the recent demand notice issued on March 28 was abrupt and lacked a show-cause notice. They contend that the last revision in 2006 covered the period up to 2032, making another revision premature. Similarly, the 2.94-acre plot on Dr A P J Abdul Kalam Road, where Claridges stands, was leased to Lala Jugal Kishore on November 12, 1936. Claridges Hotel Pvt Ltd, which acquired the property in 1972, argues that the March 27 demand notice contradicts lease clauses stipulating a 30-year revision cycle and limiting the ground rent to one-third of the plot’s letting value.
They highlight that the last revision, effective from January 15, 2016, should have set the next revision date at January 14, 2046. The L&DO justifies the new rates by citing an ad-hoc policy from December 24, 1983, intended to address delays in determining letting values. However, they insist that this policy was only for the initial revision. They claim the 30-year period for both properties expired in 2002 and 2006, necessitating the revised rates at 5% of the land value. The notices issued by the L&DO gave the hotels 30 days to comply, warning of a 10% annual interest for non-payment. In their May hearings, the High Court directed the L&DO to conduct hearings with the lessees before finalising the ground rent. Subsequent rounds of hearings are scheduled, and similar demand notices have been issued to other five-star hotels in Delhi.
