Himachal Govt asks CAG for audit of Hotel Wildflower Hall

Wildflower Hall

Shimla: Threatened with dilution in shareholding in one of India’s premier hill resorts – Hotel Wildflower Hall, the Himachal Pradesh government has asked Comptroller & Auditor General (CAG) for a special audit of Mashobra Resorts Ltd, the company that Oberoi’s set up with the state as the minor partner to run it.

Principal Accountant General (HP) Rita Mitra confirmed that the state government had made a formal request for a special audit of the company that operates Hotel Wildflower Hall.

“The special audit request is under consideration,” said Mitra.

With burning down of the old heritage building in 1990, the state government entered into a joint-agreement with EIH Ltd, an Oberoi company in the hotel industry, for resurrecting Hotel Wildflower Hall as the states first 5 star hotels in 1995.

Hotel Wildflower Hall Views

The government request letter to CAG states that the equity was worked out on a project estimated to cost Rs 40 crore but on completion it had been drastically increased to more than Rs 104 crore, which resulted in dilution of the government’s shareholding.

What’s more, in about 10 years of operation the hotel has run up losses of Rs 172.62 crore which in the books have been shown as unsecured loans.

Whereas the company has converted an Rs 100.56 Cr unsecured loan into advance against shares for EIH with the intention of converting it into share capital, the government has not given its consent as it would further dilute its equity and has sought a special CAG audit for a detailed examination of the company’s accounts.

Earlier dispute over shareholding had resulted in the government unilaterally cancelling the agreement in 2002, paying back EIH’s equity in a Rs 40 Cr venture and had attempted to forcibly takeover the property.

To start with the government had a 35 percent holding that was reduced to 21 percent triggering the dispute.

The government was restrained by the courts and the matter was referred for arbitration. A 2005 arbitration order held that the partnership was irreconcilable and asked for converting agreement into a leasehold property for which the Oberoi’s were asked to pay Rs 94 crores over a 40 year period.

However, Oberoi’s challenged the arbitration order and the case is pending before the Himachal Pradesh High Court.

Wildflower Hall happens to be one of India’s leading luxury resorts. The group has two more hotels in Shimla.

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