Himachal Government Cashes Oberoi Dividend In Hotel WildFlower Hall Dispute

Shimla: A decade old bitter battle over ownership of niche Hotel Wildflower Hall is being contested in the courts between Himachal Pradesh government and Oberoi Group but that did not stop the state government from accepting an Rs 60 lakh dividend cheque, the first one declared since the property was handed over to the private sector in 1995, at its recently held board meeting.

Top government officials confirmed to Hill Post that the government had received a dividend of about Rs 60 lakhs from Mashobra Resorts Ltd, a joint venture company between HP Government and Oberoi Group Company EIH Ltd.

“The dividend was handed over at a board meeting held recently,” said the senior government official in the know of things, but declined to come on record.

What has raised eyebrows, the government has accepted the dividend payout even though a high profile case is being contested in Himachal Pradesh High Court for the past decade in which both sides to the dispute have deployed legal hawks who descend from Kolkatta and Delhi for each hearing that takes place in the courtroom, mostly held before the chief justices court. Legal fee bills (http://www.zintego.com/) are said to have crossed crores of rupees till date.

Wildflower Hall, Shimla in the Himalayas - An Oberoi Resort 01-1
Wildflower Hall in the Himalayas

What is even more surprising is that the government has made no disclosure about having received any dividend from the Mashobra Resorts even though it is fighting a bitter ownership legal battle.

Mashobra Resorts Ltd has reported a profit for the time and the government has earned its first dividend from having disinvested the prime hotel site in 1995.

The turnaround in the business is all the more profound because only till 2011, Mashobra Resorts was incurring losses that had crossed Rs 172 crores and had run up a bill of Rs 100 crore as unsecured loans from EIH Ltd, a promoter partner in the company.

A resolution in the board to clear the balance sheet by converting the loan amount into equity that would reduce the HP government shareholding from 21% to 4% was contested in court, which restrained the board from doing so.

The dispute over ownership broke out in 2002, when the state government unilaterally cancelled the joint venture agreement and forcefully attempted to take over the built up property.

Not having the wherewithal to rebuild old Hotel Wildflower Hall, a British heritage building that burn’t down in 1990, the government, after overlooking better offers by groups like Taj, had entered into an joint Public Private Partnership agreement with Oberoi Group for constructing the new hotel.

Those in the know of things claim that initially the project layout was projected at for Rs 40 crore in which the state government equity in terms of surrendering the site was agreed upon to at 35% equity.

However, when the hotel became operational, sometime at the turn of millennia, the capital cost for the sprawling Five Star property was billed at more than Rs 104 crores. To settle the increased expenditure, the state equity was first reduced to 32% and then when an attempt was made to bring it down to 21%, the government annulled the treaty in 2002 and a foiled attempt was made to take possession. The courts restrained the government from doing so.

The dispute also has had a political fallout with former chief minister Prem Kumar Dhumal having laid the blame at a previous congress government led by chief minister Virbhadra Singh for having agreed to privatize the prime public property with not enough safeguards built into the profit sharing contract.

The matter was put to arbitration by HP High Court and the arbitration order of 2005 had concluded that difference among the shareholders were irreconcilable. As a way out, it had settled that the joint venture agreement be converted into a Rs 95 crore lease deed spread over a 40 year period. Ownership of the property was given to the government.

The arbitration order has been challenged as the warring partners could not settle upon a start date of the lease period, besides other issues regarding investments and running of the business.

Failing to settle the issue Rita Mitra, Comptroller & Auditor General for Himachal in 2011, had then let Hill Post know that a government request for a special audit for Hotel Wildflower Hall since 1995 had been received. On 19 February 2013,even the Himachal Cabinet gave its nod for an CAG audit of the company business.  However, Satish Loomba, the Comptroller & Auditor General for Himachal on 10 April 2013 claimed before reporters that CAG had written to the government to undertake an audit but the approval had not been received by then.

“This is a private company; the government has an arrangement of profit sharing. So we can do an audit,” Loomba had let the media know then.

Located at a commanding height of 8300 feet, Hotel Wildflower Hall was once the residence of Lord Kitchner, a field marshal of the British army during World War I days.

The heritage building was run as a hotel by Himachal Tourism after Independence and was frequented by Indira Gandhi, Rajiv Gandhi and Sonia Gandhi before it burnt down.

The 5 Star hotel rebuilt on the ashes of the British structure is marketed as a romance property where guests are not permitted to bring children. The only exception to the rule being Priyanka Gandhi Vadra, daughter of Congress president Sonia, who stays at the hotel whenever visiting Shimla to supervise construction of her cottage that is coming up close to Hotel Wildflower Hall.

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