Restoration of James Plaza: Loss of Rs 187 crore to UT?

Restoration of James Plaza: Loss of Rs 187 crore to UT?

Authorities of James Hotels seem to be on a lucky run-for the last 20 years.

Authorities of James Hotels seem to be on a lucky run — for the last 20 years. A prime commercial site in Sector 17 was restored to the hotel on rates prevalent two decades ago,even after a spate of defaults committed by the hotel management.

The site measuring 9,600 square yards was leased out to M/s Mehfil Restaurant on August 1,1985,at the rate of Rs 5,000 per square yard (Rs 4.8 crore). The December 2008’s auction,conducted by the UT Estate Office,recorded a market rate of around Rs 2 lakh per square yard for commercial properties (approximately Rs 192 crore for a 9,600 square yard plot). A simple calculation of the prevailing market rates indicates that the site,restored to James Plaza on old rates,caused a loss of around Rs 187 crore to the exchequer.

In 1985,Mehfil Hotels had deposited a sum of Rs 83.50 lakh and the rest was to be paid in instalments. In 1986,the lease deed was signed but when the hotel management defaulted the balance payments,the Estate Office resumed (took over) the site on the ground of ‘non-payment of the balance amount’. The hotel management appealed to the then Advisor to the Administrator,and got their site back.

On February 15,2006,the site was resumed again when the hotel management defaulted on payments. Again,an appeal was filed and on May 2,2007,the hotel management was restored the site on the condition that the construction has to be completed within one year.


On May 23,2008,when the construction still remained incomplete,UT Deputy Commissioner R K Rao ordered resumption of the hotel site once again.

This time,the hotel management approached the Punjab and Haryana High Court. About 15 days ago,the High Court granted the hotel management another 11 months to complete the construction.

A senior official of the UT Administration admitted that “it was indeed a grave loss to the exchequer. A site,whose owners have repeatedly defaulted on payments for the last two decades and have sought repeated extensions,managed to get their site restored at rates prevalent in that era.”

An identical case and its fate…
In another case concerning a commercial site,the UT Municipal Corporation resorted to auctioning the commercial site after the allottee indulged in repeated default on payments. When the allottee moved the Punjab and Haryana High Court and got relief,the MC challenged the HC orders in the Supreme Court. In September 2007,the Supreme Court observed: “Property prices increase by the day and if contractual obligations are not fulfilled within the stipulated period,the state suffers losses which cannot be compensated in terms of interest or penalty. Ultimately,auction is an exercise for detecting or discovering the price prevalent in a particular area in a particular year. We are,therefore,of the view that the High Court should not have interfered in the process,in which the Municipal Corporation was fully justified and entitled to forfeit 10 per cent of the amount and to invite fresh offers on new terms and conditions.” Finally,the Supreme Court allowed the UT Municipal Corporation to auction the said commercial site.