Even A Die-Hard Optimist Won’t Repose Trust In TTDC To Run A Four-Star Hotel; Certain Businesses Must Be Run By Private Players Only: Madras HC

The Madras High Court emphasised that certain businesses must be run by private players only, saying that even a die-hard optimist will not repose trust in Tamil Nadu Tourism Development Corporation (TTDC) to run a four-star hotel.

The Madurai Bench emphasised thus in a writ petition filed by M/s. SRM Hotels Private Limited, seeking an order for renewal of the lease in respect of the property.

A Single Bench of Justice G.R. Swaminathan remarked, “Even a die hard optimist will not repose trust in TTDC to run a Four Star Hotel. My conscience assures me that I am not being uncharitable or harsh towards TTDC. In the very nature of things, hospitality industry demands courteous treatment from the staff manning the institutions. Customers would insist on quick response to their needs. Government staff and government institutions are ill-suited for such functions. That is why, there is disinvestment and outsourcing. Certain businesses should be run only by the private players.”

The Bench added that such wisdom dawned on the government in the year 1991 and even in railways, the catering services have been privatized.

“The aim of the government should be to get the best returns on the land and the building. Of course, the learned Additional Advocate General would claim that TTDC would run the Hotel henceforth. This is like handing over Kaziranga Sanctuary to a provincial zoo keeper. I am reminded of a Tamil film “Kumki”. An elephant that used to be taken for temple festivals for show purposes was masqueraded as a trained elephant to confront and chase away a wild elephant. Of course, Manickam, the elephant rose to the occasion but lost its life in the process”, also said the Court.

Senior Advocate Srinath Sridevan represented the petitioner while Additional Advocate General Veerakathiravan represented the respondents.

In this case, the petitioner was an incorporated private limited company being engaged in hotel business. When the Tamil Nadu Government invited applications for setting up star and budget accommodation to house delegates attending the 8th World Tamil Conference at Thanjavur in January 1995, the petitioner was one of the applicants. It was chosen for developing the site and an order was issued calling upon the Managing Director, TTDC to enter into an agreement with the petitioner and hand over the site. Pursuantly, a lease deed was entered into between the parties and after possession of the site, a four-star hotel was built.

The annual lease amount was fixed at Rs. 3,85,275/- and the same was revisable once in three years. It was to be fixed at 7% of the market value and the lease period was of 30 years. The lease period ended on June 13, 2024 and during the currency of the lease period, dispute arose as regards the quantum of lease amount, which was the subject matter of the writ petition being pending before the jurisdictional civil court. The petitioner submitted representation seeking renewal of the lease on fresh terms and also sought mandatory injunction, directing the government to consider the same. The Principal Secretary to the State Government rejected the request and challenging the same, the petitioner approached the High Court.

The High Court in the above regard observed, “The object of the government should be to encourage entrepreneurship and business. A broad and benevolent approach is called for in such cases without compromising on the revenue interest of the government. … The petitioner justifiably entertained belief that they would be called for negotiation. The Secretary to the Government was obliged to invite the petitioner and hold discussion to resolve the issue.”

The Court said that the petitioner rightly thought that it would be taken into confidence before any decision is taken as consultation with the affected individual lies at the heart of legitimate expectation.

“In this case, without involving the petitioner at all, the impugned order came to be passed. It is virtually non-speaking. It merely parrot like reiterates the covenant in the contract. That is not what the first respondent was supposed to do”, it further noted.

The Court enunciated that the decision maker should in frustrating the individual's expectations act as benevolently as is necessary to meet the fair balance requirement in the individual cases.

“In transactions involving the economic interests of the applicant/licensee/lessee, the officials are expected to act as benevolently as possible. The authority may not be able to fulfil the substantive expectations of the applicant. But at least, there could be consultation and hearing so that the possibility of amelioration could be considered. In this case, the petitioner was given a short shrift. The petitioner was not invited for a discussion. The contentions set out in the petitioner's renewal application were not considered. The petitioner was not at all associated with the decision making process. It is quite possible that the authority is not in a position to accede to the petitioner's request as such”, it noted.

The Court added that the petitioner should have been given an opportunity to demonstrate that they and not TTDC are better equipped to run the hotel, it should have been given an opportunity to address the concerns pertaining to the revenue interest of the government but none of these options were explored.

“The first respondent appears to have approached the issue with a closed mind. I am, therefore, constrained to hold that procedurally, the petitioner's legitimate expectation was not met. The content of the substantive expectation is left open for the present”, it concluded.

Accordingly, the High Court allowed the writ petition, set aside the impugned order, remitted the matter to the respondent to grant personal hearing to the petitioner and consider its contentions.

Cause Title- M/s. SRM Hotels Private Limited v. The Principal Secretary to the Government of Tamil Nadu & Ors.

Appearance:

Petitioner: Senior Advocate Srinath Sridevan and Advocate Charles Kamalesh M. Appaji.

Respondents: AAG Veerakathiravan, Special Government Pleader K. Balasubramani, and Advocate C. Lakshmanan.

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