LaLiT Hotel ducked crores in dues. Justice Varma granted it relief but HC tore up his order

A Delhi High Court bench has done what a Delhi civic agency thought was long overdue: turned down an order that could have drained crores in public money while letting a luxury hotel chain sit on prime Lutyens’ Delhi land for a fraction of what it’s worth. 

On April 22, A division bench of Chief Justice DK Upadhyaya and Justice Tushar Rao Gedela cleared the path for New Delhi Municipal Council to recover Rs 1,063.74 crore from Bharat Hotels Ltd, the company that runs The LaLiT Hotels. 

The ruling they overturned? Delivered by Justice Yashwant Varma on December 6, 2023 – roughly over a year before he was allegedly caught in a ‘cash at home’ controversy while he was still a judge in the Delhi High Court. He had resigned earlier this month amid an inquiry into the incident after impeachment proceedings were initiated against him.

The dispute and its judgments

The dispute centres on a 6.0485-acre plot on Barakhamba Lane. 

In 1982, with the Asian Games months away and Delhi short on hotel rooms, NDMC’s predecessor granted Bharat Hotels a 99-year licence to build and run a five-star hotel on the site, at an annual fee of Rs 1.45 crore. The deed allowed the license fee to be revised every 33 years, but capped any increase at 100 per cent of the last fee. 

On February 13, 2020, NDMC issued two notices to the company. The first one demanded Rs 1,063.74 crore from Bharat Hotels as arrears at the revised annual licence fee rate. The second terminated their licence over an alleged unauthorised sale of four shop spaces by sub-licensees at the World Trade Centre building on the same plot.

Justice Varma’s judgment had quashed both notices. 

On the first notice, he questioned the applicability of  NDMC Act of 1994 in the context of the license deed which requires the council to charge market value for its property. He held that the Act came into force nearly a decade after the Bharat Hotels licence deed was signed and hence could not be used retrospectively. He added that the underlying arrangement had already faced and survived a legal battle in 1981, when the Delhi High Court division bench in SS Sobti vs Union of India dismissed a petition arguing that the deal had been awarded without an open tender and at too low a price, as a political favour. The court, in 1981, had held that the urgency of the Asian Games justified the negotiated route.

On the termination notice, Justice Varma maintained that the disputed sale by the sub-licensees could not be called a fundamental breach because Bharat Hotels was “not a party to” it. It was never registered and was withdrawn after the company intervened. 

However, the division bench of the Delhi High Court took a sharply different view on the matter. Chief Justice Upadhyaya and Justice Gedela held that the 1982 deed was a ‘licence’, meaning a permission to use the land, and not a ‘contract’, as Bharat Hotels had argued. The distinction mattered because of how the NDMC Act treats old agreements. Licences signed before the Act came into force survive only to the extent they do not clash with the new law. Contracts, on the other hand, survive untouched. 

So if the deed was a ‘contract’, the 100 per cent cap on fee hikes, as in the original deed, would have held. But since it was a ‘licence’, the cap clashed with the NDMC Act’s market-value rule and could not stand.

The bench also criticised Justice Varma’s reliance on the 1981 SS Sobti ruling, which involved a different company and a different licence, and never dealt with the 1994 law at all. They also held that in the Bharat Hotels vs NDMC case, the 1994 Act was not being applied retrospectively. Even if the deed was signed in 1982, what mattered was whether it stood up to the law as it was in 2014, when the first fee revision was due.

On the issue of termination, the bench contradicted Justice Varma’s view that Bharat Hotels was unaware of the 2016 sale deeds. A 2018 order by the Collector of Stamps recorded that Bharat Hotels had confirmed the transfer and even sent a representative to the stamp-duty hearings. The deeds themselves were titled “Full and Final Agreement of Sale, Purchase and Transfer” and when the buyer tried to back out, it never returned the Rs 3.03 crore it had paid or gave up possession of the shops. The bench held that this was a fundamental breach of the licence terms.

Finally, the bench invoked public interest. It noted that the Land and Development Office had in December 2023 revised NDMC’s own ground rent on the plot to Rs 15.45 crore a year – more than five times the Rs 2.9 crore Bharat Hotels would pay even at the capped fee. That shortfall, the judges said, would ultimately be borne by the “taxpayer, who are the residents of New Delhi”.

The bench then cited two Supreme Court rulings – Shiv Shankar Dal Mills (1980) and MS Sanjay vs Indian Bank (2025). They pointed out that when public money is at stake, courts cannot apply the law in isolation. They must weigh fairness too. Letting Justice Varma’s ruling stand, the bench said, would mean approving a deal that kept draining public money and costing the exchequer.

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