Prestigious Udaipur hotel, sold for a pittance by then NDA govt, taken over by govt

A special CBI court found that Laxmi Vilas Palace, valued at ₹151 crore, was disinvested for a mere ₹7.52 crore as part of disinvestment by the NDA government in 2004; orders filing of criminal case

 Hotel Laxmi Vilas Palace, Udaipur
Hotel Laxmi Vilas Palace, Udaipur
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Prakash Bhandari

The Udaipur district administration has taken over control of Lalit Suri group’s Bharat Hotels Ltd-run Hotel Laxmi Vilas Palace. The district Collector of Udaipur, Chetan Deora has initiated the process of takeover of this prestigious heritage property following a court order.

A special CBI court in Jodhpur on Wednesday had ordered the takeover after it found that the hotel, once a property of the Indian Tourism Development Corporation (ITDC), was fraudulently disinvested in 2004 by the NDA government. The court ordered that the property should be attached and reverted back to the public sector unit ITDC, which should run it. The district administration of Udaipur has appointed a Receiver and has informed the Union government about the development.

Special judge Pooran Kumar Sharma found that Laxmi Vilas Hotel, which was valued at Rs 151 crore, was disinvested for a mere Rs 7.52 crore to Bharat Hotels Ltd as a part of disinvestment by the NDA government. The court ordered that the property should be restored to the Union government.

The special judge ordered that the then Union Minister of State for Disinvestment Arun Shourie, then Disinvestment Secretary Pradip Baijal, MD of Lazard India Pvt Ltd Ashish Kumar Guha, Kantilal Karamsey Vikramsey, proprietor of Kanti Karamsey & Co., director of Bharat Hotels Jyotsana Suri and “unknown government officers and other private persons" be booked under section 120B (criminal conspiracy) and 420 (cheating) of the Indian Penal Code and section 13 (1) D of the Prevention of Corruption Act.

The court said that they should be summoned through arrest warrants. The date of the summons would be known once the warrants are issued.

The special court passed strictures against the CBI which even after discovering this shady deal in which the Union the government suffered a loss of Rs 252 crore submitted a closure report.

The CBI registered an FIR based on a complaint in August 2014, but filed a closure report after an enquiry. The CBI Court ordered a re-initiation of inquiry in August 2019, but the CBI again filed a closure report citing the reason that in the absence of witnesses, the inquiry cannot be pursued. But the CBI Court did not agree with the closure report.


The court found that when the deal was made, the state government’s price of the land in the area where the hotel was located in Udaipur was Rs 1,000 per square meter, which meant that the land alone was worth Rs 150 crore. But this fact was deliberately ignored when the disinvestment process was undertaken.

The court found that the officials involved were hell-bent on selling the hotel to Bharat Hotels Ltd at a throwaway price. Bharat Hotel was a bidder in this deal for which the reserve price was Rs 6.62 crore.

Bharat Hotels Private Limited, which purchased the hotel, owns other properties including the Lalit Group of Hotels.

The decision on disinvestment of Laxmi Vilas Palace was taken by the Cabinet Committee on Disinvestment headed by the then Prime Minister Atal Bihari Vajpayee on February 5, 2002. Disinvestment of two other prime ITDC properties in Delhi - Qutab Hotel and Lodhi Hotel - was also approved along with Laxmi Vilas Palace.

While Qutub Hotel was purchased for Rs 36 crore, the successful bidder for Lodhi Hotel paid Rs 76 crore.

Between 1996 and 2001, the occupancy of Laxmi Vilas Palace had come down from 41 per cent to 26 per cent and the hotel was facing heavy losses. The net profit margin reduced from 34 per cent to -51 per cent, leading to the government's decision of disinvestment.

As part of the disinvestment policy during the NDA regime, several hotels controlled by the state were auctioned and were purchased by private players.

The inter-ministerial panel, which recommended selling the hotel owned by Indian Tourism Development Corporation (ITDC) was headed by the then Divestment Secretary Pradip Baijal. In the Atal Behari Vajpayee-led National Democratic Alliance government that was in office then, the Disinvestment Ministry was headed by Arun Shourie.

While implementing the disinvestment decision of the government, the valuation was not done properly and there was apparent malafide in the implementation process.

On 29 August 2014, the CBI had registered a case against Baijal and several others. The hotel was sold “at much below the prescribed rates, resulting into huge monetary loss" to the government, the CBI said.

In its FIR, the CBI said that in 2001-02, the heritage hotel “was first drastically undervalued and then sold/disinvested" to Bharat Hotel Ltd for approximately Rs 7.52 crore. The CBI has said that while the government’s own valuation of the hotel was Rs 151 crore, the market value of the property during that period was Rs 280 crore.


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Published: 17 Sep 2020, 2:15 PM