Ambika Resorts Pvt. Ltd. vs UOI

Vipin Sanghi, J.—The petitioner has preferred this writ petition to seek a writ of mandamus whereby a direction is sought to the respondent department to release the capital subsidy claim of Rs. 75 lakhs currently withheld by the respondent department. I take the benefit of the judgment rendered by this Court in a batch of writ petitions, namely, W.P. (C) 5007/2010, Mahipal Singh Vs. Ministry of Tourism and various other cases decided on 02.06.2011 by S. Muralidhar, J and set out the background of this case as set out in the said judgment:-

The background to the above scheme is that the DOT had been issuing notifications in 2003 and 2004 to encourage growth of Budget Hotel Accommodation for promotion of tourism in the country. In supersession of those notifications, the DOT issued on 30th September 2004 a notification announcing the scheme of "Incentive to Accommodation Infrastructure". The objective of the scheme was to provide incentives to newly approved hotel projects in 1 to 3 Star and Heritage (Basic) categories in the country except the four metropolitan cities of Delhi, Mumbai, Kolkata and Chennai. The said scheme for grant of capital subsidy was to be effective for the whole 10th Five Year Plan from 1st April 2002 to 31st March 2007. The scheme would apply to all hotels in 1 to 3 Star and Heritage (Basic) categories "where the hotel projects have been completed and classified during the 10th Plan Period." The incentive was to be in the form of "capital grant of 10% of the total principal loan taken from designated financial institutions or upto Rs. 25 lakhs to one star, Rs. 50 lakhs to two star and Rs. 75 lakhs to three star and the heritage basic category projects which is less". It was inter alia clarified that "in the case of heritage hotels where the investment is required mainly for refurbishment of existing building, which includes creation of additional facilities and accommodation, the incentive will be available on the main loan only and not towards any additional loan.

The scheme announced by the further notification was later revised by a notification dated 7th December 2007 which made available the scheme for grant of capital subsidies to all new hotels in the 1 to 3 star and heritage basic categories where the hotel projects have been commissioned and classified by the Ministry of Tourism, Govt. of India with effect from 01.04.2007 to 31.03.2008. The incentive was to be in the form of capital grant of Rs. 2 lakh per room subject to a maximum of Rs. 30 lakhs to a one star hotel, Rs. 3 lakh per room subject to a maximum of Rs. 75 lakhs to a two star hotel, Rs. 3 lakh per room subject to a maximum of Rs. 100 lakhs to three star category hotel projects. In case of heritage hotels, where the investment was required for refurbishment of the existing building, the incentive will be available only for the lowest category, i.e., Heritage (Basic) of Rs. 3 lakh per room subject to the maximum of Rs. 100 lakhs. In para 6, it was stated that "the amount of incentive will be released to the concerned hotel after completion of its classification in the said category". The hotels availing the capital subsidy under the scheme could apply for upgradation of the classification beyond the three star category and Heritage (Basic) categories only after a period of eight years from the date of initial classification.

In the present case the petitioner set up and commissioned its hotel at Amritsar on 01.09.2007. The petitioner applied for classification of its hotel on 26.09.2007. The hotel of the petitioner was inspected on 13.02.2008. The petitioners hotel was classified as a 2 star hotel w.e.f. 13.06.2008 to 12.06.2013, vide respondent''s communication dated 02.07.2008. I may note that the petitioner had sought the classification of its hotel as a 3 star hotel.

The petitioner had applied for subsidy on the basis of the classification as done by the respondent, namely, as a 2 star hotel. The respondent rejected the said application vide letter dated 29.10.2009. Consequently the present petition has been preferred by the petitioner.

As aforesaid a batch of various writ petitions was decided by the aforesaid decision in the case of Mahipal Singh (supra). In those cases as well the grant of subsidy was declined by the Ministry of Tourism on the basis that the commissioning of the hotel as well as the process of classification had not been completed by 31.03.2008 which was stated to be the cut off date. This Court held that what was relevant was that the hotels in question had been completed and commissioned prior to 31.03.2008 and it was not necessary that the process of classification should also have been completed before the said date as the petitioners were not in control of the said process and they had all applied for classification prior to the cut off date of 31.03.2008. The observations made by the Court in the said decision read as follows:-

The above submissions have been considered. The very purpose of the scheme in question was to encourage growth of budget hotel accommodation. The objective was to encourage the setting up of 1 to 3 star hotels and heritage hotels in non-metropolitan cities. While the earlier scheme was operational up to 31st March 2007, the revised scheme was operational for the period 1st April 2007 to 31st March 2008. As long as the hotels in question were ready and commissioned before 31st March 2008, one of the major objectives of the incentive scheme stood satisfied. The scheme itself does not indicate the outer date within which a hotel had to seek classification under the scheme. In each of these cases the application for classification was made before 31st March 2008. It is also not in dispute that in each of these cases the hotels in question were commissioned prior to 31st March 2008. Therefore, from the side of the Petitioners they had complied with the requirement for their respective hotels to be commissioned prior to 31st March 2008 and applied for classification prior to that date. It must be recalled that in terms of para 6 of the notification dated 7th December 2009, the amount of incentive would not be released till the classification was complete. Therefore, it did not matter that none of the Petitioners applied for release of the capital subsidy itself prior to 31st March 2008. In any event, that was not the reason for rejection of the applications for release of capital subsidy.

The only reason given by the Respondents for rejecting the Petitioner applications was that the classification of each of their hotels in terms of the Notification dated 7th December 2007 was not completed prior to 31st March 2008. However, this was not a factor in the control of the Petitioners. In each of these cases, although the applications for classification were made prior to 31st March 2008, the MOT took its own time to send an inspection team and, thereafter, to grant classification. None of the Petitioners was however refused classification. They were only granted it belatedly. In none of the cases has the inspection team found that the hotel in question was not made operational before 31st March 2008. It is also not the case of the Respondents that the classification did not hold good as on the dates of commencement of the hotels in question. Consequently, the two essential requirements of the Notification dated 7th December 2007 stood satisfied. That the inspection of the hotels and the consequential issue of the certification for classification got delayed beyond 31st March 2008 was not something the Petitioners could have anticipated. Also, in the absence of any clause in the Notification dated 7th December 2007 requiring the Petitioners to apply before a certain date for classification, their subsequent plea for release of capital subsidy could not have been turned down as long as each of their applications were prior to 31st March 2008.

The submission of Mr. Jatan Singh, learned standing counsel is that the case of the petitioner is not covered by the decision in the case of Mahipal Singh (supra). He submits that the petitioner had made an application for classification as a three star hotel. The inspection was firstly done on 13.02.2008. Mr. Singh submits that during the said inspection, various deficiencies were found in the hotel premises. The same were communicated to the petitioner on 18.02.2008. The deficiencies which were found were as follows:-

Kitchen to be redone completely specially flooring, working tables, refrigerators and storage.

Cutlery and Crockery need to be replaced in conformity with 3 Star.

Mr. Singh submits that thereafter a second re-inspection was done on 27.04.2008 and on the basis of that inspection the Committee of the respondent recommended that the petitioners hotel be categorized as a 2 star hotel. Mr. Jatan Singh submits that since the petitioner had claimed classification as a 3 star hotel but it was found worthy of only a 2 star classification and that too, after 31.03.2008, the petitioner is not entitled to seek subsidy.

Having heard the submissions of learned counsels and also considering the judgment of this Court in the case of Mahipal Singh (supra), I am of the view that the petitioner is entitled to grant of subsidy on the basis of its classification to 2 star hotel. It is not in dispute that the petitioners hotel was completed and commissioned well in time i.e. on 01.09.2007. The petitioners application for being classified as a three star hotel was made soon thereafter on 26.09.2007. The respondent took nearly 4-1/2 months to carry out the inspection when it found certain deficiencies. Had the inspection been done earlier, the petitioners would have had more time to remove the deficiencies found by the respondent. In any event, those deficiencies were also removed and the petitioner was granted a 2 star rating after re-inspection on 27.04.2008.

As observed by this Court in Mahipal Singh (supra), the objective of the said scheme was to incentive the setting up of 1 to 3 star hotels in non-metropolitan towns in a time bound manner. That objective stood achieved even in this case, as on 01.09.2007, the petitioners hotel was completed and was operationalised. The delay in the process of classification cannot be attributed to the petitioner. Therefore, following the decision of this Court in Mahipal Singh (supra), I allow this petition and direct the respondent to process the case of the petitioner for release of capital subsidy in terms of the notification dated 07.12.2007 and to pass appropriate orders for release of capital subsidy within a period of three months from today.