Govt Staff & Institutions Not Suited For Hospitality Industry As It Demands Courteous Treatment & Quick Responses For Customers: Madras High Court

Justice GR Swaminathan observed that one of the reasons for disinvestment and outsourcing in the hospitality industry was the State's inability to manage the industry. The court added that certain businesses should be run by private persons.

“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 court observed.

Background

SRM had entered into a lease agreement with TTDC to develop a government site. After getting possession of the site, SRM built a four-star hotel. As per the agreement, the lease period was 30 years and the lease amount was fixed at 7% of the market value. Further, as per the agreement SRM was not entitled to claim renewal of the lease after its expiry. However, if the Government decided to renew the lease beyond 30 years, SRM was to abide by the same.

Before the lease period ended, SRM had given a representation seeking renewal of lease which was rejected by the State. This was challenged in the present case. SRM argued that the state had infringed its legitimate expectation and thus the order of rejection should be set aside.

The State, on the other hand, argued that after the expiry of the lease period, SRM had no right to remain in the property. it was submitted that SRM was not paying rent at 7% of the market value and when the administration tried to correct the lease amount, SRM challenged the same in court which was pending litigation.

The State argued that SRM's conduct was such that they could not claim legitimate expectations. Further, it was argued that legitimate expectations will not apply when the terms of the agreement are unambiguous.

In the present case, the court noted that SRM had investigated Rs. 60.00 crores for constructing the hotel. They claimed that unless the lease was renewed for twenty more years, the investments could not be made good. The court added that the government's objective should be to encourage entrepreneurship and business and should take a broad and benevolent approach without compromising the revenue interest of the State.

The court observed that SRM's legitimate expectation was justified and the Secretary was obliged to invite SRM and hold discussion to resolve the issue. The court added that the Government's aim should be to get the best returns on the land and building.

Noting that consultation with the affected individual lies at the heart of legitimate expectation, the court observed that SRM had rightly believed that they would be taken into confidence before any decision in taken. The court observed that the authorities approached the issue with a closed min.

Thus, noting the SRM's legitimate expectation was not met, the court set aside the State's order and remitted the matter back to the Principal Secretary, the Tourism Culture and Religious Endowment Department. The court asked the Principal Secretary to grant a personal hearing to SRM, consider all their contentions, and pass a speaking order on merits.

Counsel for the Petitioner: Mr.Srinath Sridevan, Senior Counsel, For Mr.Charles Kamalesh M.Appaji.

Counsel for the Respondent: Mr.Veerakathiravan, Additional Advocate General Assisted by Mr.K.Balasubramani, Special Government Pleader, Mr.Veerakathiravan, Additional Advocate General Assisted by Mr.C.Lakshmanan

Citation: 2024 LiveLaw (Mad) 264

Case Title: M/s. SRM Hotels Private Limited v The Principal Secretary to Government of Tamil Nadu

Case No: W.P(MD)No.13133 of 2024