WILD TUSSLE: (Top) Police presence marked the takeover bid; Wildflower Hall

Age and locale may lend a haunting aura to Wildflower Hall, the 100-year-old luxury resort at Kufri, 12 km from Shimla, but it could do without the unsettling spectre that has come to oppress it of late. Caught in an ownership battle between the state Government and the Oberoi Group's East India Hotels (EIH) Ltd, the five-star resort has been the scene of much muscle-flexing in the past month.

Run by the state's Tourism Department till 1993, the resort acquired two owners in 1995 when the then Congress government entered into a joint venture with the EIH as a first step towards disinvestment in the tourism sector. The pact envisaged the building of a world class hotel for Rs 40 crore. The project operated smoothly till 1998 when the BJP Government came to power. Certain that the previous regime had handed over the 102 bighas of prime property for a lark, the Prem Kumar Dhumal-led Government has been at odds since with the EIH.

Tourism

OTHER STORIES RELATED TO TOURISM Interview: P.K.Dhumal

On March 4 this year, it annulled the joint venture on the grounds that the EIH had failed to make the hotel fully operational in the stipulated six years, the deadline having lapsed in October 2001. "The EIH violated the spirit of the agreement," alleges Dhumal. The charge is refuted by the EIH which not only terms the Government's action "illegal and invalid" but also claims the hotel was ready for commissioning by March last year. It was the Government that deliberately resorted to delaying tactics by allowing operation of only 28 of the 84 rooms, the EIH resorts.

On March 11, the Government sealed the company secretary's office in the resort, following it up two days later with a takeover bid with police's help. It was foiled by the hotel staff and further hostilities were prevented when on EIH's petition a status quo was ordered till March 18-later extended to April 1-by the Company Law Board (CLB). This means that the hotel now has two reception counters, one manned by the EIH staff, the other by the Tourism Department employees.

At the heart of the face-off is also the escalation of project cost from Rs 40 crore to Rs 100 crore since 1995. This has skewed the EIH-government equity ratio in favour of the EIH, with the Government having virtually no say in the affairs of the Mashobra Resort Limited, the company that runs the hotel. For the past year, the Government had tried to persuade the EIH to rectify the equity imbalance in the board meetings, but failed.

Faced with an unyielding EIH and assembly elections less than a year away, the Government could not have chosen a better time to break the tie-up and portray itself as "the protector of the state's interests". "The Government's decision smacks of highhandedness and misuse of authority," alleges former Congress chief minister and leader of Opposition Virbhadra Singh.

Also implicit in the takeover decision is the pressure being exerted on the Oberoi Group to renegotiate the deal. On its part, the EIH-worried about the negative impact the impasse is likely to have on business and seeking to avoid the legal wrangles-has invoked the arbitration clause and proposed former chief justice of India justice R.S.Pathak as its sole arbitrator. The Government is yet to respond.

The deadlock puts a question mark over the project that had promised to put the state on the world tourism map and has also scuttled the disinvestment initiative. This doesn't augur well for Himachal tourism that is desperate for private investment. The Oberoi Group has already scrapped its proposed Rs 50-crore resort project at Manali. For now, the group is hoping for the controversy to sort itself out before the tourist season sets in.