30 Minute Interview

‘A bad settlement is better than successful litigation’

Lalit Bhasin of Bhasin & Company, who has been representing the hospitality industry in several legal proceedings at various levels of judiciary, says that parties to the disputes would rather settle it than go for prolonged litigation or arbitration, which is very expensive and time consuming. By Praveen K Singh

In terms of hospitality industry litigations, what are the recent engagements for which your company has been hired?

We represented the hospitality industry in a matter relating to Maximum Retail Price (MRP), which is indicated on all FMCGs. In a landmark judgment it has been held by the Delhi High Court that hotels and restaurants are at liberty to charge higher amount than the MRP, as this is not a transaction of sale of goods.

In another litigation which is still pending, we filed a writ petition against Phonographic Performance (PPL) and Indian Performing Rights Society (IPRS), who claim to have copyright over recorded music played in public areas and rooms in the hotels, as also for video films shown on the television sets. Our firm is also engaged in representing the industry (FHRAI) in the matter of levy of property tax on hotels on the basis of Unit Area Method (UAM). We have contended that hotels should be taxed on the basis of cost of construction principles, laid down by the Supreme Court.

Among the broad array of challenging issues relevant in this industry, which one figures at the top under the widespread litigation cases concerning the Indian hospitality sector?

Our firm has dealt with some cases concerning disputes arising out of management contracts. Our firm has represented hotel management companies against the owning companies, which have unilaterally terminated the management contracts after getting the necessary expertise from the hotel management companies. There are also disputes regarding brand names - whether the hotels can use common word which is used by another hotel chain as a part of its brand. In disputes pertaining to management contracts, franchises, etc, the claim can only be with regard to compensation for premature and illegal termination of the contract. There can be no specific performance of these contracts as these are contracts for rendering services.

What is the percentage of hospitality cases being settled out-of-court? Has there been an increase in such settlements of late, as hotels are increasingly employing full time lawyers for sealing foolproof corporate deals?

As mentioned earlier, a large number of commercial disputes get settled out of court. However, there are many employment-related disputes where settlement is not possible - disputes relating to wage fixation, bonus, benefits and termination of services. Even in these matters there is a marked decline due to high rate of attrition. There are other avenues of employment open to those who are comparatively young employees who would rather serve another employer than carry on litigation in Labour Courts against their faulting employers.