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ITDC realty pickers not to get Ashok trademark

Mamata Singh and Parul Gupta

The buyers of the government's stake in the six Indian Tourism Development Corporation hotels put up for sale will not get the right to use the `Ashok' trademark.

At the moment, most of these ITDC properties are being run under the `Ashok' brand name. The share purchase agreement for the deal specifies that the purchaser does not have any right, title, ownership, licence or interest in the trademark 'Ashok' or 'Ashoka' or in the official logo of the Ashok group or to any intellectual property rights emanating from it once the property is sold.

In the case of properties which are being offered on lease, Ashok Delhi and Ashok Bangalore, the successful bidders will be required to continue using the 'Ashok' brandname and to add any other name to 'Ashok'.

Since the government had demerged all these hotels, the 10 per cent stake in ITDC held by the Tata-owned Indian Hotels Corporation Ltd has been converted into a 10 per cent holding in each hotel. This stake will be sold along with the government's stake to the interested bidder.

The government has also directed the interested bidders against retrenchment of any regular employees for one year. In case of contract employees, the terms and conditions of the relevant contracts will have to be fully observed by the purchasing company and the purchaser will keep the government and ITDC indemnified against damages, losses or claims arising out of the company's failure to observe any terms of the contracts.

The share purchase agreement also states that the purchaser will make an open offer within 14 days of the deal to the residual shareholders.

The offer will be repeated thrice, at 90-day intervals or till all the residual shareholders have sold their stake. As per the terms of the agreement, the offer will have to be made at the price per share which the purchaser offers to the government.

Failure to do so will mean that the purchaser is liable to pay to the government liquidated damages equivalent to 100 per cent of the value of the shares to be acquired from the residual shareholders.

However, the purchaser of the hotels will not have to buy the shares back from the residual shareholders after one year of closing the deal.

While the agreement specifies that the government and the purchaser will be indemnified against any losses or expenses incurred on account of the other party, it also states that the purchaser will be liable to pay a penal interest at 18 per cent per annum in case of it's failure to pay creditors or other liabilities on time.

The SPA states that the government will be liable for only 90 per cent of the amount that may become payable after an indemnity claim by the purchaser. In case of indemnity against losses relating to the title to hotel premises, the government's liability will be subject to a maximum of 40 per cent of the purchase amount and in case of indemnity against losses relating to matters other than the title to hotel premises, the liability will be capped at 10 per cent of the share consideration.

The government will also not indemnify the purchaser for any loss less than Rs 100,000 and any claims for indemnity will have to be made within a 12 month period of the deal, according to the SPA.

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