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Hospitality – Indian Legal Issues

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Hospitality – Indian Legal Issues Hospitality - Indian Legal Issues Hospitality – Indian Legal Issues © Economic Laws Practice 2017 1 | P a g e Hospitality - Indian Legal Issues Table of Contents Preface .................................................................................................................................................................. 4 Investment and Acquisition of Hotels ................................................................................................................... 5 Sources of Funding and Applicable Regulations ...................................................................................................................... 5 Issues in Investments and/or Acquisitions of Existing Properties ........................................................................................... 7 Restrictions under HMAs ........................................................................................................................................................ 8 Debt Funding in the Hotel Industry ...................................................................................................................... 9 Terms and Covenants of Financing ....................................................................................................................................... 11 Competition Law and the Hospitality Industry in India ...................................................................................... 13 CCI’s Merger Control Record in the Hospitality Sector ......................................................................................................... 14 Taming the HMA Beast – Issues in HMA ............................................................................................................. 15 Limitation on the Rights of the Manager .............................................................................................................................. 15 Control Rights to Owners ...................................................................................................................................................... 16 Non-Disturbance Agreements ............................................................................................................................................... 17 Exit Rights .............................................................................................................................................................................. 17 An Alternate Arrangement – Hotel Franchising .................................................................................................. 20 Brand Standards .................................................................................................................................................................... 20 Liquidated Damages .............................................................................................................................................................. 20 Restrictions on Transfer of Interest ....................................................................................................................................... 21 Protected Areas..................................................................................................................................................................... 21 Employment Relationship under HMAs .............................................................................................................. 23 Master- Servant Relationship ................................................................................................................................................ 23 Vicarious Liability .................................................................................................................................................................. 24 Data Privacy Legislation in India and Ownership of Guest Data ......................................................................... 25 Ownership and Nature of Guest Data ................................................................................................................................... 25 Data Privacy Laws .................................................................................................................................................................. 26 Data Breaches ....................................................................................................................................................................... 27 Dispute resolution Clauses in HMAs ................................................................................................................... 29 Institutional or Ad hoc Arbitration ........................................................................................................................................ 29 Method of Selection and Number of Arbitrators .................................................................................................................. 29 Arbitration Rules ................................................................................................................................................................... 30 Language of the Arbitration .................................................................................................................................................. 30 Place of the arbitration ......................................................................................................................................................... 30 Enforcement and Annulment/Setting aside of Awards ......................................................................................................... 31 © Economic Laws Practice 2017 2 | P a g e Hospitality - Indian Legal Issues Expert Determination in HMAs ............................................................................................................................................. 31 Will GST Show Some Hospitality to the Sector? ................................................................................................. 35 Implications under the Existing Regime ................................................................................................................................ 35 Proposed GST Regime ........................................................................................................................................................... 36 Note on GATS ...................................................................................................................................................... 39 Introduction .......................................................................................................................................................................... 39 Services Covered ................................................................................................................................................................... 39 Tourism and Hospitality Services .......................................................................................................................................... 40 Future Tense – Evolving Business Models in Hospitality .................................................................................... 42 Understanding the Model ..................................................................................................................................................... 42 Issues arising in New Models ................................................................................................................................................ 43 Delays in Hotel Construction Projects................................................................................................................. 44 Insolvency and Bankrutpcy Code, 2016 .............................................................................................................. 47 Did You Know? .................................................................................................................................................... 51 Abbreviations ...................................................................................................................................................... 54 Acknowledgement .............................................................................................................................................. 56 Notes ................................................................................................................................................................... 57 © Economic Laws Practice 2017 3 | P a g e Hospitality - Indian Legal Issues Preface Lawyers enjoy a little mystery, you know. Why, if everybody came forward and told the truth, the whole truth, and nothing but the truth straight out, we should all retire to the workhouse ~Dorothy L. Sayers We are delighted to bring you ELP's guide to “Hospitality – Indian Legal Issues” which highlights the important Indian legal issues that impact the Hospitality Sector. The laws and contracts that govern the relationship between hotel owners, operators, guests and hotel financiers are not taught at Law School or College. Therefore, we have had to draw upon our experiences from the 75 hotel transactions that we have been a part of over the last 15 years. For this experience we are indebted to numerous clients who have entrusted us with negotiating and drafting contracts and structuring transactions that are meant to live
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