THE HOSPITALITY INDUSTRY IN INDIA A GUIDE TO LEGAL ISSUES Table of Contents Preface ....................................................................................................................................................................... 4 Taking Stock: Current Challenges ............................................................................................................................. 5 Ease of doing business….The Restaurant Industry ............................................................................................... 5 The Demanding Customer: One size doesn’t really fit all ..................................................................................... 7 Fragmented market…. .......................................................................................................................................... 7 Lending: Banks are not investment friendly ......................................................................................................... 8 Human Capital ....................................................................................................................................................... 8 The Threat of Terrorism………. ............................................................................................................................. 10 Security and the Foreign Traveller ...................................................................................................................... 11 AirBnb and Online Travel Agencies….Your neighbor could be your competition .............................................. 11 Legal Issues in Hospitality Operations..................................................................................................................... 13 Infra Hospitium – The Car Valet Case ................................................................................................................. 14 The Brand ............................................................................................................................................................ 15 Checking In… ....................................................................................................................................................... 16 Elevator Music .................................................................................................................................................... 19 Dinner Time ......................................................................................................................................................... 20 At The Spa………. .................................................................................................................................................. 22 Deficiency of Services and Disclaimers ............................................................................................................... 23 Risk sharing under the HMA ............................................................................................................................... 24 Extra Territorial Claims........................................................................................................................................ 25 Insolvency and Bankruptcy ..................................................................................................................................... 26 Steps Involved in the Corporate Insolvency Resolution Process ........................................................................ 28 Initiation of Proceedings for CIRP ....................................................................................................................... 29 Consequences of an Admission of an Application by the NCLT to Initiate the CIRP .......................................... 33 Constitution of the COC and the Interim Management ..................................................................................... 36 Resolution Plan and its approval by the COC ...................................................................................................... 39 Approval of the Resolution Plan by the NCLT ..................................................................................................... 41 Investment & Acquisition of Hotels ......................................................................................................................... 42 Hospitality: Indian Legal Issues 1 | P a g e © Economic Laws Practice 2018 Sources of Funding and Applicable Regulations ................................................................................................. 42 Issues in Investments and/or Acquisitions of Existing Properties ...................................................................... 46 Restrictions under HMAs .................................................................................................................................... 48 Debt Funding in the Hotel Industry ........................................................................................................................ 49 Terms and Covenants of Financing ..................................................................................................................... 51 Competition Law & The Hospitality Industry in India ............................................................................................ 53 Notification to the CCI – Jurisdictional Thresholds ............................................................................................. 53 CCI’s Merger Control Record in the Hospitality Sector ....................................................................................... 54 Taming The Beast- Issues in HMAs ....................................................................................................................... 56 Limitation on the Rights of the Manager ........................................................................................................... 57 Control Rights to Owners .................................................................................................................................... 58 Non-Disturbance Agreements ............................................................................................................................ 59 Exit Rights ............................................................................................................................................................ 60 Employee Relationships under HMAs .................................................................................................................... 62 Master- Servant Relationship ............................................................................................................................. 62 Vicarious Liability ................................................................................................................................................ 63 Dispute resolution Clauses in HMAs ...................................................................................................................... 65 Institutional or Ad hoc Arbitration ...................................................................................................................... 65 Method of Selection and Number of Arbitrators ............................................................................................... 66 Arbitration Rules ................................................................................................................................................. 67 Language of the Arbitration ................................................................................................................................ 67 Place of the arbitration ....................................................................................................................................... 67 Enforcement and Annulment/Setting aside of Awards ...................................................................................... 68 Expert Determination in HMAs ........................................................................................................................... 68 An Alternate Arrangement- Hotel Franchising ........................................................................................................ 72 Brand Standards .................................................................................................................................................. 72 Liquidated Damages ............................................................................................................................................ 73 Restrictions on Transfer of Interest .................................................................................................................... 73 Protected Areas .................................................................................................................................................. 74 Data Privacy Legislation In India and Ownership of Guest Data ............................................................................ 75 Hospitality: Indian Legal Issues 2 | P a g e © Economic Laws Practice 2018 Ownership and Nature of Guest Data................................................................................................................. 75 Data Privacy Laws ............................................................................................................................................... 77 Data Breaches ....................................................................................................................................................