THE HOSPITALITY INDUSTRY IN INDIA A GUIDE TO LEGAL ISSUES Table of Contents Preface ...................................................................................................................................................................... 3 Disruptors in the Hospitality Industry ..................................................................................................................... 4 Digital Disruptors: Technology Trends .................................................................................................................. 4 Disruptive Ideas: Capitalising on New Opportunities ........................................................................................... 7 Airbnb: Your Neighbour Could be Your Competition ........................................................................................... 9 Legal Issues in Hospitality Operations ................................................................................................................... 11 Infra hospitium – The Car Valet Case .................................................................................................................. 12 The Brand ............................................................................................................................................................ 13 Trade Mark .......................................................................................................................................................... 13 Tips & Service Charges ........................................................................................................................................ 18 Prevention of Sexual Harassment in the Hospitality Industry: Whose cross is it to bear? ................................. 20 Deficiency of Services and Disclaimers ............................................................................................................... 22 Risk sharing under the Hotel Management Agreement (HMA) ......................................................................... 23 Extra-Territorial Claims ....................................................................................................................................... 24 Insolvency and Bankruptcy .................................................................................................................................... 25 Steps Involved in the Corporate Insolvency Resolution Process ........................................................................ 27 Initiation of Proceedings for CIRP ....................................................................................................................... 28 Consequences of an Admission of an Application by the NCLT to Initiate the CIRP .......................................... 32 Constitution of the COC and the Interim Management ..................................................................................... 35 Resolution Plan and its Approval by the COC ..................................................................................................... 38 Approval of the Resolution Plan by the NCLT ..................................................................................................... 40 Emerging Trends in Acquisition of Hotels ............................................................................................................. 41 Foreign Equity ..................................................................................................................................................... 41 Domestic Equity .................................................................................................................................................. 41 Debt Financing .................................................................................................................................................... 42 Real Estate Investment Trusts (REITS) and Infrastructure Investment Trusts (INVITS) ...................................... 42 Understanding Typical Risks in Hotel Acquisitions ............................................................................................. 43 Debt Funding in the Hotel Industry ....................................................................................................................... 44 Terms and Covenants of Financing ..................................................................................................................... 46 Competition Law & The Hospitality Industry in India ........................................................................................... 48 Behavioural Issues – Potential of Inquiry into Anti-Competitive Conduct in the Hospitality Sector.................. 48 Notification to the CCI – Jurisdictional Thresholds ............................................................................................. 49 CCI’s Merger Control Record in the Hospitality Sector ....................................................................................... 50 Taming the Beast- Issues in HMAs ......................................................................................................................... 51 Limitation on the Rights of the Manager ........................................................................................................... 52 Control Rights to Owners .................................................................................................................................... 53 Non-Disturbance Agreements ............................................................................................................................ 54 The hospitality industry: A guide to legal issues 1 | P a g e © Economic Laws Practice 2019 Exit Rights ............................................................................................................................................................ 55 Employee Relationships under HMAs ................................................................................................................... 57 Master- Servant Relationship ............................................................................................................................. 57 Vicarious Liability ................................................................................................................................................ 58 Who is the Employer: Owner or Operator? ........................................................................................................ 59 HMAs: Negligence & Gross Negligence ................................................................................................................. 60 Negligence ........................................................................................................................................................... 60 Gross Negligence................................................................................................................................................. 61 Difference between Negligence and Gross Negligence ...................................................................................... 62 Dispute Resolution Clauses in HMAs ..................................................................................................................... 66 Institutional or Ad hoc Arbitration ...................................................................................................................... 66 Method of Selection and Number of Arbitrators ............................................................................................... 67 Arbitration Rules ................................................................................................................................................. 68 Language of the Arbitration ................................................................................................................................ 68 Place of the Arbitration ....................................................................................................................................... 68 Enforcement and Annulment/Setting aside of Awards ...................................................................................... 69 Expert Determination in HMAs ........................................................................................................................... 69 An Alternate Arrangement- Hotel Franchising ...................................................................................................... 73 Brand Standards .................................................................................................................................................. 73 Liquidated Damages ............................................................................................................................................ 74 Restrictions on Transfer of Interest .................................................................................................................... 74 Protected Areas .................................................................................................................................................. 75 Data Privacy Legislation in India and Ownership of Guest Data .......................................................................... 76 Right and Nature of Guest Data .......................................................................................................................... 76 Data Privacy Laws ..............................................................................................................................................