KHAITAN & CO | HOSPITALITY HANDBOOK

1 1 KHAITAN & CO | HOSPITALITY HANDBOOK KHAITAN & CO | HOSPITALITY HANDBOOK INDEX PREFACE .. 1 OVERVIEW .. 2 TEAM .. 4 HOTEL BUSINESS MODELS, RISK ALLOCATION & COST IN INDIA .. 7 INDIAN TAX ISSUES IN HOSPITALITY .. 12 HOTEL MANAGEMENT CONTRACTS 101 - PART 1 .. 18 HOTEL MANAGEMENT CONTRACTS 101 PART 2 .. 23 HOTEL OPERATOR EXPENSES TAXABLE IN INDIA OPERATORS & OWNERS BEWARE! .. 27 INTELLECTUAL PROPERTY IN THE HOSPITALITY SECTOR .. 30 HOTEL DATA PRIVACY & PROTECTION .. 36 ANTI-CORRUPTION ISSUES IN INDIAN HOSPITALITY .. 40 BOMBAY HIGH COURT REVERSES THE AUCTION SALE OF THE PARK HYATT (GOA): PROCEDURE TRUMPS SUBSTANCE .. 44 DISCLAIMER For private circulation only The contents of this HANDBOOK are for informational purposes only and for the reader s personal non-commercial use. The views expressed are not the personal views of KHAITAN & Co and do not constitute legal advice.

2 The contents are intended, but not guaranteed, to be correct, complete, or up to date. KHAITAN & Co disclaims all liability to any person for any loss or damage caused by errors or omissions, whether arising from negligence, accident or any other cause. 2016 KHAITAN & Co. All rights reserved. 1 PREFACE In this second edition of the KHAITAN HOSPITALITY HANDBOOK we have collated a selection of HOSPITALITY related articles authored by members of our HOSPITALITY team over the last 2 years. This HANDBOOK also includes our HOSPITALITY profile for reference and further communication. Our HOSPITALITY team is comprised of lawyers specialising in different practice areas including real estate, taxation, intellectual property, corporate, banking and finance and funds. We hope you enjoy reading the HANDBOOK and that you find the information provided relevant and useful.

3 We have now been actively involved in working in the HOSPITALITY industry in India for some years now providing advice and assisting hotel owners, investors, developers and operators. Of course the last few years have not been without difficulty as there has been substantial new development. Although demand has also grown it has not been at the same time or at the same pace as supply of new rooms and this has caused issues in the market and problems for many hotel owners who were planning and expecting continued growth in revenues and profits. Even so the last three years have been an exciting time for the industry in India as HOSPITALITY has continued to grow. With tourism being an important part of the government s agenda for growth and important initiatives like the visa on arrival scheme the future outlook looks very positive.

4 We look forward to working together with our clients and associates in the future development of the industry in India. Sudip Mullick Partner, KHAITAN & Co KHAITAN & CO | HOSPITALITY HANDBOOK OVERVIEW KHAITAN & Co (alternatively referred to as the Firm ) is one of India s oldest and recognised full service law firms. It was founded in 1911 by Late Debi Prasad KHAITAN , a member of the Constituent Assembly of India (Independent India's first Parliament) and one of the seven members of the Drafting Committee which framed the Constitution of India. The Firm attracted many stalwarts from the field of law who laid the foundations of integrity, simplicity, dedication and professionalism. Deeply rooted in this tradition, the Firm continued to grow and prosper expanding its presence in India from its first office in Kolkata (1911) to New Delhi (1970) to Bengaluru (1994) and to Mumbai (2001).

5 The Firm takes pride in its steady growth and celebrated its centenary year in 2011 (11 November 2011). Over the years the Firm has attracted and retained some of the best legal talent in India to provide high quality legal counsel expected from it across all spheres of commerce and industry. Besides offering a broad spectrum of legal expertise to all its clients, the Firm also ensures personal attention and prompt and quality service in a cost effective manner. The Firm is adequately equipped to respond with the speed and creative solutions that are demanded in today s highly competitive and rapidly changing environment. Its clients include business and financial enterprises, large business houses, banks, financial institutions, government bodies, educational and charitable trusts, cultural institutions, high net-worth individuals, estates and trusts.

6 KHAITAN & Co is an exclusive member of Meritas in India. Meritas is a worldwide alliance of more than 175 independent commercial law firms located in over 80 countries, membership to which is purely by invitation. The Firm today, has a strength of over 500 fee earners including 106 partners and directors, in its 4 offices. In addition to fee-earners, KHAITAN & Co has over 250 shared services. 3 HOSPITALITY India has undergone unprecedented development in the HOSPITALITY sector in the last 5 years. Most industry observers believe that the growth and development of the HOSPITALITY industry will continue well into the foreseeable future. The Firm is committed to assisting its clients in pursuing the significant opportunities and meeting the inevitable challenges that lay ahead. The Firm has established a national HOSPITALITY team to service domestic and foreign clients with fully integrated real estate, financing, tax, corporate, intellectual property and dispute resolution expertise to undertake the broad spectrum of work that the industry requires including: Hotel acquisitions and sales including due diligence; New hotel construction and development documentation; Hotel financing and debt restructuring; Advice to foreign owners and management companies on transaction structuring; Hotel management contracts and franchises; Hotel joint ventures and alliances; Branded residence structures and marketing; and Multi use project development including hotels and residences; Intellectual property issues including trade mark protection and enforcement.

7 HOSPITALITY corporate mergers and acquisitions; and HOSPITALITY dispute resolution including mediation, conciliation, expert determination, arbitration (domestic and international) and litigation. Because of the international nature of the industry, the Firm s objective is to provide its HOSPITALITY industry clients with the high standards of expertise and service which their work demands and thereby to assist those clients in achieving the growth and development in the Indian market to which they aspire. KHAITAN & CO | HOSPITALITY HANDBOOK TEAM Sudip Mullick | Partner, Real Estate D: +91 22 6657 5235 | E: Sudip is a specialist in the real estate, construction and HOSPITALITY sector. He has been advising clients on diverse real estate transactions, litigations and dispute resolutions matters. Sudip is known for his deep (legal and commercial) understanding of hotel development, construction and management contracts.

8 Savita Singh | Partner, Real Estate D: +91 22 6657 5250 | E: Savita specialises in all kinds of property matters. She regularly advises her clients on foreign direct investments in real estate in India, property leasing, licensing and development; including dispute resolution matters. Anand Mehta | Partner, Corporate D: +91 22 6657 5155 | E: Anand Mehta specialises in corporate acquisitions and mergers, India entry strategies, corporate & commercial laws, anti-trust, contract and securities laws. His forte, apart from mergers and acquisitions includes anti employment, data privacy & protection, anti-bribery laws, etc. He is also a qualified Company Secretary. Siddharth Shah | Partner, Investment Funds and Corporate & Securities D: +91 22 6657 5160 | E: Siddharth Shah specialises on matters involving fund structuring, organisation, documentation, regulatory matters, LP negotiations, carry structuring, tax advisory, fund governance, securities law matters, exchange control regulations, REITs, etc.

9 Bijal Ajinkya | Partner , Direct Tax D: +91 22 6657 5165 | E: Bijal is a tax specialist with a deep understanding of international tax and in particular issues related to the structuring of entities and transactions for inbound investment. 5 Nihal Kothari | Executive Director, Indirect Tax D: +91 22 6657 5180 | E: Nihal specialises in direct and indirect taxes applicable in India and advises on tax planning, business structures, tax efficient business models, tax compliances, mergers and demergers. Shishir Mehta | Partner, Banking & Finance D: +91 22 6657 5145 | E: Shishir is an expert in banking and finance law with significant international experience gained working in UK and US. He specialises in domestic and cross-border financing transactions. Adheesh Nargolkar | Partner, Intellectual Property Rights D: +91 22 6657 5240 | E: Adheesh specialises in Intellectual Property Rights (IPR) and handles contentious as well as non-contentious matters including prosecution, enforcement and advisory work.

10 Kartick Maheshwari | Partner, Corporate D: +91 22 6636 5070 | E: Kartick specialises in the private equity and corporate matters. He regularly represents private equity firms, alternative investment funds, sovereign wealth funds and corporate strategic investors on a variety of domestic and cross-border transactions. Namrata Mehta | Principal Associate, Corporate D: +91 22 6657 5274 | E: Namrata is a Principal Associate in the Corporate-3 Group at our Mumbai office. Namrata has over six years experience in corporate, commercial and infrastructure transactions. Namrata also has worked on several transactions in the HOSPITALITY sector, from both owner and operator perspectives. KHAITAN & CO | HOSPITALITY HANDBOOK Rajiv KHAITAN | Partner, Corporate & Commercial D: +91 80 4339 7000 | E: Rajiv has over twenty five years of experience in general legal practice with focus on business and commercial laws.