The National Company Law Appellate Tribunal (NCLAT) on Tuesday set aside insolvency proceedings against Asian Hotels (West), which operates Hyatt Regency, Mumbai.
The appellate insolvency tribunal has also accepted the proposal submitted by former promoters and directors of the company under Section 12A of the Insolvency & Bankruptcy Code.
NCLAT said the decision of lenders of Asian Hotels (West) was "arbitrary in not approving 12A Proposal", which offered to pay the entire debt of financial creditors as well as all other creditors.
"The Proposal under 12A submitted by the Appellant (former promoters) dated August 11, 2023 as revised on October 4, 2023 is accepted. The CIRP (Corporate Insolvency Resolution Process) is closed," said the NCLAT order.
The NCLAT order further said the order passed by the New Delhi Bench of the National Company Law Tribunal (NCLT) "dated September 16, 2022, admitting Section 7 application is set aside."
Asian Hotels West had borrowed the initial amount from YES Bank, which was transferred to JM Financial Asset Reconstruction, which, in turn, was assigned to UV Asset Reconstruction Company Ltd.
A two-member bench slammed the UV Asset Reconstruction Company Ltd and said the claim admitted in the CIRP was Rs 295 crore, which was proposed to be fully paid under 12A proposal.
However, UVARCL had proposed for a total payment of Rs 329.14 crore.
The NCLAT bench said, "We find substance in the submission of learned counsel for the appellant that intent of UVARCL is to somehow take over prime prized asset of the corporate debtor i.e. Hyatt Regency, Mumbai, and handover the assets to some Prospective Resolution Applicant which is known to UVARCL only."
NCLAT said the 12A proposal by the promoters clears dues of all creditors, including operational creditors, employees and workmen and government dues.
Section 12A permits the withdrawal of CIRP by NCLT, if the proposal is voted by 90 per cent of the creditors.
Moreover, it also observed that the Committee of Creditors (CoC) has already decided to refund the deposit of one of the prospective resolution applicants.
"We, thus, are of the view that in view of the aforesaid, we at the instance of prospective resolution applicant cannot direct the CoC to evaluate the Resolution Plan which it has received," it said.
The said course cannot be allowed to be directed since the proposal under Section 12A has to be finally determined as to whether it deserves to be accepted and the decision of the CoC to refuse to accept the proposal is arbitrary and unsustainable, it said.
Asian Hotels (West) has availed of term loans in different tranches totalling Rs 200 crore from YES Bank. It served its all financial obligations to Yes Bank till March 31, 2021.
Due to Covid-19 lockdown, hotel business was worst affected.
It had applied for the Emergency Credit Lines Guarantee Scheme (ECLGS) to avail of additional credit lines.
However, YES Bank despite issuing a sanction letter on May 3, 2021, did not release the amount sanctioned under ECLGS on the ground that certain conditions, which are to be fulfilled by the corporate debtor have not been fulfilled.
Later on August 13, 2021, it moved NCLT claiming a default of Rs 264.07 crore, which was admitted on September 16, 2022.
Later, JM Financial Asset Reconstruction Company Ltd substituted in place of YES Bank.