The NCLAT reversed insolvency proceedings against Asian Hotels (West), Mumbai's Hyatt Regency, approving the former promoters' proposal dismissed by lenders, citing it as arbitrary. Criticising UVARCL's claim differences, the tribunal favoured the promoters' plan for full creditor repayment. The hotel, affected by COVID-19, faced financial strains despite YES Bank's loans. The ruling highlights complexities in insolvency amid economic uncertainties like the pandemic.
The insolvency proceedings against Asian Hotels (West), operating Mumbai's Hyatt Regency, have been overturned by the National Company Law Appellate Tribunal (NCLAT) on Tuesday. The tribunal also approved the proposal presented by the former promoters and directors under Section 12A of the Insolvency & Bankruptcy Code.
NCLAT criticised the lenders' decision, deeming it "arbitrary" for not accepting the 12A Proposal, which offered complete repayment of debts to financial and other creditors. The tribunal accepted the revised proposal submitted by the former promoters, closing the Corporate Insolvency Resolution Process (CIRP) for the company.
According to NCLAT's order, the insolvency proceedings initiated by the New Delhi Bench of the National Company Law Tribunal (NCLT) on September 16, 2022, based on a Section 7 application, have been set aside.
The initial borrowing by Asian Hotels (West) was from YES Bank, later transferred to JM Financial Asset Reconstruction, which was subsequently assigned to UV Asset Reconstruction Company Ltd (UVARCL).
The tribunal criticised UVARCL, highlighting discrepancies in the claim amount admitted during CIRP, stating a proposed full payment of Rs 295 crore under the 12A proposal while UVARCL proposed a total payment of Rs 329.14 crore.
NCLAT questioned UVARCL's intentions, suggesting a potential attempt to acquire the prized asset of the corporate debtor, Hyatt Regency, Mumbai, and hand it over to a Prospective Resolution Applicant known to UVARCL alone.
Furthermore, the 12A proposal by the former promoters aimed to clear dues of all creditors, including operational creditors, employees, workmen, and government dues. However, the CoC's decision to reject the 12A proposal was deemed arbitrary and unsustainable by NCLAT.
The tribunal observed that Asian Hotels (West) had availed term loans totaling Rs 200 crore from YES Bank, meeting its financial obligations until March 31, 2021. The hotel business suffered significantly due to the Covid-19 lockdown, prompting the company to seek additional credit lines through the Emergency Credit Lines Guarantee Scheme (ECLGS). Despite YES Bank issuing a sanction letter in May 2021, the sanctioned amount was not released due to unfulfilled corporate debtor conditions.
In conclusion, the NCLAT's decision to overturn the insolvency proceedings signifies a significant turn in the company's fate. The rejection of the 12A proposal by the CoC has been deemed arbitrary, leading to the tribunal's ruling in favour of the former promoters' proposal. This case sheds light on the complexities of insolvency processes and creditor decisions, highlighting the challenges faced by companies amid economic uncertainties and unforeseen adversities like the Covid-19 pandemic.
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