The NCLT rejects Express Group's revival plan for Neesa Leisure Ltd, dismissing the proposal due to flaws in transparency and fairness. Despite creditor approval, the plan favored secured over unsecured creditors, overlooking claims on disputed assets. Now, creditors must regroup to devise a revised strategy. The decision reflects broader trends in the hospitality sector, where strategic buyers and investors are eyeing distressed assets. With over 7,000 companies undergoing resolution, including 146 from hospitality, the sector faces challenges and opportunities for restructuring amidst economic uncertainties.
"The NCLT in Ahmedabad has rejected the revival request for Neesa Leisure Ltd, which is owned by the Express Group of Hotels, best known for its Cambay luxury hotel chain. With obligations exceeding INR 1,580 crore, the company's lenders approved a resolution plan that offered them INR 150 crore for acquisition through bankruptcy proceedings. Despite creditors' support, the tribunal found the plan faulty, lacking transparency and fair consideration for unsecured creditors' claims, notably in relation to contested assets, which were predominantly leased properties in Gandhinagar, Ahmedabad, Neemrana, Udaipur, and Jaipur.
The tribunal's division bench, which included judicial member Chitra Hankare and technical member Velamur G. Venkata Chalapathy, ruled the procedure faulty, citing a lack of transparency and fairness in application evaluation. This judgment came after Neesa Leisure's creditors approved the plan by a 67.5% majority. Critically, the authorized plan neglected unsecured creditors' claims while emphasizing secured creditors' obligations, creating worries about significant disputed assets, primarily leased buildings.
The next stages for Neesa Leisure include creditors meeting to design a revised plan that addresses the issues raised in the order, which is critical for correcting fundamental defects. Originally admitted for resolution in April 2019 following an application by Asset Reconstruction firm (I) Ltd, the firm now confronts the difficulty of determining a feasible path forward to meet its financial commitments.
The hospitality industry has emerged as an appealing business opportunity, with strategic buyers and investors showing increased interest in the aftermath of the pandemic. With the promise of ""revenge tourism"" fuelling demand following the lockdowns, hotel and resort properties in bankruptcy are attracting the attention of investors with strong financial support. Notably, Hemant Kanoria-promoted Sarga Hotels, which operates the Westin brand in Kolkata, was acquired through the IBC process by Shri Ram Multicom in January, indicating ongoing market dynamics.
Similarly, Viceroy Hotels, which operates Marriott properties in Hyderabad, and V Hotels Ltd, which owns Tulip Star (previously Centaur Hotel Juhu) in Mumbai, have piqued the interest of investors and strategic purchasers looking for troubled assets under resolution. These instances highlight the changing picture of distressed asset acquisitions in the hotel industry, fueled by restored investor confidence and growing market opportunities.
The latest statistics from the Insolvency & Bankruptcy Board of India demonstrates the widespread impact of bankruptcy proceedings, with over 7,000 enterprises admitted for resolution by the end of December, including around 146 organizations in the hotels and hospitality sector. This trend emphasizes the sector's vulnerability to financial difficulties in the face of broader economic challenges, while simultaneously providing prospects for restructuring and revitalization through smart interventions. "
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