The National Company Law Appellate Tribunal (NCLAT) has upheld the insolvency resolution process initiated by the National Company Law Tribunal (NCLT) against Tulip Hotels for defaulting on corporate guarantees of INR 450 crore each provided to Cox & Kings and EzeeGo One Travel. Yes Bank, the financial creditor, had claimed a default of INR 900 crore against Tulip Hotels after invoking the guarantees when the principal borrowers failed to repay loans. While Tulip Hotels contended it had no relationship with the defaulters, NCLAT observed that as a corporate guarantor, Tulip Hotels became liable to repay the debt as soon as the principal borrowers defaulted. It dismissed the appeal by Tulip Hotels against the NCLT order.
The National Company Law Appellate Tribunal (NCLAT) has upheld the insolvency proceedings against Tulip Hotels, which had defaulted on corporate guarantees of INR 450 crore each given for Cox & Kings and EzeeGo One Travel & Tours.
The Mumbai bench of National Company Law Tribunal (NCLT) had earlier ordered the initiation of Corporate Insolvency Resolution Process (CIRP) against Tulip Hotels on May 16, 2023 over a plea filed by Yes Bank. Yes Bank had claimed a default of INR 900 crore for the two corporate guarantees issued by Tulip Hotels.
Yes Bank had submitted that Urrshila Kerkar, daughter of Tulip Hotels' promoter Ajit Kerkar, is the promoter and shareholder of Ezeego One Travel & Tours.
Urrshila also filed an affidavit in reply in the company petition filed by the lender against Ezeego One Travel & Tours. She also holds a power of attorney of Ajay Ajit Peter Kerkar, promoter of Cox and Kings, and has filed the affidavit in reply for Cox & Kings, the petitioner said.
Tulip Hotels had appealed this order before the NCLAT. However, the appellate tribunal upheld the NCLT order, stating that when a corporate debtor provides a guarantee for a loan, the financial creditor can initiate insolvency proceedings against it as soon as the principal borrower defaults.
Tulip Hotels had provided corporate guarantees of INR 450 crore each for loans disbursed by Yes Bank to Cox & Kings and EzeeGo One Travel. After they defaulted, Yes Bank invoked the guarantees. Tulip Hotels had contended that it was not related to both the defaulters and have not received any funds from them.
The NCLAT observed that both the principal borrower and corporate guarantor become liable to pay as soon as the default occurs. It added that Yes Bank had validly invoked the guarantees, so the defaults arose for Tulip Hotels when the payment demands were issued. Therefore, the NCLT was correct in initiating CIRP against Tulip Hotels for its default. The NCLAT dismissed Tulip Hotel's appeal.
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