Appu Hotels Checks Out Of Insolvency Court

India’s National Company Law Tribunal (NCLT) allowed the withdrawal of corporate insolvency resolution process (CIRP) initiated against Appu Hotels Ltd., which operates Le Meridien in Chennai and Coimbatore.

“The CoC (committee of creditors) has deliberated in detail the settlement proposal and took a decision exercising its commercial wisdom by voting 100% for the settlement proposal and the same cannot be thrown out on hyper-technical ground that Regulation 30A was not strictly complied with,” the NCLT said in its order dated 20 December.

The development comes after the creditors earlier approved the settlement proposal of Appu Hotels’ promoter Palani G. Periasamy under Section 12A of the Insolvency and Bankruptcy Code (IBC) with a 100% voting, the NCLT order showed.

Appu Hotels went into insolvency resolution after the NCLT in May 2020 admitted the application of its financial creditor Tourism Finance Corporation of India Ltd.

After bidding process and several legal challenges, the creditors in October 2022 approved Periasamy’s settlement proposal for Appu Hotels, which had admitted claims of 592 crore rupees ($71 million), the NCLT order showed.

CREDITORS’ STAND

Appu Hotels’ creditors said the comparison of proposals submitted by the company’s promoter under Section 12A and other seven resolution plans, showed the amount offered by the promoter was much more than the other resolution plans, according to the order.

The creditors noted the proposal under Section 12A settles the entire claim amount filed against the company and the proposal has been submitted with the definite source of funds for immediate payment by way of 25% cash deposit in no lien account with the lead bank and 75% bank guarantee, the order said.

“The 12A proposal of the promoters, offers reasonable interest amount to all the secured financial creditors in addition to the admitted claims,” the creditors said. “The 12A proposal seems to balance and it protects the interest of all the stakeholders without any dilution.”

THE VERDICT

The NCLT allowed the creditors’ stand and dismissed the petition filed by the prospective resolution applicants. It also allowed the withdrawal of CIRP against Appu Hotels and gave its approval for the extension of the company’s CIRP period.

The tribunal clarified that it is allowing withdrawal simpliciter filed by the resolution professional under Section 12A of IBC and not approving the settlement proposal.

The NCLT said the board’s powers, which stood suspended, is restored and directed the resolution professional to handover the management and affairs of Appu Hotels to them.

The order was passed by NCLT Chennai Judicial Member Sanjiv Jain and Technical Member Venkataraman Subramaniam.

Note: $1 = 83.1795 Indian rupees

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