The National Company Law Tribunal (NCLT) has dismissed the resolution plan submitted for realty developer Rajesh Lifespaces’ hotel business, Rajesh Business & Leisure Hotels, citing non-conformity with statutory requirements and procedural irregularities.
The corporate insolvency resolution process (CIRP) of Rajesh Business & Leisure Hotels, managed by the resolution professional (RP), had witnessed competing proposals from consortiums led by Sankalp Consortium and Rare ARC-Shree Naman Developers.
Initially, the resolution plan offered by Rare ARC and Shree Naman Developers was chosen by the committee of creditors (CoC) but has now been dismissed due to procedural lapses and non-compliance with statutory norms.
The contentious points raised during proceedings included alleged irregularities in the conduct of the CIRP and deficiencies in information disclosure to stakeholders.
In the case, counsel Nausher Kohli appeared for Sankalp Recreation and opposed the approval of the resolution plan submitted by the successful resolution applicant and argued that there have been material irregularities in the conduct of the CIRP.
Advocate Rohit Gupta appeared for the original promoters of the company and sought to declare that the resolution plan as well as the process adopted for approval of the plan is contrary to the law.
The ruling, delivered by NCLT members Anil Rajchellan and Kuldip Kumar, highlighted several lapses, including the delayed provision of essential documents to the erstwhile directors and purported non-compliance with the stipulated timelines for information dissemination.
The resolution plan, initially valued at Rs. 479.14 crore plus equity shares, proposed by Rare ARC in partnership with Shree Naman Developers, faced scrutiny over its feasibility and adherence to financial viability standards. Despite offering substantial financial returns to creditors, this plan was deemed inadequate in documentation and procedural transparency by the tribunal.
Key stakeholders, including the promoters of Rajesh Business & Leisure Hotels, contested the approval process, citing procedural lapses and alleged bias in favour of the consortium led by Rare ARC and Shree Naman Developers. They argued that the delayed disclosure of crucial information undermined their ability to participate effectively in the CIRP process.
The tribunal’s ruling reinforces the principle that the commercial wisdom of the CoC, while paramount, must align strictly with statutory provisions and ensure equitable treatment of all stakeholders.
Legal experts emphasise that this decision sets a critical precedent in insolvency proceedings, highlighting the importance of procedural adherence and transparency under the Insolvency and Bankruptcy Code (IBC).
As a consequence of the dismissal, the RP and CoC have been granted liberty to reinitiate the resolution process in strict accordance with the IBC and CIRP regulations.
Additionally, an extension of the CIRP period by four months has been provisionally approved to facilitate a thorough re-evaluation and reconsideration of resolution proposals.
The outcome of this case is poised to influence future insolvency proceedings, underscoring the necessity for meticulous compliance with statutory norms and procedural fairness in all stages of the CIRP. The parties involved are expected to abide by the tribunal’s directives as they navigate the next phase of this contentious insolvency resolution.
