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2025 Supreme(Online)(NCLAT) 77
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Justice Ashok Bhushan (Chairperson) , Hon'ble Mr. Barun Mitra (Member (Technical)) ,
Deepak Raheja and Anr. – Appellant
Versus
OMKARA ASSETS RECONSTRUCTION PRIVATELIMITED – Respondent
165/ND/2024 COMPANY APPEAL(AT)(INS)
The court ruled that the Adjudicating Authority must consider all relevant financial agreements and the profitability of Corporate Debtors before determining defaults in loan repayments.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 7 - Corporate Insolvency Resolution Process (CIRP) - Appeals against orders initiating CIRP against two Corporate Debtors running profitable hotels - The Appellants contended that the Corporate Debtors were not in default of loan repayments and had sufficient cash reserves to continue operations - The Adjudicating Authority's findings regarding defaults were challenged, particularly concerning the Cash Management Agreement (CMA) and Debt Service Reserve Amount (DSRA) - The court found that the Adjudicating Authority failed to consider the CMA and DSRA in its assessment of defaults, leading to the conclusion that the orders initiating CIRP were unsustainable and required fresh consideration. (Paras 1-64)
(B) Corporate Debtors - Financial status - The Corporate Debtors were found to be profitable, with substantial earnings post-COVID-19, and had made significant repayments to lenders, contradicting claims of default. (Paras 20-24)
(C) Legal principles - The court emphasized the necessity for the Adjudicating Authority to consider all relevant agreements and financial arrangements before concluding on defaults, particularly in the context of ongoing profitable operations. (Paras 35-40)
| Table of Content |
|---|
| 1. appellant's submissions on profitability (Para 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62 , 63) |
| 2. appeals allowed and orders set aside (Para 64 , 65) |
JUDGMENT
ASHOK BHUSHAN, J.
These two Appeal(s) challenge the orders dated 09.01.2024 passed by National Company Law Tribunal, Mumbai Bench, Court-I, initiating Corporate Insolvency Resolution Process (“CIRP”) against the two Corporate Debtors, running two Hotels - (i) JW Marriott (five- star Hotel) situated at Bengaluru; (ii) Crown Plaza Hotel, situated at Pune.
2. Company Appeal (AT) (Ins.) No. 165 of 2024 has been filed by Suspended Director of the Corporate Debtor – GSTAAD Hotels Pvt. Ltd.; and Company Appeal (AT) (Ins.) No. 212 of 2024 has been filed by Shareholder and Suspended Director of the Corporate Debtor – Neo Capricorn Plaza Pvt. Ltd., a subsidiary of M/s GSTAAD Hotels Pvt. Ltd. Lenders of both the Corporate Debtors being common and lending commenced by a common Loan Agreement dated 26.12.2017 and both the Appeal(s) involving common issues of facts and law, have been heard together and are being decided by this common judgment
3. Brief facts of the case giving rise to these Appeal(s) are:
Company Appeal (AT) (Ins.) No.165 of 2024
(i) Piramal Capital Housing Finance Ltd. (“Piramal”) entered into a Loan Agreement dated 26.12.2017 with Corporate Debtor (“CD”) - M/s GSTAAD Hotels Pvt. Ltd. (“GSTAAD Hotels”) and Neo Capricorn Plaza Pvt. Ltd. (“Neo Capricorn”), agreeing to extend Term Loan Facility of Rs.600 crores, wherein GSTAAD was granted loan of Rs.450 crores, Rs.50 crores as revolving facility and Neo Capricorn was granted a loan of Rs.100 crores. Rate of interest was 10.5% (per annum) payable every month. In case of default interest of 1.25% per month was payable.
(ii) On 17.01.2018, a Cash Management Agreement was entered between Piramal and GSTAAD Hotels (Borrower), whereby 66% of the revenue of the Hotel was to be transferred into the Revenue Account and 34% of the Revenue Account was to be transferred into a Retention Account, to be used for service of debt under the Facility Agreement.
(iii) As per Loan Agreement dated 26.12.2017, there was a Debt Service Retention Account (“DSRA”) where Rs.8 crores remained undisbursed in order to meet any shortfall.
(iv) The Corporate Debtor – GSTAAD Hotels continued to service its Loan Agreement till March 2000. After the onslaught of Covid-19, GSTAAD Hotels availed ECLGS Facility of Rs.98 crores on 30.12.2020 at the interest rate of 13% per annum. The principal amount was repayable within four years. Moratorium of one year was also granted. Another ECLGS Facility II was granted to GSTAAD Hotels on 11.03.2022 of Rs.65 crores, repayable within five years with moratorium period of two years.
(v) On 10.08.2021, IDBI Trusteeship Ltd. filed a Company Petition against the CD – GSTAAD Hotels being CP(IB) No.1292 of 2021 before the NCLT Mumbai Bench, in respect of default under the Loan Agreement dated 26.12.2017. Company Petition - CP(IB) No.1292 of 2021 was withdrawn on 13.12.2022. On 27.12.2022, Lenders assigned their all rights under Loan Agreement, ECLGS Facility-I (“ECLGS-1”) and ECLGS Facility-II (“ECLGS-2”) to Omkara Asset Reconstruction Company Pvt. Ltd. (“Omkara”).
(vi) On 15.12.2023, Omkara issued a legal notice, calling upon the CD to repay the amount of Rs.666,53,26,968/-. A Company Petition under Section 7 being CP(IB) No.291/MB/2023 was filed by the Omkara against GSTAAD Hotels, claiming debt and default on 15.11.2022.
(vii) GSTAAD Hotels filed a Writ Petition No. 6037 of 2023 before the Karnataka High Court, challenging the assignment dated 27.12.2022 seeking a declaration that there being no default in repayment of loan facility and the account of the CD not having been decla
