Suspended Directors of Asian Hotels (West) Ltd. Challenge NCLT Order Admitting Section 7 Application - 2024-01-11

The Suspended Director of Asian Hotels (West) Ltd. and shareholders of the Corporate Debtor have filed four appeals challenging the order passed by the Adjudicating Authority (National Company Law Tribunal) New Delhi Bench IV admitting Section 7 application filed by the Financial Creditor. These appeals arise out of the same proceedings and are being decided by a common judgment..
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The Corporate Debtor is a company registered on 08.01.2007 with a registered office in New Delhi. It runs the Hyatt Regency hotel in Mumbai. The Corporate Debtor availed financial assistance from Yes Bank on 21.04.2016, amounting to Rs.180 Crores and further Term Loans in different Tranches totalling to Rs.200 Crores. An Overdraft facility of Rs.27 Crores was also availed by the Corporate Debtor. In the year 2020, a FITL Term Loan and a FITL-LRD facility was availed on 01.09.2020..
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The Corporate Debtor served all its financial obligations to Yes Bank till 31.03.2021. Due to the COVID-19 pandemic, a lockdown was enforced from 25.03.2020, and during this period, the hotel business was severely affected. The Government of India introduced the Emergency Credit Lines Guarantee Scheme (ECLGS) to support business enterprises severely affected by COVID-19. Under the ECLGS, eligible borrowers could avail additional credit lines in the form of additional working capital/term loan facility on the basis of 100% guarantee coverage sanctioned under the ECLGS..
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The Corporate Debtor applied for an additional facility of Rs.40 Crore under ECLGS 2.0 on 24.11.2020. Yes Bank issued a sanction letter on 03.05.2021, which was accepted by the Corporate Debtor on 04.05.2021. However, the Bank did not release the amount sanctioned under ECLGS on the ground that certain conditions to be fulfilled by the Corporate Debtor had not been fulfilled..
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The Corporate Debtor defaulted in paying the instalments of April 2021. There was a default committed by the Corporate Debtor for a loan and other facilities during April 2021 to August 2021..
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On 30.07.2021, the Bank issued a Loan Recall Notice recalling the entire loan amount along with interest. On the same date, a notice under Section 13(2) was issued by Yes Bank. On 19.08.2021, Yes Bank filed a Section 7 application before the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench IV, claiming a default of an amount of Rs.264,07,35,129/- as on 13.08.2021..
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The Yes Bank also took possession of assets on 21.08.2021 under the SARFAESI Act, 2002. The Corporate Debtor filed a counter affidavit in the Section 7 application filed in November 2021. The Corporate Debtor opposed the Section 7 application, pleading that it had fulfilled its obligations under the Credit Facility up to 31.03.2021. It was also pleaded that the Bank had unlawfully refused to release the amount of Rs.38.5 Crore against the ECLGS and that if the amount had been released, the Company would not have been a defaulter..
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On 09.12.2021, an I.A. No. 5699/PB/2021 was filed by Asian Hotels (East) Ltd. praying for impleadment in the application filed by Yes Bank under Section 7. On 01.06.2022, Yes Bank issued a notice for the sale of financial assistance/loan of the Corporate Debtor. On 21.06.2022, Yes Bank assigned the debt of the Corporate Debtor to JM Financial Asset Reconstruction Company Ltd. I.A. No. 3041 of 2022 was filed by JM Financial Asset Reconstruction Company Ltd. for substitution in place of the original Financial Creditor – Yes Bank. The I.A. was opposed by the Corporate Debtor..
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The Adjudicating Authority vide order dated 05.08.2022 rejected I.A. No. 5699/PB/2021 filed by Asian Hotels (East) Ltd. for impleadment. Company Appeal (AT) (Ins.) No. 1271 of 2022 has been filed by Asian Hotels (East) Ltd. challenging the order dated 05.08.2022..
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The Adjudicating Authority heard the parties on the Section 7 application as well as on I.A. No.3041 of 2022, I.A. No. 4021 of 2022 and by impugned order dated 16.09.2022 admitted Section 7 application filed by the Financial Creditor. I.A. No.3041 of 2022 filed by JM Financial Asset Reconstruction Company Ltd. to be substituted in place of Yes Bank was also allowed. Aggrieved by orders dated 16.09.2022, appeals have been filed, as noted above..
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Company Appeal (AT) (Ins.) No. 1192-1193 of 2022 was heard by the Tribunal on 29.09.2022, on which date notices were issued and an interim order was passed restraining the CoC and the RP from taking any final decision regarding the resolution.