NCLAT dismisses EIH’s plea seeking NCLT order approving sale of Golden Jubilee Hotel

New Delhi, Dec 15 (PTI) The National Company Law Appellate Tribunal (NCLAT) has dismissed a petition filed by hospitality major EIH Ltd against the NCLT order sanctioning the sale of the Golden Jubilee Hotels in Hyderabad.

The Court of Appeal upheld an earlier ruling by the National Company Law Tribunal (NCLT) allowing the bid by the Singaporean entity and said the commercial decision of the majority of the committee of creditors (CoC) “cannot be questioned or investigated”.

“The recent judgment has certainly boosted confidence in the business acumen of the CoC and there is minimal scope for judicial intervention,” two members of NCLAT said.

Earlier, the NCLT Hyderabad Arbitral Tribunal on February 7, 2020 had approved the bid of Singapore-based BREP Asia II Indian Holding Co II (NQ) PTE, which was challenged at NCLAT by Oberoi Group flagship company EIH challenges.

EIH, which manages Golden Jubilee Hotels with a 16% stake, argued that it cannot be considered a promoter under Section 29A of the Insolvency and Bankruptcy Code and is “not eligible” to participate in the hotel’s resolution plan. International Bulk Company).

During the resolution process, part of the resolution plan recommended that EIH continue as an independent operator of the hotel. However, resolution professionals noted that this was a “conflict of interest” and such bids could lead to disqualification.

Aggrieved, EIH approached the NCLT, which also stated that EIH as a promoter of Golden Jubilee Hotels would not be eligible under Section 29A and any solution to include EIH in the resolution plan would render it ineffective.

Section 29A of the IBC is a restrictive provision that states that no person on the negative list is eligible to submit a solution. This includes undischarged bankrupts, willful defaulters or defaulters who are under the management or control of that person.

EIH argued that section 29A applied to bidders and not to third party operators like EIH, and that EIH was proposing as the operator of the hotel without any ownership or management rights. In addition, the management and operation of the hotel are independent.

However, NCLAT dismissed the plea and held that EIH was the original promoter of the hotel and the land would not be allotted unless the promoter had experience in running and operating the hotel.

“Therefore, the decision of the corporate debtor promoters to engage the appellant as hotelier cannot be treated as an independent contract. In view of this, Section 29A of the Code will apply to the appellant as part of the hotelier. Resolution Plan,” NCLAT said.

Further, the Appellate Tribunal observed that the CoC and NCLT had left it to the discretion of the successful bidder whether to retain EIH or change hotel operator and there was nothing wrong in this reasoning.

NCLAT said the resolution plan envisages complete freedom from all contracts and obligations to the existing shareholders and promoters, including the appellant EIH Ltd.

NCLAT also pointed out that the bidders believed that poor management of the hotel was the reason for the loss. It further submitted that if EIH had continued as the hotel operator, Golden Jubilee Hotel would never have been able to turn a profit as it “suffered losses due to poor operational management”.

“The SRA (Successful Resolution Applicant) actually objected to the appellant (EIH) continuing to work with the previous hotel operator (here the appellant),” NCLAT said.