The National Company Law Tribunal (NCLT) has rejected the resolution plan for Rajesh Lifespaces’ hotel division, Rajesh Business & Leisure Hotels, citing procedural irregularities and non-compliance with statutory requirements. This decision mandates a fresh round of resolution proceedings for the struggling entity.
The corporate insolvency resolution process (CIRP) of Rajesh Business & Leisure Hotels, overseen by the resolution professional (RP), witnessed competitive bids from Sankalp Consortium and a consortium led by Rare ARC and Shree Naman Developers. Initially, the committee of creditors (CoC) had selected the proposal from Rare ARC and Shree Naman Developers. However, this plan has now been dismissed due to significant procedural lapses and failure to meet statutory norms.
During the proceedings, key issues raised included alleged irregularities in the conduct of the CIRP and deficiencies in information disclosure to stakeholders. Nausher Kohli, representing Sankalp Recreation, contested the approval of the resolution plan, arguing material irregularities in the CIRP. Similarly, Advocate Rohit Gupta, representing the original promoters, argued that both the resolution plan and the approval process contravened legal provisions. The ruling by NCLT members Anil Rajchellan and Kuldip Kumar underscored several critical lapses, including delayed provision of essential documents to former directors and non-compliance with stipulated timelines for information dissemination. The resolution plan, valued at INR 479.14 crore plus equity shares and proposed by Rare ARC in collaboration with Shree Naman Developers, faced scrutiny over its feasibility and adherence to financial viability standards. Despite promising substantial financial returns to creditors, the plan was deemed insufficient in terms of 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 towards 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 highlight that this decision sets a critical precedent in insolvency proceedings, emphasizing the importance of procedural adherence and transparency under the Insolvency and Bankruptcy Code (IBC).
As a result of the dismissal, the RP and CoC have been granted permission 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 adhere to the tribunal’s directives as they navigate the next phase of this contentious insolvency resolution.
