Introduction –

The Principal Bench of the National Company Law Tribunal (hereinafter referred to as the ‘NCLT’), in the case of Alchemist Asset Reconstruction Company Limited (herein after referred to as AARCL) vs Hotel Gaudavan Pvt. Ltd (herein after referred to as HGPL)[1], entertained the first resolution plan filed before it, which was the first to have been submitted since the implementation of the Insolvency and Bankruptcy Code, 2016.

However, the corporate debtor, HGPL, fought back hard against the resolution plan. The application filed under Section 7 of the Insolvency and Bankruptcy Code 2016, by AARCL, was admitted on March 31, 2017. The matter went to the Supreme Court as well, after HGPL violated the moratorium order.

Brief facts of the case –

Upon admission, HGPL (through its erstwhile directors) filed a writ petition before the Rajasthan High Court, where, although the petition was admitted, the stay on moratorium was rejected. Following this, unsuccessful attempts at stalling the proceedings were made by HGPL in the Supreme Court and the NCLAT.

After a failed effort at the Supreme Court and during the pendency of the moratorium, HGPL invoked an arbitration clause and filed an appeal before the District Court of Jaisalmer under Section 37 of the Arbitration and Conciliation Act, 1996. Following this, the District Court issued a notice, which was later challenged in the Supreme Court by AARCL.

Meanwhile, HGPL refused to comply with the NCLT moratorium order and a contempt petition was filed, in which an adverse order was also passed. To further stall the resolution process, the HGPL also registered FIRs against the Resolution Professional and the officials of AARCL.

AARCL, along with the Resolution Professional, later challenged the arbitration proceedings and the FIRs filed against them in the Supreme Court. The Court, however, declined the challenge while giving the following verdict, stating that “The facts of the present case disclose a very sorry state of affairs”. Taking note of the Supreme Court order, the NCLAT dismissed the appeals pending before it.

Court ruling –

Then, the NCLT, by an order dated December 13, 2017, approved the resolution plan submitted by one of the financial creditors, JFC Finance (India) Limited.

As a part of the approved resolution plan:

  • The shares held by existing shareholders of HGPL will be transferred to JFC for a consideration of INR 1 per share, for a total consideration of INR 1738.83 lakhs.
  • Fresh capital infusion by JFC to the tune of INR 500 lakhs for which further 50 lakh shares of INR 10 each will be issued.
  • AACRL will convert a part of its debt (INR 100 crore) into equity and a part of it (INR 150 crore) will be converted into interest-free CCDs with INR 500 lakh payment upfront and balance debt clearance by March 31, 2018.
  • Existing three directors will be removed and three new directors will be appointed as recommended in the resolution plan.