NCLT rejects resolution plan for Viceroy Hotels, orders fresh bids

The tribunal found that the bank guarantee furnished by Anirudh Agro Farms had not only expired, but also did not cover the implementation plan.

The National Company Law Tribunal (NCLT) has rejected the plan of the successful resolution applicant, Anirudh Agro Farms (AAFL), for Viceroy Hotels (VHL) following the expiry of bank guarantees furnished by AAFL.

Viewing liquidation of the corporate debtor as the last resort, the tribunal directed the continuation of the corporate insolvency resolution process (CIRP) and asked the resolution professional to call for fresh bids.

Viceroy Hotels currently owns two properties in Hyderabad. At one of these, the Marriott group operates a five-star hotel, and at the other it operates a three-star outfit.

On June 9, the NCLT Hyderabad bench comprising judicial member Venkata Ramakrishna Badarinath Nandula and technical member Charan Singh, rejected the application filed by resolution professional Govindarajula Venkata Narasimha Rao seeking to approve the resolution plan of Anirudh Agro, which had been approved by 95.82 percent of the committee of creditors (CoC).

Anirudh Agro could not be reached for comment.

The tribunal had in March 2018 admitted the petition filed by the financial creditor the Asset Reconstruction Company, and ordered the commencement of the CIRP proceedings.

In all, Rs 714.24 crore of claims from financial creditors were admitted after the resolution professional constituted the CoC and invited bids from resolution applicants.

Though 88 percent of the CoC had approved the resolution plan of CFM Asset Reconstruction, the tribunal rejected it in September 2021 on the ground that an asset reconstruction company would not be capable of implementing the resolution plan without prior approval of the Reserve Bank of India.

Subsequently, the tribunal extended the CIRP multiple times, allowed the CoC to replace the resolution professional, and cleared the proposal to call for fresh bids.

Responding to the bids called for in June 2022, five resolution applicants, including Anirudh Agro, submitted their plans.

While the fair value was placed at Rs 357.19 crore and the liquidation value at Rs 202.83 crore through a revised valuation exercise in July 2022, the resolution plan of Anirudh Agro Farms at Rs 168.5 crore was approved by the CoC on November 10 last year.

The successful resolution applicant also proposed to infuse fresh capital of Rs 50 crore required to improve the operations of the two properties of VHL in Hyderabad, and work closely with the existing hotel operators.

However, the tribunal found that the bank guarantee furnished by Anirudh Agro Farms had not only expired, but also did not cover the implementation plan.

The tribunal did not accept AAFL’s undertaking that payments to creditors would be made in five tranches as per the approved plan, and that payments in prior tranches are liable to be forfeited if it fails to make subsequent payments.

Accordingly, the tribunal rejected the resolution plan, finding it to be in breach of statutory provisions.