Setback for Rajesh Lifespaces Hotel Sale as NCLT Orders Rerun

15 Jul 2024 , 01:38 PM

The resolution plan that was submitted for the hotel business of real estate developer Rajesh Lifespaces, Rajesh Business & Leisure Hotels, was dismissed by the National Company Law Tribunal (NCLT) due to procedural irregularities and non-compliance with statutory criteria.

The Rajesh Business & Leisure Hotels’ corporate insolvency resolution procedure (CIRP), overseen by the resolution professional (RP), has seen rival bids from consortiums headed by Rare ARC-Shree Naman Developers and Sankalp Consortium.

The committee of creditors (CoC) initially selected the resolution plan put up by Rare ARC and Shree Naman Developers; however, it has now been rejected because of procedural errors and a failure to adhere to legal requirements.

Throughout the proceedings, a number of controversial issues were brought up, including purported irregularities in the CIRP’s operation and shortcomings in the information disclosed to stakeholders.

Attorney Nausher Kohli represented Sankalp Recreation in the case. He contended that there had been significant anomalies in the CIRP’s behavior and he contested the acceptance of the resolution plan offered by the victorious resolution applicant.

Attorney Rohit Gupta represented the company’s original promoters in his appearance, arguing that the resolution plan and the procedure used to approve it were illegal.

Anil Rajchellan and Kuldip Kumar, members of the NCLT, presented the decision, which pointed out a number of mistakes, such as the failure to provide former directors with crucial documents on time and the alleged disregard for the deadlines for disseminating information.

The resolution proposal, which was first put up by Rare ARC in collaboration with Shree Naman Developers and valued at Rs. 479.14 crore plus equity shares, was subject to criticism regarding its viability and compliance with financial viability criteria. Although this scheme provided creditors with significant financial returns, the tribunal found that it lacked sufficient documentation and procedural clarity.

Important parties, such as the Rajesh Business & Leisure Hotels’ promoters, challenged the clearance procedure, accusing it of being biased in favor of the consortium headed by Rare ARC and Shree Naman Developers and claiming procedural errors. They contended that their capacity to engage in the CIRP process effectively was compromised by the delayed disclosure of important information.

The tribunal’s decision upholds the fundamental idea that, even while the CoC’s business acumen is crucial, it must scrupulously adhere to legal requirements and guarantee that all parties are treated fairly.

Legal experts stress that this ruling establishes a crucial precedent for insolvency procedures and emphasizes how crucial it is to follow the Insolvency and Bankruptcy Code’s (IBC) procedures and maintain transparency.

The dismissal has given the RP and CoC permission to reopen the settlement procedure under the rigorous guidelines set forth by the CIRP and IBC.

Furthermore, a four-month interim extension of the CIRP period has been agreed in order to allow for a comprehensive reassessment and re-examination of resolution proposals.

This case’s conclusion will likely impact future insolvency processes, highlighting the importance of rigorous adherence to legal requirements and procedural justice throughout the whole CIRP process. As they proceed through the next stage of this acrimonious insolvency resolution process, the parties concerned are expected to follow the tribunal’s instructions.

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