NCLT Chennai Terminates Insolvency Proceedings Against Appu Hotels Ltd., Approves Settlement Proposal By Promoter

The National Company Law Tribunal (NCLT), Chennai Bench, comprising of Shri Sanjiv Jain (Judicial Member) and Shri Venkataraman Subramaniam (Technical Member), has terminated the Corporate Insolvency Resolution Process (“CIRP”) against Appu Hotels Ltd. while allowing an application filed under Section 12A of IBC by the Resolution Professional. The Committee of Creditors have approved the Settlement Proposal submitted by Promoter of Corporate Debtor valued at Rs. 592 Crores, whereas the total claims admitted by the Resolution Professional amounted to Rs. 438.8 Crores. A Resolution Plan submitted by MGM Healthcare's owner, Mr. M.K. Rajagopalan, valued at Rs. 423 Crores was earlier approved by the NCLT but later set aside by the NCLAT. Background Facts Appu Hotels Limited (“Corporate Debtor”) is a company Promoted by Dr. Palani G Periasamy (“Promoter”). The Corporate Debtor is engaged in the business of hospitality and runs the hotels such as Le Meridian (Coimbatore), Le Royal Meridien (Chennai) and Riverside Resort (Kumbakonam). On 05.05.2020, the Corporate Debtor was admitted into CIRP by the NCLT. The total claims received by creditors amounted to Rs. 540 Crores, however, the Resolution Professional admitted the claims to the extent of Rs. 438.8 Crores. The fair value of Corporate Debtor was Rs. 730.8 Crores and the liquidation value was Rs. 569 Crores. Mr. M.K. Rajagopalan (“Resolution Applicant”) is the owner of MGM Healthcare and had submitted a Resolution Plan for the Corporate Debtor valued at Rs. 423 Crores. Mr. Rajagopalan's plan was approved by the Committee of Creditors (“CoC”) and thereafter by NCLT on 15.07.2021. In an appeal filed by the Promoter of Corporate Debtor, the NCLAT on 30.07.2021 had stayed the implementation of approved resolution plan. Thereafter, on 17.02.2022 the NCLAT set aside the Mr. Rajagopalan's Resolution Plan and directed the CoC to invite Expression of Interest afresh and place the settlement proposal of the Promoter within 15 days. Mr. Rajagopalan filed an appeal before the Supreme Court against NCLAT order. On 16.03.2022, the Supreme Court directed that CoC may continue but the entire process shall remain subject to final orders to be passed in the appeal. The Promoter submitted a settlement proposal under Section 12A of IBC, which was rejected by the CoC on 25.03.2022 with 51.81% voting share. Thereafter, fresh Form – G was issued on 26.04.2022 and seven Prospective Resolution Applicants submitted Resolution Plans. In the meantime, the Promoter submitted a second Settlement Proposal under Section 12A of IBC, which was approved by the CoC on 31.10.2022. The CoC resolved with 100% votes for withdrawal by moving an Application under Section 12A of IBC. The Supreme Court vide its order dated 03.05.2023 upheld the order of NCLAT setting aside the Resolution Plan of Mr. M.K. Rajagopalan. The Resolution Professional filed an application under Section 12A of IBC before NCLT, seeking termination of CIRP against the Corporate Debtor. An intervention application was also filed by Mr. Rajagopalan seeking rejection of the Settlement Proposal submitted by the Promoter. Outlay Of Settlement Proposal The Settlement Proposal of Promoter is valued at Rs. 592.3 Crores, in accordance with the admitted claims and balance in books of accounts of Corporate Debtor. The Settlement Proposal proposes to pay Rs. 340.43 Crores to Secured Creditors, alongwith simple interest @ 6% p.a. to the extent of Rs.25.29 Crores for the period from 06.05.2020 to 31.07.2021. The unsecured Financial Creditors would be paid Rs. 94.13 Crores. The dues of Workmen and Employees, Government and other Operational Creditors are to be paid 100% of their book value dues. The rights and benefits accrued to the Equity Shareholders and Preference Share Holders will continue without any dilution. NCLT Verdict The NCLT has allowed the application filed under Section 12A of IBC and the Settlement Proposal of Promoter has been approved. The Intervention Application filed by Mr. Rajagopalan has been rejected. Accordingly, the CIRP of Corporate Debtor has been terminated. Case Title: Tourism Financial Corporation of India Ltd v M/s. Appu Hotels Limited Case No.: IA(IBC)/1134(CHE)/2022 in IBA/1459/2019 Counsel For RP: N.L. Rajah, Senior Advocate Counsel for CoC: E. Om Prakash, Senior Advocate Counsel for Promoters: P.H. Arvindh Pandian, Senior Advocate. Counsel for Intervenors: U.K. Chaudhry, Senior Advocate R. Venkatavaradhan, Advocate, P. Chidambaram, Senior Advocate P.R. Raman, Senior Advocate. Click Here to Read/Download Order

NCLT Chennai Terminates Insolvency Proceedings Against Appu Hotels Ltd., Approves Settlement Proposal By Promoter

Pallavi Mishra

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