NCLAT gives back control of Appu Hotels to original owners; terminates insolvency resolution process
The National Company Law Appellate Tribunal (NCLAT) has delivered a decisive verdict in favor of the existing promoters of Appu Hotels, thwarting a takeover bid by MGM Healthcare’s Managing Director, M K Rajagopalan. This landmark ruling ensures the iconic Le Royal Meridien in Chennai, along with other Appu Hotels properties, will remain under the stewardship of its original owners.
Divisional Bench-1 in Chennai declared, “Appu Hotels’ Board of Directors, previously suspended, are reinstated with immediate effect. Management and affairs of the company shall be handed back to them, including control of all books and assets seized during the corporate insolvency resolution process (CIRP).” This effectively discharges the Resolution Professional and restores Appu Hotels to its pre-insolvency state, operating under its own Board.
This victory stems from the acceptance of Promoter Palani G Periasamy’s settlement proposal, surpassing Mr. Rajagopalan’s initial acquisition bid of ₹423 crore. Mr. Periasamy passionately argued that Appu Hotels’ assets, encompassing two Le Royal Meridien hotels and prime land near Chennai airport, were significantly undervalued in Mr. Rajagopalan’s offer.
Recognizing the merit of Mr. Periasamy’s claim, the NCLAT granted him an opportunity to submit a revised proposal. Demonstrating unwavering commitment, Appu Hotels promptly deposited ₹420 crore in cash and bank guarantee as part of their counter-offer. Mr. Rajagopalan’s attempt to challenge this decision in the Supreme Court proved unsuccessful, upholding the NCLAT’s verdict and later dismissing a review petition.
“We are thrilled to be back in the hospitality business,” exclaimed Mr. Periasamy, a renowned NRI industrialist and Chairman of Appu Hotels Ltd. “Hotel Le Royal Meridien Chennai and Le Meridien Coimbatore are back with us, bringing heart-warming joy as we approach the New Year.”
COVID-19 and extended lockdowns undoubtedly hit the hospitality industry hard, impacting Appu Hotels significantly. “Our finances faced a major blow, leading us to the NCLT framework,” Mr. Periasamy acknowledged. “But those challenges are now a distant memory.”
The CIRP of Appu Hotels began in May 2020 following an application filed by Tourism Finance Corporation of India Ltd (TFCIL), and the Chennai bench of the NCLT approved the resolution plan by M K Rajagopalan in July 2021. The corporate debtor owed a total of Rs 438 crore to different creditors – Rs 389 crore to financial creditors and the rest to operational creditors. Against this claim, the resolution plan submitted by Mr Rajagoplan offered to pay Rs 398 crore to the creditors. The resolution plan offered to pay 100% of the financial creditors claim. However, the resolution plan does not make any provision for payment to related parties, which had put in claims of Rs 45 crore.
Also See: Related party financial, operational creditors cannot be discriminated against in resolution plan
