Pothys wins Arihant Retail in IBC: NCLT clears Rs 43-crore plan, Chennai mall to make way for Pothys store

The Chennai bench of the National Company Law Tribunal (NCLT) has approved textile retailer Pothys Retail Pvt Ltd’s Rs 43.02-crore resolution plan for Arihant Retail Pvt Ltd. Arihant is a Chennai textile retailer that had once been headed for liquidation. Secured lenders will recover 31.4% of their admitted claims of Rs 134.56 crore. Almost all of that money goes to LIC Housing Finance. A bench of Sanjiv Jain (judicial member) and Venkataraman Subramaniam (technical member) approved the plan on October 13.

Back from liquidation

The approval follows an unusual sequence. Resolution professional Shruti Lohia received four resolution plans by February 2026, from Advantech Technology, Pothys Retail, Shine Star Build Cap and Kanchansobha Finance. The committee of creditors (CoC) found none of them feasible and asked for revised plans. Only Pothys submitted one.

On March 14, 2026, the CoC rejected all three plans put to vote and resolved to liquidate the company under Section 33(2) of the Insolvency and Bankruptcy Code (IBC). A liquidation application was filed.

In June, LIC Housing Finance asked for more time to deliberate on resolution plans. On July 9, the tribunal restored the insolvency process for 60 days. Pothys and Shine Star then submitted addenda to their plans. The CoC approved Pothys’s plan with 100% of votes on August 4.

Who gets what

Of the Rs 42.25 crore set aside for secured lenders, LIC Housing Finance gets Rs 41.50 crore against its admitted claim of Rs 93.72 crore. It holds a mortgage over the company’s only realisable asset: the land and building of Arihant Square Mall on Cemetery Road, Chennai. The plot measures 29,664 sq ft and the building has a built-up area of 69,000 sq ft.

Axis Bank and Karur Vysya Bank held charges over current assets that valuers assessed at nil. They will share the remaining Rs 75 lakh: Axis Bank gets Rs 35.45 lakh against a Rs 19.30-crore claim, and Karur Vysya Bank gets Rs 39.55 lakh against Rs 21.53 crore. Based on calculations from the order, both banks recover under 2%.

Operational creditors, whose admitted claims total about Rs 23.83 crore including Rs 20.21 crore in government dues, will receive Rs 12 lakh. That is 0.5% of their claims. Of this, Rs 67,010 goes to the Employees’ State Insurance Corporation. The rest will be shared among the income tax department, the commercial tax department, Greater Chennai Corporation and Giriras Investment Pvt Ltd. Giriras had filed a claim as a financial creditor, but the CoC admitted it as an operational creditor.

The resolution professional rejected unsecured financial claims of Rs 18.22 crore from related parties Vishal Surana HUF, Vaishali Surana and Sanskar Surana.

The plan provides Rs 65 lakh towards insolvency process costs. All payments are due within 30 days of approval. Pothys will fund the plan from its bank limits and internal accruals.

Mall to be demolished

Pothys plans to demolish the existing mall and its multiple retail units. In their place it will build a single integrated commercial store “like the existing Pothys stores”, with about Rs 15 crore in capital expenditure over two years. This spending is over and above the payments to creditors.

The company’s existing paid-up capital of Rs 17.54 crore will be cancelled. Pothys will own 100% through fresh capital of Rs 2 crore. The order describes the Pothys Group as having a turnover of Rs 6,000 crore in FY25.

The tribunal recorded a fair value of Rs 49.57 crore and a liquidation value of Rs 38.48 crore. On that basis, the plan is worth about 87% of fair value and about 112% of liquidation value, based on calculations from the order.

Tax losses left to the I-T department

Pothys asked the tribunal to allow Arihant Retail’s past losses to be carried forward despite the change in ownership. The tribunal declined to rule on this. It said Pothys may claim the benefit before the income-tax authorities, who will decide under Section 79 of the Income-tax Act, 1961 and Section 119 of the new Income-tax Act, 2025.

The income-tax department had placed on record a letter dated October 9 reserving its right to examine any such claim. The tribunal also refused stamp duty exemptions. It refused a request to bar financial creditors from filing litigation that could affect implementation. Most waivers of tax and regulatory dues were left to the authorities concerned.

Background

Arihant Retail was incorporated in 1996 and is a registered MSME. The company filed for insolvency itself under Section 10 of the IBC, citing losses since the Covid-19 lockdown. It was admitted on May 2, 2025.

The resolution professional has filed applications over preferential, undervalued, fraudulent and extortionate (PUFE) transactions under Section 66 of the IBC. LIC Housing Finance will pursue them after the plan is approved.

Pothys has deposited a Rs 3-crore performance security, which will be forfeited if the plan is not implemented.

Also See: NCLT clears Rs 577-cr plan for Arch Pharmalabs; lenders to recover about 5% of Rs 10,518-cr claims