The National Company Law Tribunal (NCLT) has dealt a significant blow to Rajesh Lifespaces, rejecting the resolution plan for its hotel division, Rajesh Business & Leisure Hotels. The rejection, citing procedural irregularities and non-compliance with statutory requirements, necessitates a fresh round of resolution proceedings. The corporate insolvency resolution process (CIRP) of Rajesh Business & Leisure Hotels, overseen by the resolution professional (RP), had attracted competitive bids from Sankalp Consortium and a consortium led by Rare ARC and Shree Naman Developers.
Initially, the committee of creditors (CoC) favored the Rare ARC-Shree Naman Developers proposal. However, the NCLT’s decision has overturned this, highlighting significant procedural lapses and deficiencies in the resolution plan. Key issues raised during the proceedings included alleged irregularities in the conduct of the CIRP and inadequate information disclosure to stakeholders. Nausher Kohli, representing Sankalp Recreation, and Advocate Rohit Gupta, representing the original promoters, contested the approval of the resolution plan, arguing material irregularities and contraventions of legal provisions.
The NCLT ruling underscored several critical lapses, including delayed provision of essential documents to former directors and non-compliance with stipulated timelines for information dissemination. The resolution plan, valued at Rs. 479.14 crore plus equity shares, faced scrutiny over its feasibility and adherence to financial viability standards. Despite promising substantial financial returns to creditors, the tribunal deemed it insufficient in terms of documentation and procedural transparency. Key stakeholders, including the promoters of Rajesh Business & Leisure Hotels, contested the approval process, citing procedural lapses and alleged bias towards the Rare ARC-Shree Naman Developers consortium. They argued that the delayed disclosure of crucial information undermined their ability to participate effectively in the CIRP process.
The tribunal’s ruling reinforces the principle that the commercial wisdom of the CoC, while paramount, must align strictly with statutory provisions and ensure equitable treatment of all stakeholders. Legal experts highlight that this decision sets a critical precedent in insolvency proceedings, emphasizing the importance of procedural adherence and transparency under the Insolvency and Bankruptcy Code (IBC).
As a result of the dismissal, the RP and CoC have been granted permission to reinitiate the resolution process in strict accordance with the IBC and CIRP regulations. Additionally, an extension of the CIRP period by four months has been provisionally approved to facilitate a thorough re-evaluation and reconsideration of resolution proposals. The outcome of this case is poised to influence future insolvency proceedings, underscoring the necessity for meticulous compliance with statutory norms and procedural fairness in all stages of the CIRP. The parties involved are expected to adhere to the tribunal’s directives as they navigate the next phase of this contentious insolvency resolution.
