HBI Staff | Hyderabad 
The National Company Law Appellate Tribunal (NCLAT) has upheld the Hyderabad Bench of the National Company Law Tribunal’s (NCLT) decision approving the resolution plan for Hyderabad-based Golden Jubilee Hotels. The appellate tribunal dismissed the appeal filed by EIH Ltd, a flagship company of The Oberoi Group, reaffirming the primacy of the Committee of Creditors (CoC) in decision-making during insolvency proceedings.
The ruling clears the way for Singapore-based BREP Asia II Indian Holding Co II (NQ) PTE to execute its resolution plan for Golden Jubilee Hotels. The NCLAT emphasized that the CoC’s commercial judgment holds significant weight and is subject to minimal judicial intervention. “This judgment reinforces faith in the CoC’s commercial wisdom, leaving little room for judicial interference,” stated the two-member NCLAT bench.
EIH Ltd, which managed Golden Jubilee Hotels and held a 16% stake in the company, contested the NCLT’s February 2020 approval of the resolution plan. EIH argued that it could not be classified as a promoter under Section 29A of the Insolvency and Bankruptcy Code (IBC), which restricts promoters, defaulters, and others on the negative list from submitting a resolution plan.
During the resolution process, some proposed plans included retaining EIH as the hotel’s operator. However, the resolution professional flagged a potential conflict of interest, suggesting that such proposals might lead to disqualification under Section 29A.
The NCLT sided with the resolution professional, ruling that EIH’s role as the original promoter of Golden Jubilee Hotels rendered it ineligible under Section 29A. Furthermore, the court held that including EIH in the resolution plan would invalidate the process.
The NCLAT echoed the NCLT’s findings, noting that EIH had played a foundational role in Golden Jubilee Hotels, as the land for the project was allotted on the basis of its experience in hotel management. The tribunal ruled that EIH could not claim to be an independent third-party operator, as its involvement with Golden Jubilee Hotels was not at arm’s length.
Moreover, the appellate tribunal noted that the CoC and NCLT had left it to the discretion of the successful resolution applicant (SRA) to either retain EIH or appoint a new operator. The successful bidder, BREP Asia II Indian Holding Co II, expressed concerns that EIH’s continued management would hinder the hotel’s turnaround, citing mismanagement as a primary cause of past losses.
This ruling underscores the critical role of CoC decisions in the insolvency process and highlights the legal complexities surrounding hospitality operators in distressed assets. For hoteliers, the case sets a precedent regarding the application of Section 29A to operators with promoter ties, emphasizing the importance of compliance with IBC regulations.
The NCLAT ruling also signals a push for fresh starts in resolution plans, particularly in cases where operational inefficiencies are linked to previous management. As India’s hospitality sector continues to rebound post-pandemic, such judgments could pave the way for new investors and operators to reshape distressed properties into profitable ventures.
By allowing the resolution plan to proceed, the ruling ensures a clear path for Golden Jubilee Hotels’ revival under new management, aligning with broader industry efforts to attract investment and revitalize underperforming assets.
source: PTI
