NCLAT Upholds Sristi Hospitality Sale, Dismisses Undervaluation Allegations

Sristi Hospitality’s sale to a consortium led by Amit Jatia of Hardcastle Restaurants has been upheld by the National Company Law Appellate Tribunal (NCLAT), dismissing appeals against the valuation of the asset and refusing to review its valuation.

NCLAT Dismisses Appeals Against Sristi Hospitality Sale

The NCLAT has rejected allegations of undervaluation of the asset by the suspended board of Sristi Hospitality, stating that once the Committee of Creditors (CoC) is satisfied with the valuation and has approved the resolution plan, such allegations cannot be entertained.

The Mumbai bench of the National Company Law Tribunal (NCLT) had approved the resolution plan of a consortium comprising Admas Industries, Subh Ashish Exim Pvt Ltd, and Amit Jatia, Hardcastle Restaurants, which proposed an investment of ₹32.41 crore.

Former Promoters’ Allegations Rejected

Santosh R Shetty, suspended director of the board of Sristi Hospitality, had alleged that earlier valuations (2017 and 2020) clearly established a much higher fair market value, which was up to ₹76.72 crore, and that the valuation obtained during the insolvency process was manipulated to enable the consortium to acquire the prime property at a throwaway price.

However, the appellate tribunal rejected his appeals and stated that only valuations conducted by IBBI-registered valuers appointed after the commencement of the CIRP are relevant, and that pre-insolvency valuations have no bearing on the process.

Market Impact and Details

• The NCLAT observed that the commercial wisdom of the Committee of Creditors (CoC) is non-justiciable and that neither the NCLT nor the NCLAT has jurisdiction to reverse the commercial decision of the CoC.
• The tribunal also noted that if the CoC disagrees with a valuation, it has the power to direct a fresh valuation.
• The NCLAT further observed that the bids approved by NCLT on July 12, 2024, have been fully implemented and that no material irregularity in the exercise of powers by the Resolution Professional has been established.

Key Takeaways

• The NCLAT has upheld the sale of Sristi Hospitality to a consortium led by Amit Jatia of Hardcastle Restaurants.
• The appellate tribunal has rejected allegations of undervaluation of the asset by the suspended board of Sristi Hospitality.
• The NCLAT has observed that the commercial wisdom of the Committee of Creditors (CoC) is non-justiciable and that neither the NCLT nor the NCLAT has jurisdiction to reverse the commercial decision of the CoC.

FAQs

What is the significance of the NCLAT’s decision in the Sristi Hospitality case?

The NCLAT’s decision upholds the sale of Sristi Hospitality to a consortium led by Amit Jatia of Hardcastle Restaurants, dismissing appeals against the valuation of the asset and refusing to review its valuation.

What are the implications of the NCLAT’s decision on the Committee of Creditors (CoC)?

The NCLAT’s decision reinforces the commercial wisdom of the CoC and underscores the fact that neither the NCLT nor the NCLAT has jurisdiction to reverse the commercial decision of the CoC.

What is the next step in the Sristi Hospitality case?

The NCLAT’s decision has been implemented, and the bids approved by NCLT on July 12, 2024, have been fully implemented.

Conclusion

The NCLAT’s decision in the Sristi Hospitality case has significant implications for the Committee of Creditors (CoC) and underscores the importance of commercial wisdom in the insolvency resolution process.

The decision reinforces the fact that the CoC’s decision is final and cannot be interfered with by the Adjudicating Authority (NCLT) or the appellate tribunal on grounds of commercial inadequacy.

As the insolvency resolution process continues, it is essential for stakeholders to understand the implications of the NCLAT’s decision and to navigate the complex landscape of commercial insolvency resolution.