MUMBAI: Hemant Kanoria-promoted Sarga Hotels, which operates a five-star hotel under the Westin brand in Kolkata, will be acquired by Shri Ram Multicom under the Insolvency and Bankruptcy Code (IBC) process.
The Kolkata bench of the National Company Law Tribunal approved a Rs 301 crore resolution plan against Rs 816 crore admitted claims from creditors, employees, and trade creditors. Shri Ram Multicom has developed Fairfield Hotel, a budget category hotel and operates malls and hotels in Dhanbad, Jharkhand.
Creditors JC Flowers Asset Reconstruction Company and Rare ARC have voted in favour of Shri Ram Multicom’s plan. This will equate to a recovery of 39% for both creditors.
Sarga Hotels is a wholly-owned subsidiary of Shristi Infrastructure Development Corporation – which is owned by the Kanoria family, the erstwhile promoters of Srei Infrastructure Finance and Srei Equipment Finance.
Both companies were sold under IBC to the government-backed National Asset Reconstruction Co.
Yes Bank and Rare Asset Reconstruction Company are the only two creditors that had filed claims amounting to Rs370 crore and Rs393 crore, respectively. Yes Bank has since assigned the loans to JC Flowers ARC last year.
Incidentally, Sarga Hotels was admitted for corporate insolvency in August 2020 but got out of it a year later following a decision by the National Company Law Appellate Tribunal (NCLAT) to set aside the admission order. Shri Ram Multicom’s plan pertains to its admittance for the second time in February 2022.
The resolution professional Avishek Gupta rejected Rare ARC’s claims when the corporate insolvency resolution process was initiated a second time.
The RP informed the NCLT that Srei Equipment Finance sold the loan to Rare ARC under the 15:85 structure. Under this, Rare ARC offered 15% of the consideration in cash and the remaining 85% in the form of security receipts (SR) that were subscribed to by Srei Equipment Finance. The RP pointed out that since this is a related party transaction, Rare ARC’s claim was rejected.
Rare ARC argued that Srei Equipment Finance assigned the loan to Rare ARC before the NCLT admitted Sarga Hotels in 2022 — hence, they were not connected.
However, the RP contended that the assignment agreement between Srei Equipment Finance and Rare ARC was dated September 9, 2020, and allegedly, the assignment was made effective retrospectively with a cut-off date of August 12, 2020, which incidentally is the same date when Sarga was admitted for insolvency the first time. This order was subsequently set aside as “collusive” by the NCLAT on August 27, 2021.
In an order dated September 13, NCLT had ruled in favour of the RP’s decision not to admit Rare ARC’s claim given the Srei group, promoted by the Kanodia family, is holding 85 % of the SRs for the loan.
However, NCLAT once again ruled in favour of Kanoria, saying that “we are inclined to hold that no clear case has been made out either by the applicant or not even by the RP that the assignment to Rare ARC by Srei Infrastructure Finance/Srei Equipment Finance is collusive in nature”.
Subsequent to this order, the RP admitted Rare ARC’s claims of Rs393 crore. Both creditors, JC Flowers ARC and Rare ARC voted in favour of Shri Ram Multicom’s plan. This will equate to a recovery of 39% for both creditors.
