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In a pivotal decision that has stirred the Indian hospitality industry, the National Company Law Tribunal (NCLT) has approved the commencement of insolvency proceedings against Tulip Hotels. The original application was filed by Yes Bank and later transferred to JC Flowers following a successful substitution application permitted on March 6.
Despite objections from Tulip Hotels against the debt transfer, the challenge was dismissed by the court on March 23. JC Flowers' counsel, Nausher Kohli, stated that Tulip Hotels had failed to make payments under two guarantees, acting as a guarantor for two substantial loans, each worth INR 450 crores. These loans were granted by Yes Bank to travel companies Cox and Kings, and Ezeego One Travel & Tours, both of which defaulted on their debt repayment obligations, including principal amount, interest, and other charges.
The saga further unfolded when these loan guarantees, issued by Tulip Hotels, were invoked by the lender in August and November 2019 after the default of both companies. However, Tulip Hotels neglected to repay the guaranteed amount.
Contrarily, Tulip Hotels categorically denied these allegations through an affidavit, claiming no association with either Cox and Kings or Ezeego One Travel & Tours, stating they have not received any funding from these companies since March 2011.
The petitioner further unveiled that Urrshila Kerkar, daughter of Tulip Hotels' promoter Ajit Kerkar, serves as the promoter and shareholder of Ezeego One Travel & Tours. Kerkar holds a power of attorney of Ajay Ajit Peter Kerkar, promoter of Cox and Kings, and has filed affidavits on behalf of both companies.
The tribunal has initiated the insolvency process, stating that the application presented by the lender complies with the legal requirements and clearly establishes that Tulip Hotels has defaulted on its debt.
In its defence, Tulip Hotels affirmed that there are no investments from the borrowers in Tulip Hotels and no crossholdings in either entity. It further denied any knowledge of financial aid from the lender to these companies or having signed any guarantees for these loans. Tulip Hotels went on to accuse the lender of document fabrication, claiming the debts have already been admitted in the ongoing insolvency proceedings of the borrowers and the lender is attempting double recovery.
In conclusion, the unfolding of these insolvency proceedings will undeniably leave a significant mark on the hospitality industry and the case will be closely watched for its potential precedents in debt recovery and insolvency law.
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