Asian Hotels (West), Owner Of Hyatt Regency (Mumbai), Admitted Into Insolvency: NCLT Delhi

Background Facts

In 2010, the renowned Asian Hotels group had demerged to form Asian Hotels (North), Asian Hotels (East) and Asian Hotels (West) Limited ("Corporate Debtor"). The Corporate Debtor is engaged in hospitality sector and owns Hotel Hyatt Regency in Mumbai and JW Marriott in New Delhi Aerocity (through its subsidiary).

Yes Bank Ltd. had sanctioned to the Corporate Debtor a (i) Term Loan of Rs. 2,00,00,00,000/-; (ii) Overdraft facility of Rs. 10,00,00,000/-; (iii) Letter of Credit of Rs. 5,00,00,000/-; (iv) Letter of Undertaking for Buyer's Credit of Rs. 5,00,00,000/-; (v) a Financial/Performance Guarantee of Rs. 5,00,00,000/-; and (vi) a Bank Guarantee of Rs. 98,50,000/-. These credit facilities were later enhanced and renewed at the request of Corporate Debtor.

Subsequently, the Corporate Debtor defaulted in repayments of the aforementioned loans and its account was declared Non Performing Asset on 27.07.2021. The Bank issued loan recall cum Bank Guarantee invocation notice to the Corporate Debtor, however, the payments were not received. Therefore Yes Bank Ltd. filed a petition under Section 7 of the Insolvency and Bankruptcy Act, 2016 ("IBC"), seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor over a default of Rs. 264,07,35,129/-.

Subsequently, Yes Bank Limited assigned the Corporate Debtor's debt to JM Financial Asset Reconstruction Co. Ltd ("Financial Creditor") on 21.06.2022. The Financial Creditor replaced Yes Bank as Petitioner in the proceedings before NCLT.

Contentions Of The Corporate Debtor

The Corporate Debtor argued that the Petition was not maintainable. Mr. Ankit Jain i.e. the representative of Yes Bank who filed the petition, was not authorized through a Board Resolution, rather through Power of Attorney issued by the Managing Director & CEO (Mr. Prashant Kumar) of Yes Bank. It was contended that as per a Ministry of Corporate Affairs notification dated 27.02.2019, only a person authorized through Board Resolution can file a Section 7 Petition. Further, the Petition was filed with intent to recover the debts, which is not the objective of IBC.

Contentions Of The Financial Creditor

The Financial Creditor argued that Mr. Prashant Kumar was authorized by Yes Bank's Board of Directors, to further authorize Mr. Ankit Jain through Power of Attorney to file the Petition.

Decision Of The NCLT

The Bench observed that Mr. Ankit Jain was duly authorized on behalf of Yes Bank to sign the Petition under Section 7 of IBC, as Mr. Prashant was authorized to delegate his powers to other officials of Bank as per the Board Resolution.

"Therefore, we are of the considered view that mere use of 'Power of Attorney' while delegating such power will not be in violation of the MCA Notification dated 27.02.2019 S.O. 1091 (E). and nor will it take away the authority of such officer and for all purposes it is to be treated as a valid 'authorization' by the 'Financial Creditor' in favour of the officer, which can be delegated even by designation."

The Bench held that an officer delegated with power can claim to be an Authorized Representative for filing a Section 7 petition under IBC. Further, the Bench observed that no element of fraudulent or malicious initiation of CIRP was present in the matter.

The Bench admitted the petition and initiated CIRP against the Corporate Debtor. Mr. Sapan Mohan Garg has been appointed as the Interim Resolution Professional.

Case Title: JM Financial Asset Reconstruction Co. Ltd. v Asian Hotels (West) Ltd.

Case No.: C.P. (IB) No. 571 (PB)/2021

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