19 June 2019: JM Financial Asset Reconstruction Co Ltd today told ITC Ltd to clear the 70-bln-rupee debt owed by Hotel Leelaventure Ltd if it is interested in saving the debt-ridden hotelier.
The comments came as part of the asset reconstruction company’s arguments before the National Company Law Tribunal, in response to ITC’s plea to waive off minimum shareholding requirement to move the oppression and mismanagement suit against Hotel Leelaventure.
A minority shareholder has to own at least 10% stake in the company to initiate such proceedings. However, the tribunal, at its discretion, can dispose of the requirement.
ITC had filed the mismanagement suit against Hotel Leelaventure, challenging the sale of four assets to Brookfield Asset Management for 40 bln rupees and JM Financial ARC’s 2017 acquisition of 26% stake in the company by converting debt to equity.
ITC can repay Hotel Leelventure’s debt to acquire controlling stake, if it feels the asset sale to Brookfield is not in the interest of the company, JM Financial ARC, represented by senior counsel Janak Dwarkadas, told the tribunal.
JM Financial ARC further told the tribunal that it is only interested to recover its dues from Hotel Leelaventure and does not want to acquire its properties. Separately, JM Financial ARC has filed an insolvency plea against the company, which is pending before the tribunal.
Hotel Leelaventure’s proposed asset sale has derailed the hotels-to-cigarettes conglomerate’s ploy to acquire the debt-laden company’s hotels at a discount, the asset recast company told the tribunal.
JM Financial ARC also questioned ITC’s move to acquire minority stake in Hotel Leelaventure in 2010, at a time when the company was already posting heavy losses.
Such conduct, according to JM Financial ARC, is not eligible for granting a waiver, the tribunal was told.
Earlier, the company law tribunal had deferred the hearing of ITC’s plea as the Securities and Exchange Board of India had put the asset sale on hold and was conducting an independent hearing on the issue.
However, ITC on Tuesday began its arguments on the waiver application to save time, in case it receives an unfavourable verdict from SEBI.
ITC argued that although it held 11% stake in Hotel Leelaventure at a point, because of the share issue to JM Financial ARC, its stake was diluted to 7.92%.
ITC, in its plea, has alleged that the asset sale to Brookfield will leave Hotel Leelaventure with almost no business, except for a hotel in Mumbai, which is already in dispute.
Today, shares of ITC ended 0.8% higher at 277.20 rupees on the National Stock Exchange, and those of Hotel Leelaventure ended 5.6% lower at 7.55 rupees.