Retail giant ITC has taken the Hotel Leela group to the company law court seeking the cancellation of stake sale deals to asset management firms JM Financial ARC and Brookfield. The petition in the National Company Law Tribunal (NCLT) that also seeks the removal of promoter group directors and the appointment of an administrator can potentially delay the closure of the deals and throw the management of the properties of the troubled group into chaos, according to reports.
ITC, which has 8.72 per cent stake in the Hotel Leela Palaces, Hotels and Resorts, has accused the Hotel Leelaventures Limited, the holding company of the hospitality group, of oppression and mismanagement.
ITC, which has interests in confectionery-to-tobacco and classified as a public shareholder in the beleaguered hotel, has also filed two applications seeking an urgent hearing and the waiver of the requirement of the minimum threshold of 10 per cent shareholding, Hotel Leelaventure said in its stock exchange filing, according to a report in Business Standard. Unidentified sources have said ITC has petitioned for cancelling the issue and allotment of 163.9 million equity shares in September 2017, which constitute 26 per cent of the issued capital of Hotel Leelaventure (Leela), to JM Financial Asset Reconstruction Company (JM Financial ARC), converting a part of an Rs 275-crore loan to equity.
ITC has also sought the removal of Leela group promoters Vivek Nair and Dinesh Nair and directors Vinay Kapadia and Vijay Sharma from the board. It also wants the appointment of an administrator to conduct and manage the affairs of Hotel Leela, founded by Captain CP Krishnan Nair, one of India's top entrepreneurs.
ITC has also sought injunctions restraining Hotel Leela, its promoters, directors and JM Financial from the implementation of the decisions taken at Leela's board meeting on March 18, where it approved the sale and transfer of assets of four hotels and one property to Brookfield for Rs 4,250 crore. The proposed transaction with Brookfield, according to ITC in the petition to NCLT, is skewed in favour of the promoters and JM Financial ARC and not in the interest of other shareholders, including the petitioner.
The petitioner believes the transactions would in effect transfer a substantial part of Leela's assets to Brookfield. Of this, Rs 2,950 crore would be paid to the lenders while Rs 1,960 crore was being paid to JM Financial, and Rs 300 crore would go to the promoters, according to the report. The petition said Leela's revenue stream was being diverted to Brookfield and it would be left with no real business prospects while it retained large liabilities, which it would not be able to service, the petition alleges. ITC said it had sought the inspection of documents and agreements referred to in the postal ballot notice and the explanatory statement, was allowed inspection of only some documents.
