NCLT Excludes Phoenix ARC from Hotel Horizon's CIRP

The National Company Law Tribunal (NCLT) has partially approved the application filed by the suspended promoters of Hotel Horizon, directing the exclusion of Phoenix ARC's claim from the ongoing Corporate Insolvency Resolution Process (CIRP). The tribunal cited the claim as barred by limitation, a decision that significantly impacts the resolution process.

Hotel Horizon’s key asset is a prime 1.85-acre land parcel in Mumbai’s plush Juhu area, overlooking the Arabian Sea. This strategic location has attracted significant interest from potential buyers, particularly in the real estate market.

Last month, Oberoi Realty, in partnership with Shree Naman Developers and JM Financial Properties, secured the approval of the Committee of Creditors (CoC) to acquire the company through the CIRP. The consortium’s resolution plan, involving a total settlement of Rs 919 crore, was cleared by the CoC, with the resolution professional (RP) issuing a formal letter of intent.

The latest order, passed on July 17, stated that the debt claimed by Phoenix ARC, which had acquired the loan from IDFC Bank, was time-barred and could not be considered a financial debt under the Insolvency and Bankruptcy Code (IBC). This decision was based on the limitations period, which Phoenix ARC failed to meet.

The tribunal also instructed the RP to rework the claim admitted for JM Financial Asset Reconstruction Company (JMFARC), factoring in the refund of a Rs 14 crore processing fee and interest, originally agreed upon by ICICI Bank in a credit committee resolution. This reworking is crucial to ensure that all claims are accurately assessed and fairly considered.

The development follows a challenge by Sagar and Vishal Sharma, the suspended directors of Hotel Horizon, who had sought the removal of four creditors—Union Bank of India (UBI), ACRE, JMFARC, and Phoenix ARC—from the CoC, alleging that their claims were inflated, fictitious, and time-barred. While dismissing the request to remove UBI, ACRE, and JMFARC from the CoC, the NCLT directed the RP to reverify UBI’s admitted claims, including applicable interest rates and other levies, considering subsequent agreements that might supersede the original facility agreement.

Akash Agarwal, founder of MAAK Legal, along with counsels Pulkit Sharma and Rohan Agrawal, appeared for the promoters of Hotel Horizon. The tribunal held that debts owed to UBI, ACRE, and JMFARC were not barred by limitation due to continued acknowledgments of liability by the corporate debtor through one-time settlement proposals, balance sheets, and communications extending the limitation period.

In contrast, Phoenix ARC’s claim, previously dismissed by the National Company Law Appellate Tribunal (NCLAT) in 2020 for being time-barred, could not be reconsidered. The NCLT held that in the absence of any stay on the NCLAT order by the Supreme Court, it remained binding.

Further, the tribunal clarified that additional interest, liquidated damages, and interest on arrears of such damages do constitute financial debt, reinforcing the principle that such charges are intrinsically linked to lending arrangements and risk-based pricing.

Meanwhile, CFM ARC, which acquired the debt from Phoenix ARC, has filed an appeal before the NCLAT seeking a stay in the matter. This appeal could potentially impact the ongoing resolution process and the final outcome for Hotel Horizon.