India’s National Company Law Tribunal (NCLT) admitted an insolvency resolution petition against loan guarantor Tulip Hotels Private Ltd.

The insolvency petition was initially filed by the financial creditor Yes Bank Ltd.. against Tulip Hotels for defaulting on debt, which was later assigned to JC Flowers Asset Reconstructions Private Ltd., according to the NCLT order dated 16 May.

JC Flowers acting in its capacity as trustee of JCF YES Trust, and assignee filed a substitution application, which was allowed on 6 March 2023. Tulip Hotels later challenged the assignment of debt in favor JC Flowers, but the Mumbai bench of the NCLT dismissed its plea.

JC Flowers later filed an application, claiming a total default of 900 crore rupees ($109 million) by Tulip Hotels, which was a guarantor to certain loans disbursed to Cox & Kings Ltd. and Ezeego One Travel & Tours Ltd., the NCLT order showed.

Total amount due from Cox & Kings and Ezeego was 450 crore rupees each.

In 2019, Tulip Hotels had executed deed of guarantee for the loans availed by Cox & Kings and Ezeego, assuring to pay a maximum of 450 crore rupees each for the loans availed by them. These companies later defaulted in repayment of their financial debt.

The petitioner later revoked both guarantees and asked Tulip Hotels to pay the amount, but the company failed to repay the guaranteed amount, prompting JC Flowers to file a petition.

The tribunal heard the matter and said the facilities were secured by guarantee of Tulip Hotels. The clauses contained in both the guarantees make it abundantly clear that Tulip Hotels is liable to the credit facilities availed by principal borrowers, it noted.

The NCLT bench, comprising Judicial Member Kishore Vemulapalli and Technical Member Prabhat Kumar, admitted the insolvency petition against Tulip Hotels on 16 May.

The tribunal also appointed Gaurav Adukia as interim resolution professional of the company and declared moratorium under Section 14 of Insolvency and Bankruptcy Code.

(Note: $1 = 82.5000 Indian rupees)

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