The promoters of Hotel Leelaventure and JM Financial ARC, which holds 26 percent in the bankrupt hotel group, Wednesday told NCLT that ITC's bid to stall their deal with Brookfield is an attempt to wrest the control of the premium hotel chain through the back door.
The counsel for JM Financial ARC said that even after knowing the financial health of Leela, ITC Hotels has been picking up stake in the company between 2008 and 2013, acquiring 13 percent.
"Through this petition they want to drag the matter so that the Rs 3,950-crore Brookfield deal falls through and to take over Leela for a song after sending it for bankruptcy.
"Their main aim is not to get returns on investment but to acquire the hotel," he argued.
"If the sale goes through, public money will be recovered," he said, adding JM Financial ARC will get only 6 percent and the rest will go to 14 banks most of them public sector ones.
Meanwhile, the promoters' counsel in their reply said this waiver application (of 10 percent shareholding to be considered as a minority shareholder) needs to be dismissed as, ITC's prayer is contradictory where on the one hand it is saying it still owns 11.78 percent even after conversion of debt into equity and on the other hand asking for the waiver.
"One cannot ride on both the horses," the counsel said, adding the tribunal should also consider continuity of the jobs of over 6,500 people if the deal with Brookfield is allowed to go ahead.
He also pointed out that from 2013 till 2017, ITC did not even vote when Hotel Leelaventure disposed off many of its properties, and after it began to take interest in the company only after media reports said the company would be revived and suddenly it woke up.
Earlier, ITC and LIC, which owns 2 percent in Leela had moved the Sebi seeking to stay the deal with Brookfield saying the Rs 3,950-crore deal will leave the holding company a skeleton as deal involves selling all the four key properties of Leela in New Delhi, Udaipur, Chennai and Bengaluru, and a land parcel in Agra, leaving only the Mumbai property, which anyway is under litigation with the Airports Authority over land ownership.
Following this, Sebi asked Leela and JM Financial ARC to put the deal, announced on March 18, on hold. As of now ITC owns only 8.72 per cent in Hotel Leelaventure and claimed that its holding came down from 11.78 per cent after JM converted debt into equity after the banks sold their loans to JM Financial ARC, which did the debt-equity conversion.
The Company Act provisions recongnise only those with 10 percent or more non-promoters as minority shareholders who can sue the management for oppression and mismanagement.
The promoters along with JM Financial ARC are proposing to sell 96.8 percent of the company to the Canadian private equity player Brookfield.
Tuesday ITC while seeking the waiver of the 10 percent shareholding norms, had argued that since other minority shareholders have very low shareholding in Leela, they don't have the capacity to maintain a petition of oppression and mismanagement, therefore, ITC filed the case, it argued.
He said, ITC wants a waiver of the minimum 10 percent shareholding requirement clause for any minority shareholder to file a petition for oppression and miss-management against the management. And if Sebi decides to give a go ahead to the deal, they can fight the case on its merit in NCLT, he had said.