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2018 SCC OnLine NCLT 24885

In the National Company Law Tribunal†

(BEFORE BIKKI RAVEENDRA BABU, MEMBER (JUDICIAL))

In the matter of:

Golden Jubilee Hotels Private Limited
And
EIH Ltd. … Applicant;
Versus
Subhodh Kumar Agrawal … Respondent.
I.A. No. 73 of 2018 in CP (IB) No. 248/7/HDB/2017
Decided on July 25, 2018
Advocates who appeared in this case :
Ms. Sulata Saha, Counsel on vehalf of Ms. T. Varalakshmi For Bank of Baroda;
Mr. S. Niranjan Reddy, Sr. Counsel along with For Applicant;
Ms. Rubaina Khatoon,;
Mr. Vadeenra Joshi and Mr. K. Jashwanth Rao;
Mr. Y. Suryanarayana Sr. Counsel along with For Resolution Professional;
Ms. Mano Ranjani and Dr. K.V. Srinivas Rao and;
Mr. Subodh Kumar Agrawal.
ORDER
1. EIH Limited filed this Application under Section 60(5) of the Insolvency and
Bankruptcy Code, 2016, questioning interference of Interim Resolution Professional in
the Operation, Management rights of the applicant in relation to the Trident Hotel. The
following are prayers in this Application.
a) Direction to the Interim Resolution Professional (IRP) not to interfere with the
Operation and Management of Trident Hotel by the Applicant.
b) Direct the IRP to conduct any action only for and on behalf of the Corporate
Debtor without interfering with the rights of the Applicant in accordance with the
Management Agreement Incorporating Technical Assistance Services dated
05.08.2006.
c) To direct the IRP acting upon or implementing Agenda item No. 3(iv) and
Agenda item No. 6 affecting or violating the Applicant's rights under the
Management Agreement incorporating Technical Assistance Services dated
05.08.2016.
2. The Government of Andhra Pradesh in June 2005 floated a request for proposal
for the construction and development of a Five Star Hotel in Sy. No. 64, Hitech City
Main Road, Hitech City, Madhapur, Hyderabad on Build, Operate, Transfer (BOT) basis
on land owned by the State Government. As per REP documents, companies were
enabled to bid for a Hotel Project by forming a consortium, subject to the condition
that any such consortium would necessarily consist of a Lead Member, a Financially
Significant Member and a Technical Member.
3. Government of Andhra Pradesh after due evaluation and scrutiny declared the
bid submitted by the My Home Group consortium comprising the Applicant as Member
Technical Member, as successful. Consequently, as per the requirement of the bid a
special purpose vehicle was formed by consortium members by name Golden Jubilee
Hotels Private Limited, (Corporate Debtor). Golden Jubilee Hotels Private Limited (CD)
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entered into an independent agreement with the Applicant enabling the Applicant to
conduct the operation of the Hotel in its independent capacity subject to terms
specified in Management Agreement Incorporating Technical Assistance Services dated
05.08.2006 (hereinafter referred to as Management Agreement) and License
Agreement dated 05.08.2006.
4. According to the Applicant, Management Agreement stipulated that the Applicant
as Operator would have absolute and sole discretion in the management and the
supervision of the operation of the Hotel without any interference by the Corporate
Debtor. It is also stated that Management Agreement inter alia provided that the
Applicant would have exclusive right to open and operate the Operations Account of
the Hotel. The Applicant has sole and absolute discretion in determining and
supervising all operations, reporting and control systems in the Hotel including
recruitment, appointment and transfer of all Hotel personnel, determining credit card
arrangements for the Hotel, and determining the terms and conditions of licenses and
concessions for shops within Hotel premises.
5. The Hotel Trident, Hyderabad commenced commercial operations on 01.09.2013
and since then Applicant exclusively operating and managing the Hotel in terms of the
Management Agreement.
6. The dispute between the Applicant and Corporate Debtor was referred to
Arbitration. The Arbitral Tribunal passed Interim Order enabling the Applicant to
continue to operate and manage the hotel under the Management Agreement and
License Agreement.
7. The Bank of Baroda initiated Corporate Insolvency Resolution Process against
Golden Jubilee Hotels Private Limited, under Section 7 of the IB Code vide CP (IB) No.
248/7/HDB/2017.
8. This Adjudicating Authority by its Order dated 27.02.2018 commenced the
Corporate Insolvency Resolution Process by appointing Sri Subodh Kumar Agrawal as
Interim Resolution Professional.
9. It is alleged by the Petitioner that in the meeting Held on 27.02.2018 IRP
informed that all cheques issued to various creditors by the Hotel on or before
27.02.2018 would be dishonoured and instructions accordingly have been issued to
the Bank of Baroda. Applicant raised objections for the same. Thereupon IRP directed
the Applicant to forward the said list of cheques for his review.
10. It is also alleged that IRP has been withholding the day to day payments to be
made to the Suppliers and Service Providers of the Applicant apart from withholding of
the payment of their past claims as stated earlier. It is alleged that IRP stated that
there will be concurrent Auditors to check each and every bill before making payment
and released and that the payments relating only to essential functioning of the hotel
would be processed for payment.
11. It is stated that Applicant brought to the notice of the IRP regarding the non-
payment of TDS amounts. But IRP has failed to make payments. IRP requested for
access to the revenue details of the hotel along with access to the Opera/Micros and
any other software for audit and the night audit reports along with the details of
swiping machines.
12. It is also stated that IRP convened a meeting of creditors on 22.03.2018 and
circulated the Agenda note dated 15.03.2018 and the said note of Agenda at item No.
3 Clause (iv), the IRP inter alia specified as follows:
“(iv) To ratify and approve the appointment and fee of Concurrent Accountants to
do the concurrent audit of the corporate debtor only for the purpose of TRA
accounts. Their scope of work did not include the concurrent/pre-audit of operation
account being maintained by the operator/pre-audit of operations account being
maintained by the operator EIH Ltd. with Bank of Baroda. As such to take full
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control of revenue and expenditure, the concurrent/pre audit for payment is

required and as such the same firm Sagar & Associates were asked if they can
undertake the pre-audit/concurrent audit of the entire operation of the company
including operatins part. Previously they were being paid a professional fee of Rs.
50,000/- per month and they have agreed to do the enhanced scope with an
additional professional fee of Rs. 25,000/- so totalling to Rs. 75,000/- per month
(Rs. Seventy Five Thousand).
The following resolution is therefore placed before the members of the committee
of creditors for consideration:
Resolution:
To consider and if found fit, to pass with or without modification the
following Resolution:
“RESOLVED FURTHER THAT Sagar & Associates is appointed as the
concurrent auditor to do the pre audit of all the payments and verification
of revenue as required by IRP/RP.
“RESOLED FURTHER THAT the committee of creditors hereby approve a total
fee of Rs. 75,000/-) Rs. Seventy Five Thousand) per month”.
The said Agenda item was adjourned on account of the various members of the
Committee of Creditors seeking further time for reconsideration.
13. It is stated that IRP by communication dated 23.03.2018 circulated a fresh
agenda note for the meeting proposed to be conducted on 28.03.2018.
Agenda item No. 6 and the notes thereto inter alia proposed as follows:
“Agenda Item No. 6
To open a new bank account for ensuring that all the revenue is getting
credited into a single bank account.
Facts and Explanatory Statement:
During the first CoC meeting Held on 22nd March, 2018 the IRP informed to the
CoC members that entire revenue was getting credited to single designated bank
account with Bank of Baroda. Also required expenses for operator of hotel is
being paid from the same account after due verification by concurrent auditor
and IRP/RP.
In this regard CoC asked the IRP if all revenue belonging to the Corporate Debtor
is credited to Single Bank Account. IRP informed the CoC that as per his knowledge
and information received from Mr. Dhiraj Mehta, General Manager and Mr. Puneet
Sharma, Finance Controller that all the revenue is being credited to oe single bank
account with Bank of Baroda i.e., Current Account # 25210200000124.
The IRP has mentioned that he is of the opinion that a new bank account needs
to be opened for the above operations going forwarded as this is the best practice.
The CoC has requested the IRP to open this account with any of the CoC member
Bankers.
Resolution:
To consider and if found fit, to pass with or without modification the following
Resolution.
RESOLVED THAT Curret Account ink the name and style of Golden Jubilee Hotels
Private Limited (under CIRP) be opened with the (Branch) for the operations of the
Company and that the following Authorised Signatory (ies) be and are hereby
authorised to open and operate the said account:
14. It is stated that Section 17 of the IB Code provides for vesting of the
management affairs of the Corporate Debtor only in the hands of IRP and the IRP to
act only for and on behalf of the Corporate Debtor. It is further stated that in
contravention of the IBC, IRP is indirectly trying to supervise and manage the affairs
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of the Applicant by interfering with the management and operation of the Hotel, by
mandating the presence of concurrent Auditor at the time of making payments.
15. It is also stated that Section 18(1)(d) empower IRP to monitor the assets of the
Corporate Debtor and manage its operations until a Resolution Professional is
appointed by the Committee of Creditors and such authority would not extend to any
person other than the Corporate Debtor.
16. It is also stated that actions of the IRP in unilaterally dishonouring the cheques
and withholding the payments to the vendors and suppliers of Applicant is a serious
detriment to the status of Corporate Debtor as a going concern and it is a blatant
violation of Section 20 of the IB Code.
17. It is also stated power, authority and rights of the IRP are co-extensive with
that of the Corporate Debtor or its Board of Directors. The IRP cannot have more rights
than Corporate Debtor. It is also stated that IRP has no power or authority to amend
or modify any contract entered by the Corporate Debtor with any third party before the
appointment of the IRP. It is also stated that the Power under Section 20(2)(b) to
amend or modify the contract must be read ejusdem generis with the power to enter
into a contract provided in the same section and therefore such modification or
amendment has necessarily be in accordance with the Indian Contract Act, 1872.
18. IRP has no authority to unilaterally alter or modify any contract and therefore
the Management Agreement which was entered into between Applicant and Corporate
Debtor before the appointment of the IRP cannot now be unilaterally modified by IRP
either expressly or impliedly through his conduct.
19. IRP filed counter stating that immediately on his appointment and in due
compliance of his duties as IRP U/s. 17 of IBC, 2016 took over the management of the
Corporate Debtor. IRP further stated that as part of his duties he had
meetings/communications with various Stake holders, Key Managerial Personnel
including CEO and the Applicant/Operator and took control of the operations of
Corporate Debtor in due compliance of the provisions U/s. 17, 18 & 20 of IBC Code.
20. According to the IRP the Applicant is duty bound to extend full cooperation in
the management of the Corporate debtor and was required to support the Interim
Resolution Professional to manage the operations of the Corporate Debtor as a going
concern as required U/s. 19(1) of IBC, 2016.
21. According to the IRP, Applicant has chosen not to comply with the spirit of the
provisions of IBC, 2016 and had been resisting in discharge of his duties U/s. 18 & 19
of the Code. The Commercial relations between the Corporate Debtor and the
Applicant herein is governed by the Management Agreement dated 05.08.2006
executed between them. It is stated by IRP, U/s. 20(2)(b) of IBC, 2016 IRP is
empowered, has powers to modify the Agreement executed between Corporate Debtor
and the Applicant.
22. IRP alleged that the intention of the Applicant is to divert the available funds of
the Corporate Debtor to clear prior period dues or the dues which are not permissible
under the IBC 2016 which shall be detrimental to the financial interest of other
Financial Operational Creditors of the Corporate Debtor and such acts are punishable
U/s. 68, 69, 70 & 71 of IBC 2016 and illegal.
23. IRP stated that Committee of Creditors confirmed to continue him as Resolution
Professional. The IRP requested the authority to direct the Applicant to hand over
records, data information files pertaining to going Corporate Insolvency Resolution
Process of Golden Jubilee Hotels Private Limited and direct the Applicant to cooperate
in the matter as and when required.
The Relevant Sections of IB Code are reproduced for ready reference:
Section 17: Management of affairs of Corporate Debtor by Interim
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Resolution Professional:—
(1) From the date of appointment of the interim resolution professional,—
(a) the management of the affairs of the corporate debtor shall vest in the
interim resolution professional;
(b) the powers of the board of directors for the partners of the corporate debtor
as the case may be, shall stand suspended and be exercised by the interim
resolution professional;
(c) the officers and managers of the corporate debtor shall report to the interim
resolution professional and provide access to such documents and records of
the corporate debtor as may be required by the interim resolution
professional;
(d) the financial institutions maintaining accounts of the Corporate debtor shall
act on the instructions of the interim resolution professional in relation to such
accounts and furnish all information relating to the corporate debtor available
with them to the interim resolution professional
(2) The interim resolution professional vested with the management of the
corporate debtor shall—
(a) act and execute in the name and on behalf of the corporate debtor all deeds,
receipts, and other documents, if any;
(b) take such actions, in the manner and subject to such restrictions, as may be
specified by the Board;
(c) have the authority to access the electronic records of corporate debtor from
information utility having financial information of the corporate debtor;
(d) have the authority to access the books of accounts records and other relevant
documents of corporate debtor available with government authorities,
statutory auditors, accountants and such other persons as may be specified.
Section 18: Duties of interim resolution professional:— (1) The interim
resolution professional shall perform the following duties namely:—
(a) Collect all information relating to the assets, finances and operations of the
corporate debtor for determining the financial position of the corporate debtor,
including information relating to—
(i) business operations for the previous two years.
(ii) financial and operational payments for the previous two years;
(iii) list of assets and liabilities as on the initiation date; and
(iv) such other matters as may be specified
(b) receive and collateral the claims submitted by creditors to him, pursuant to the
public announcement made under sections 13 and 15;
(c) constitute a committee of creditors;
(d) monitor the assets of the corporate debtor and manage its operations until a
resolution professional is appointed by the committee of creditors;
(e) file information collected with the information utility, if necessary; and
(f) take control and custody of any asset over which the corporate debtor has
ownership rights as recorded in thee balance sheet of the corporate debtor, or
with information utility or the depository of securities or any other registry that
records the ownership of assets including—
(i) assets over which the corporate debtor has ownership rights which may be
located in a foreign country;
(ii) assets that may or may not be in possession of the corporate debtor;
(iii) Tangible assets whether movable or immovable;
(iv) intangible assets including intellectual property;
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(v) securities including shares held in many subsidiary of the corporate debtor,
financial instruments, insurance policies;’
(vi) assets subject to the determination of ownership by a court or authority.
a. to perform such other duties as may be specified by the Board.
Explanation:— For the purposes of this sub-section, the term “assets” shall not
include the following, namely:—
(a) assets owned by a third party in possession of the corporate debtor held
under trust or under contractual arrangements including bailment;
(b) assets of any Indian or foreign subsidiary of the corporate debtor; and
(c) such other assets as may be notified by the Central Government in
consultation kwith any financial sector regulator.
Section 20 (Management of operations of corporate debtor as going
concern:— (1) The interim resolution professional shall make every endeavour to
protect and preserve the value of the property of the corporate debtor and manage the
operations of the corporate debtor as a going concern.
(2) For the purposes of sub-section (1), the interim resolution professional shall
have the authority—
(a) to appointment accountants, legal or other professionals as may be
necessary;
(b) to enter into contracts on behalf of the corporate debtor or to amend or
modify the contracts or transaction which were entered into before the
commencement of corporate insolvency resolution process;
c) to raise interim finance provided that no security interest shall be created over
any encumbered property of the corporate debtor without the prior consent of
the creditors whose debt is secured over such encumbered property.
Provided that no prior consent of the creditor shall be required where the value of
such property is not less than the amount equivalent to twice the amount of the
debt.
(d) to issue instructions to personnel of the corporate debtor as may be
necessary for keeping the concerned corporate debtor as a going concern; and
(e) to take all such actions as are necessary to keep the corporate debtor as a
going concern.
Relevant Clauses in the Management Agreement.
ARTICLE V
RIGHTS AND OBLIGATINS OF OWNER
1. Owner shall obtain and maintain, for and on behalf of the Hotel, all license and
permits required in connection with the operation of the Hotel. Operator shall
inform Owner in advance and shall also assist and cooperate with Owner in
applying for, obtaining and maintaining such licences and permits. The cost and
expenses so incurred shall form a part of the Gross Operating Expenses.
2.1 Without limiting any other provisions of this Agreement, it is expressly agreed
that the following costs and expenses of Owner shall be borne and met by
Owner.
2.1.1 Repayment and interest on loans taken by Owner:
2.1.2 All rents, rates, taxes, levies, assessments and/or impositions of any kind or
nature by any local or Municipal Authority including, without limiting the
generality of the foregoing, ground rent, property tax, and building tax,
municipal or corporation tax for the like, howsoever characterized.
2.1.3 Income tax and/or other personal taxes of Owner, whether levied, assessed or
imposed on Owner and/or on the Hotel;
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2.1.4 All corporate expenses of Owner.

2.1.5 All travelling and other expenses of Owner, subject to Clause 10.18 of Article
1 hereof;
2.1.6 Insurance Premia as provided for in Clause 1 of Article XIX hereof;
2.1.7 Capital Expenditure as provided for in Article XXI hereof;
2.1.8 Security Deposits and all other deposits required for the operation of the
Hotel.
2.2 Depreciation on the Hotel or any part thereof shall be provided for by Owner in
Owner's books of account.
2.3 Owner shall be responsible for any rental charges, hire charges, lease rental or
other costs and expenses for any rental, hire-purchase and/or leasing
arrangements made by Owner for all items that are to be provided by owner as
per this Agreement. All such costs and expenses shall be borne by Owner and
shall not be an expense under Gross Operating Expenses.
3. Owner shall ensure that all payments to be made by Owner in relation to the
Hotel, including repayment of loans and interest thereon, are promptly paid as
and when the payments fall du. If, as a result of the failure on the part of Owner
to make such payments, the operation of the Hotel by Operator is threatened
and/or his Agreement is jeopardised, then, Operator may make such payments,
at its discretion, out of the amount payable to Owner in terms of Article XII
hereof.
4. On receiving a prior notice of 24 hours from the Owner, Operator shall accord to
the duly authorised officers, accountants, employees, agents and attorneys of
Owner, the right to enter any part of the Hotel at all reasonable times, during the
term of the Agreement, for the purpose of examining or making extracts from
the books and other accounting records of the Hotel or for any other purpose
which Owner in its discretion shall deem necessary or advisable, but the same
shall be done with as little disturbance to the operation of the Hotel as possible.
In the event Owner finds any deficiencies or discrepancies, owner shall bring the
same to the notice of Operator. Operator shall endeavour to use its best efforts to
rectify the same promptly.
5. The full and complete title of the Hotel shall at all times remain exclusively with
Owner, and Owner shall always be the legal and rightful owner of the Hotel.
Nothing I this Agreement shall be construed to mean or create any interest or
right of Operator in the title/ownership of the Hotel.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF OPERATOR
1. All the activities of Operator relating to the management, use and operation of
the Hotel shall be on behalf of and for the account of the Owner. The employees
of the Hotel shall be employees of the Owner. All contracts of employment and
all leases and confessions, all purchase orders and agreements shall be executed
by the Operator in the name and on behalf of the Owner. All bank accounts and
other deposits shall also be in the name of Owner.
2. Operator shall provide and maintain in the Hotel all facilities and services
normally provided by operators in First Class International Hotels and shall not
lease or sub-lease or grant concessions, in respect of such facilities and services,
except that Operator shall have the right to grant licenses and concessions for
shops within the Hotel premises to third parties which re customarily provided in
First Class International Hotels.
All income received from such licenses and concessions shall be included in the
Total Revenue of the Hotel, as defined under Clause 21.1 of Article 1 hereof.
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3. Operator, in its capacity as a hotel management expert, shall have absolute and
sole discretion in the direction, management and supervision of the operation of
the Hotel, without limiting the generality of the foregoing, such discretion of
Operator shall include and extend to inter alia the operation of the Hotel for all
customary purposes and particularly in respect of but not limited to the
following:
3.1 Pre-Opening Services prior to the Opening Date of the Hotel;
3.2 Recruitment, appointment, transfer, termination, training and assignment of
duties of all personnel as may in Operator's opinion be required for the purpose
of operating he Hotel.
3.3 Fixing of emoluments of all personnel, including fringe and employee benefits
as per standard operating polies of the hotels owned and managed by Operator;
3.4 Formulation and administration of the personnel policies as per standard
operating policies of the hotels owned and managed by Operator;
3.5 Institution and supervision of all operating policies, reporting and control
systems and other procedures for all departments, including but not limited to
general administration, purchasing, accounting, credit policies (including
entering into agreements with credit card organisations), front office,
housekeeping, security food & beverage including kitchens, restaurants, bars and
banquets, engineering, maintenance, laundry and dry cleaning, as per standard
operating polices of the hotels owned ad manged by Operator.
3.6 Fixing of all prices, rates and tariffs.
3.7 Determination of the terms and conditions of granting of all licenses and
concessions for shops within the confines of the Hotel as Operator may deem
necessary or desirable in connection with the operation of the Hotel.
3.8 Appointment in the course of Hotel operation of contractors, agents,
consultants, and other parties to perform services deemed necessary or desirable
by Operator for the operation of the Hotel.
3.9 Maintenance of proper records and books of account.
3.10 Granting discounts and complimentary rooms or stay as per standard
operating polies of the hotels owned and managed by Operator, such policies
shall be submitted owner;
3.11 Purchase of such Consumable Supplies, Operating supplies, additions to or
replacement of Operating Equipment and replacement of Furniture, Furnishing
and Equipment as Operator may deem necessary or desirable for the proper
operation of the Hotel;
3.12. Making such repairs, improvements and decorations to the Hotel as Operator
may deem necessary or desirable for the proper maintenance and operation of
the Hotel, but excluding Capital Expenditure.
3.13 Planning, preparation and contracting for marketing, advertising, publicity,
public relations and promotional programmes for the Hotel;
3.14 Perform all acts and to render all services necessary in connection with the
operation of the Hotel in a diligent and proper manner;
3.15 Endeavour to determine and maintain requisite safety standards;
3.16 Take such action in law or in equity in the name of Operator as may be
necessary and proper in connection with the operation of the Hotel, or in the
name of Owner as may be necessary and proper in connection with the operation
of the Hotel only with Owner's prior consent, which consent shall not be
unreasonably withheld. The costs and expenses so inured shall form a part of the
Gross Operating Expenses.
ARTICLE VII
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RESPONSIBILITY AND AUTHORITY OF OWNER AND OPERTOR AND MUTUAL

COVEANANTS
1. Operator shall act solely as the agent of Owner in the performance of its duties as
Operator of the Hotel. Nothing herein shall constitute, or be construed to be, or
to create a partnership or joint venture between Owner and Operator and further
this Agreement does not confer any proprietary interest, ownership interest or
leasehold rights or any other right, title or interest on Operator. All debts and
liabilities to third persons incurred by Operator in the course of its operation and
management of the Hotel shall be the debts and liabilities of Owner and/or the
Hotel, as the case may be. Operator shall not borrow any funds or raise any loans
or create any encumbrance, charge or lien of this Hotel, during the course of
operation and management of this Hotel, without the prior written consent of
Owner.
2. The right of Owner to receive the monthly profit and Loss statement, the Profit
and Loss Forecast, the Annual Profit and Loss Statement and Balance Sheet shall
not be deemed to give Owner any control or discretion in the operation of the
Hotel.
3. All Hotel employees shall be the employees of Owner, unless specifically stated
otherwise in the appointment letter issued to the employees, ad all persons
performing services under this Agreement shall be acting as agents of Owner
including all agents and employees of Owner hired by Operator.
4. Funds necessary for the operation of the Hotel to the extent not generated by
operations shall be provided by Owner to Operator. Operator shall inform the
Owner at least 30 days prior to such requirement of funds with the reasons
thereof including the action taken by the Operator to rectify the situation.
5. All contracts of employment shall be executed by Operator on behalf of Owner.
6. Owner shall not in any proposed financing arrangement represent or imply that
Operator is responsible in any way for Owner's obligations nor shall owner in any
way make use of the name of Operator in connection with any such proposed
financing arrangement other than to state that the Hotel shall be or is being
operated by Operator. The Owner shall be disclosing relevant information. About
the Operator as may be deemed necessary and the Operator shall provide such
information to the Owner for arriving at the financial arrangement for the Project.
7. All covenants, provisions, terms and agreements contained herein expressly or
by statutory implications cover and comprise the whole of the agreement
between Owner and Operator. The Owner and Operator, hereby expressly
acknowledge, agree and declare that, except the Licence Agreement, no further
or other covenants, agreements, provisions or terms shall be deemed to be
implied herein or to arise between Owner and Operator by way of collateral or
other agreement by reason of any promise, representation, warranty or
undertaking given or made by either owner or Operator to the other on or prior to
the execution of this agreement and the existence of any such implication or
collateral or other agreement is hereby negated.
8. Operator and Owner shall, in the performance of this Agreement, not be liable to
each other or to any other person for any act or omission, negligence, tortuous or
otherwise, done in good faith, by any agent, representative or employee of either
party or shall Owner object to any expenditure made by Operator, in good faith,
in the course of its operation and management of the Hotel, unless such
expenditure is specifically prohibited by this Agreement. Owner and Operator
hereby indemnify and agree to indemnify and keep each other indemnified and
saved harmless in respect of any and all liabilities, including income tax and
sales tax actions, claims, proceedings, demands, losses, damages, costs or
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expenses by reason of any such acts or omissions, negligence, tortuous or

otherwise, attributable to that party or its agents, representatives or employees
or carried out under its supervision or direction or authority or due to the breach
by it of any of the terms of representation/warranty of this Agreement, done in
good faith. Subject to the above, Owner shall, at Operator's request. Assume the
defence of any proceedings brought by any third party to establish any such
liability or claim. The costs of such defence shall be a part of the Gross Operating
Expenses.
9. Operator shall have full authority to file, institute, conduct and contest legal
proceedings of any nature for and on behalf of the Hotel and to engage lawyers
for conducting the aforesaid proceedings in respect to the operation of the Hotel.
Expenses incurred under this clause shall be a part of the Gross Operating
Expenses.
However, in the event of any matter involving the title and ownership of the Hotel,
Operator will bring such matter to the notice of Owner and Owner shall have the
exclusive right to file, institute, conduct and contest legal proceedings accordingly.
10. Owner hereby acknowledges that in entering into this Agreement, Owner has
not relied upon any forecasts or projections of earnings, information and/or any
other matter related to the future viability of the Hotel, made by or on behalf of
Operator and/or representation or warranty whether expressed or implied arising
there from or otherwise.
11. Operator, to the best of its knowledge and information, will endeavour to
comply with and/or will endeavour to ensure compliance with all orders, rules,
regulations and requirements imposed by or in connection with or effecting the
operation and occupancy of the Hotel and also insurance policies of fire/and or
other risks and public liability and keep indemnified Owner from and against any
loss or damage caused to Owner as a result of the breach on the part of Operator
of the provisions of this clause.
12. Neither party shall do or cause to be done any act of omission or commission
which is likely to adversely affect the other or the rights of the other under this
Agreement. Owner and Operator agree to indemnify each other against any
claims from any third party, including costs and expenses incidental thereto by
reason of any action taken or omitted to be taken in good faith by Owner or
Operator as the case may be or their respective officers, employees, agents or
representatives, pursuant to this Agreement, except when arising out of the
wilful misconduct or bad faith on their part.
13.1 Operator shall, prior to commencing pre-opening services submit a Budget for
Pre-Opening Expenses to the Owner. The Owner shall approve the said Pre-
opening Budget within a levied of 15 days. Such approval not to be unreasonably
withheld delayed or conditioned and simultaneously. Owner shall transfer funds
to a bank account established for the costs and expenses of pre-opening
activities as per the Pre-opening Budget submitted by Operator.
13.2 Not later than two (2) Calendar Months before the Opening Date of the Hotel
and within thirty (30) days prior to the commencement of each subsequent
Fiscal Year of the Operating Term, Operator shall deliver to Owner the Annual
Budget, duly approved by Operator, settling out in reasonable detail, the
anticipated Total Revenue and Gross Operating Expenses for such Fiscal Year.
The Annual Budget is only a forecast and Operator shall not be responsible for
any deviations. Operator shall also make available its senior representative (at
least of GM's rank) to Owner for consultation in respect of the Annual Budget.
The Operator shall endeavour to achieve the Annual Budget.
The Owner shall also approve the said Annual Budget without any modifications
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within 15 days of its submission. If the Operator does not receive approval, in writing,
from the Owner in relation to the Annual Budget within 15 days of its submission, the
Annual Budget shall also be deemed as approved by Owner.
Upon a request from Owner, Operator will provide reasonable opportunities for
consultations at mutually convenient time for explanation of any material deviations
from the said Annual Budget approved by Operator from the statements of actual
results and the actions bailing taken by the Operator.
13.3 Operator shall deliver to Owner promptly after the end of each Calendar Month
a financial statement and such statement shall be the customary form as
generally prepared by Operator for tier hotels operated for managed by Operator
and such financial statement shall show the results of the operational of the
Hotel for the preceding month and the year to date, and contain a computation
of the Gross Operating Profit and the Owner's return together with a report on
human resources and marketing, any situation adversely affecting the operation,
if any land the measures being adopted to overcome the shortfall in the budget
forecast. The figures contained in the financial statement shall be taken from the
books of accounts maintained by the Hotel.
13.4 Within ninety (90) days after the end of each Fiscal Year, Operator shall deliver
to owner a balance sheet and a Profit & Loss Account, certified by the Hotel
Auditor, showing the results of the operation of the Hotel during the preceding
fiscal year, containing a computation of the Gross Operating Profit and the
Owner's return for such period.
13.5 Appointment in the course of business of major contractors, agents and
consultants for performing services for the Hotel, subject to Clause 13.6 of this
Article.
13.6 Operator shall take prior approval of Owner in respect of any contract to be
entered into by Operator for the Hotel for a period of over three years, except
those relating to staff. However, for any contract that Operator enters into on a
group basis for its hotels in India or globally, approval of Owner for such
contracts shall not be required.
14. Operator shall not enter into any contract which is beyond the expiry date of
this Agreement.
15. Owner shall nominate its representative who will act as a liaison and coordinate
all activities and exchange of information between Owner and Operator. This
representative of Owner shall meet with the General Manager of the Hotel or with
any executive(s) from the Corporate Office of Operator nominated by Operator to
review the monthly financial statement of the Hotel on a monthly basis or more
frequently, if required.
16. Owner shall be provided with approximately 1000 sq. ft. of space for its offices
which shall be mutually decided by Owner and Operator in consultations with the
architect.
24. In the Rejoinder Applicant stated that Section 60(5) of the Code confers
jurisdiction on this Authority to dispose of the applications filed not only by and
against the Corporate Debtor or but also applications in relation to any question of
priority including questions of law or facts which may arise in relation to Insolvency
Resolution Process of a Corporate Debtor. It is stated that the present Application has
been filed in relation to the actions of the Resolution Professional during the CIRP
which amounts to interference with the Operation and Management of the Trident
Hotel as per Management Agreement between Applicant and Corporate Debtor and
therefore this Authority has got jurisdiction.
25. It is stated that the Agreement between the Applicant and Corporate Debtor
provides exclusive rights of the Management and Operation of Hotel to the Applicant.
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It is stated that Clause-3.5 of Article-VI of the Management Agreement provides

exclusive rights and discretion to the Operator to enter into agreements with credit
card organisations. Further Article XIV provides for exclusive rights of the Operator to
manage the Bank Accounts of the Hotel and provides for sole authority of the Operator
to provide for signatories on such Bank accounts.
26. It is stated that the Applicant is member of the Board of Directors of the
Corporate Debtor as per the Restated Shareholders Agreement and has been
represented by its authorised representative in the Board Meetings of the Corporate
Debtor. Section 24, prescribes for notice to all the Members of the Board regarding
Meetings of the Corporate Debtor. It is stated in the rejoinder that Applicant never
resisted the Resolution Professional in discharge of duties U/s. 19 and Moreover
applicant provided all the information and documents to the Resolution Professional as
and when sought by him. Applicant denied allegation that he is trying to divert the
available funds and turned it as baseless allegation.
27. There is no dispute about the fact that it is the Management Agreement dated
05.08.2016 that was entered into between Golden Jubilee Hotels Private Limited and
the Applicant that governs the operations of Trident Hotel. It appears after the
commencement of CIRP, the Resolution Professional started managing affairs of the
Corporate Debtor and while doing so certain actions that are narrated in the
application warranted this application by the operator of the hotel i.e., applicant
herein.
28. It is needless to say the Management Agreement entered into between
Corporate Debtor and the Applicant herein, is a binding contract between the
Corporate Debtor and the Applicant. It is also a fact that the dispute between
Corporate Debtor and the Applicant that arose prior to the commencement of CIRP had
been referred to Arbitral Tribunal and the Arbitral Tribunal allowed Applicant herein to
run the operation of the Hotel, by virtue of Interim Order which is still in force. In this
scenario the Resolution Professional stepped into the shoes of the Corporate Debtor is
also bound by the Management Agreement.
29. There are Articles in Management Agreements that described and narrated the
rights and obligations of owner vide Article-V; rights and obligations of the operator
vide Article-VI; the responsibilities and authority of owner and operator and mutual
covenants vide Article-VII.
30. Unless and until Articles - V, VI and VII are amended the parties to the
Agreement namely Applicant herein and the Corporate Debtor now the Resolution
Professional is bound by those Articles. If there is any dispute or controversy in
relation to the implementation of those Articles or in respect of encroachment of rights
one party by the other the proper course for the Applicant or for the Resolution
Professional is to approach this Authority and rightly so the applicant invoked the
jurisdiction of this Authority under Section 60(5) of the Insolvency and Bankruptcy
Code 2016.
31. Be that as it may the actions of the Resolution Professional namely Mr. Subodh
Kumar Agrawal, making attempt to dishonour the cheques issued by the operator,
making an attempt to have an Audit party to audit the bills raised by the operator are
not the actions that are to be exercised by the Corporate Debtor under 3.6 of Article-
VI, which clearly says that it is the right of the operator to fix all prices and rates.
32. Clause 3.9 of Article VI clearly says it is the obligation of the Operator to
maintain proper records and books of account.
33. Clause 3.10 of Article-VI says it is the right of the Operator to grant discounts
and complementary rooms etc..
34. Clause 3.11 of Article VI says purchases of consumable samples, operating
supplies, replacement of furniture etc., are the rights of the operator. The operator is
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also given the right to make such improvements and decorations to the Hotel.
35. The right to contracting for markets, Advertising, publicity etc., is also vested
with the operator as per clause 3.13 of the Article-VI.
36. Clause 4 of the Article-V authorised the owner to examining the Books and
Accounts, records and making extracts of the records of books and other accounting
records. This clause 4 of Article-V requires giving of prior notice of 24 hours by the
owner to the operator.
37. Perhaps the Resolution Professional thinking that he has got authority to Audit
all the vouchers and bills raised by the operator, proposed pre-audit of operation
accounts maintained by the operator or concurrent audit of operation account. But
such course is not contemplated in clause 4 of the Article-V.
38. It appears that the Resolution Professional proposed to open new Bank Account.
Coming to the opening of Bank Account regarding operation of the hotel there is no
specific authorisation to the Corporate Debtor to operate the Bank Account regarding
operation of Hotel or to change the existing banking accounts. Therefore, the
Resolution Professional do not have such power to change the existing accounts that
are operated by the operator i.e., Applicant herein.
39. Coming to the action of the Resolution Professional to amend the agreement by
taking the consent of Committee of Creditors (CoC) it is necessary to refer to Section-
20(2) Clause (B) of the IB Code. No doubt section 20(2) clause (B) of the Code enable
the Resolution Professional to enter into contract or to modify the existing contracts
that are entered into by the Corporate Debtor whenever contract is entered between
two parties it can only be modified with the consent of both the parties.
40. Therefore, the Resolution Professional cannot unilaterally modify the contracts,
so as to take over the obligations and rights of the operator as per the Management
Agreement.
41. Section 17 & 18 of the Code no doubt authorise Resolution Professional to
operate the affairs of the Corporate Debtor only for the purpose of making it a going
concern. Prior to commencement of Corporate Insolvency Process (CIR) when there
was an Agreement between Corporate Debtor and the Applicant herein the clauses in
the Agreement must be adhered to by both applicants and the Resolution Professional
representing Corporate Debtor.
42. As per Clause 13.3 of Article-VII enjoying upon i.e., Applicant herein to deliver
to the owner/Corporate Debtor promptly after the end of each calendar month a
financial statement showing the results of the operation of the Hotel for the preceding
month and the year to date, and contain a computation of the gross operating profit
and the owners return together with report of human resources and marketing, any
situation adversely affecting the operation, if any and the measures being adopted to
overcome the shortfall in the budget forecast.
43. A duty is also to cast upon the operator as per Clause 13.4 of the Article-VII
and at the end of each financial year, to deliver a balance sheet and Profit & Loss
Account certified by the Hotel Auditor.
44. In view of the above clause 13.6 of the Article-VII, the Operator shall take prior
approval of owner in respect of any contract entered into by operator for the hotel for a
period of over three years except in relation to staff or when the operator entered on
group basis into any contract for hotels in India or Globally.
45. Considering the provisions of Section 17, 18 & 20 of the IB Code and various
clauses in Management Agreement the findings of the Adjudicating Authority are as
follows:
1. The Management Agreement entered into between Applicant herein and
Corporate Debtor is binding on the Applicant and as well as Resolution
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Professional.
2. The Resolution Professional has no right to conduct concurrent pre-audit of the
operation account of the Applicant herein.
3. The Resolution Professional has no authority to amend the Management
Agreement unilaterally even with the consent of the Committee of Creditors
(CoC)
4. The Resolution Professional has no authority to open a new Bank Account
pertaining to the operations of the Hotel by the Applicant herein.
46. Therefore, in view of the above said findings both the Operator/Applicant herein
and the Resolution Professional are directed to adhere to various Clauses in Articles V,
VI & VII, and see that the affairs of the Corporate Debtor runs smoothly.
47. Application is disposed off accordingly.
———
†
Hydeabad Bench

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