2025 (12) TMI 375 - HC - IBC

IBC section 31 resolution plan overrides infrastructure statute; project rights transferred, contractual and FDI-based objections dismissed with costs

Maha Hotel Projects Pvt. Ltd. Versus State of Telangana, Telangana State Tourism Development Corporation, BREP Asia II Indian Holding Co II NQ PTE Ltd., Reserve Bank of India, Union of India Ministry of Commerce and Industry New Delhi.

The HC upheld the decision of the State Empowered Committee (Tourism) approving transfer of project rights to respondent company pursuant to an ... Constitutional validity of decision taken by Empowered Committee (Tourism) of the State of Telangana - taking away accrued right of Petitioner without following procedure established by law and without compensating for the same - violation of the Consolidated FDI Policy of India - HELD THAT:- This Court is of the opinion that the project company, Golden Jubilee Hotels Pvt. Ltd. entered insolvency resolution under the IBC and the approved Resolution Plan expressly required State Government's consent, an exercise of contractual and statutory discretion. Petitioner's challenges to transfer and restructuring of project responsibilities have already failed before this Court in M/S. MAHA HOTEL PROJECTS PRIVATE LIMITED. [2023 (4) TMI 1454 - TELANGANA HIGH COURT] and M/S. MAHA HOTEL PROJECTS PVT. LTD [2024 (6) TMI 1523 - TELANGANA HIGH COURT] and before the Hon'ble Apex Court in M/S. MAHA HOTEL PROJECTS PVT. LTD. [2024 (9) TMI 1846 - SC ORDER], conclusively holding that the provisions of the Insolvency and Bankruptcy Code, 2016 override the Telangana Infrastructure Development Enabling Act, 2001 to the extent of inconsistency. Further, once the NCLT-approved plan is in operation, its terms, including permissible changes in shareholding, are binding unless set aside in accordance with the Code. The State's consent to Respondent No. 4 is in line with the Plan and the rights of petitioner, if any, arise out of contract and are subject to the terms, including consequences of insolvency and changes arising from judicial orders. The argument that no notice was given or compensation was paid ignores the supervening effect of the IBC and the scheme approved thereunder. Proceedings regarding alleged contract breaches or compensation are pending before the NCLT and the petitioner's remedies lie therein. The FDI approvals and compliance with national policy are the subject matter of competent central authorities and not this Court's writ jurisdiction, unless a clear and gross illegality is shown and none is established by petitioner. The opportunity to represent concerns was part of the extensive proceedings before NCLT, High Court and the Hon’ble Supreme Court in related litigation. Re-litigation of settled issues is not permissible. Further, petitioner has availed remedies before multiple forums, lost on the core issues and now sought to be reopened. The relief, if any, with respect to valuation, compensation or contract enforcement would lie before the specialized adjudicating authorities, but not in writ proceedings. This Court finds no merit in the Writ Petition. The impugned decision of the Empowered Committee dated 22.09.2025 does not suffer from any constitutional or legal infirmity. Hence, the Writ Petition is liable to be dismissed, however, to discourage this kind of frivolous litigation, with costs - Petition dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether, in view of the Corporate Insolvency Resolution Process and the approved Resolution Plan under the Insolvency and Bankruptcy Code, 2016, the High Court could interfere under Article 226 with the State Government's consent and the decision of the Empowered Committee relating to the project and the SPV. 1.2 Whether the decision of the Empowered Committee dated 22.09.2025, granting consent and 'No Objection Certificate' to the successful Resolution Applicant, was arbitrary, violative of Articles 14 and 300A of the Constitution, or contrary to the petitioner's alleged accrued contractual and proprietary rights. 1.3 Whether the selection/continuation of the technical member/operator and the substitution of the petitioner as lead developer pursuant to the Resolution Plan amounted to hostile discrimination or arbitrary treatment under Article 14. 1.4 Whether alleged non-compliance with, or violation of, the Consolidated FDI Policy of India concerning 100% FDI in an already developed hotel project could be a ground, in writ jurisdiction, to invalidate the Empowered Committee's decision. 1.5 Whether the writ petition was an impermissible attempt to re-litigate issues already decided in earlier proceedings before the NCLT, NCLAT, this Court and the Supreme Court, warranting dismissal with costs. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Interference with State consent and Empowered Committee decision in the backdrop of IBC proceedings Legal framework discussed 2.1 The Court noted that: (i) a Resolution Plan in respect of the project company was approved by the NCLT under Sections 29, 30 and 31 of the Insolvency and Bankruptcy Code, 2016; (ii) under Section 31(1) of the IBC, an approved Resolution Plan is binding on all stakeholders including shareholders; (iii) under Section 60(5)(c), the NCLT has jurisdiction over questions of law and fact arising out of, or in relation to, the insolvency resolution process; and (iv) under Section 238, the IBC has overriding effect over any inconsistent law or instrument. 2.2 The Court also recorded that in earlier litigation it had already been conclusively held that provisions of the IBC override the Telangana Infrastructure Development Enabling Act, 2001 to the extent of inconsistency, and that only the NCLT/NCLAT had jurisdiction over challenges to the CIRP and Resolution Plan. Interpretation and reasoning 2.3 The Court found that the project company (SPV) was the corporate debtor under IBC and entered CIRP, and that the State Government's consent, now impugned, was a condition expressly required in the approved Resolution Plan to enable change of shareholding in the SPV. 2.4 Once the Resolution Plan had been approved under the IBC and sustained in appeal up to the Supreme Court, its terms, including the mechanism for transfer of shareholding and substitution, were binding on all parties, including the petitioner as shareholder/lead developer. Any dispute arising from or relating to the Plan and its implementation fell within the statutory jurisdiction of NCLT/NCLAT. 2.5 The Court viewed the State's consent and the Empowered Committee's decision as an act in furtherance of, and in conformity with, the approved Resolution Plan and the insolvency framework, and not as an independent, free-standing executive allocation of the project. 2.6 The Court held that in the face of the comprehensive and overriding IBC scheme, and the binding nature of the approved Resolution Plan, the High Court's interference under Article 226 would be contrary to the statutory design and the settled position laid down in prior decisions, including those upholding the lack of writ jurisdiction in this very dispute post-CIRP. Conclusions 2.7 The Court concluded that the decision of the Empowered Committee and the State's consent were integrally connected with, and governed by, the approved Resolution Plan under the IBC. Interference under Article 226 was not warranted, as the proper forum for any challenge related to the Plan or its implementation lay before the NCLT/NCLAT, in view of Sections 31, 60(5)(c) and 238 of the IBC and prior binding decisions. Issue 2 - Alleged arbitrariness, violation of Articles 14 and 300A, and extinguishment of petitioner's rights without notice or compensation Interpretation and reasoning 2.8 The Court accepted that petitioner's claimed rights were rooted in its position as lead member/shareholder in the SPV and in the project agreements. However, it held that such contractual and derivative proprietary interests were necessarily subject to consequences flowing from insolvency of the SPV and the approved Resolution Plan. 2.9 The Court observed that the supervening operation of the IBC and the Resolution Plan lawfully altered the corporate and contractual landscape, including shareholding and project control. Any alleged extinguishment or modification of petitioner's rights occurred within the statutory insolvency framework and pursuant to judicial orders, not by arbitrary State action. 2.10 The argument that the State could not give consent/No Objection without issuing notice or paying compensation to the petitioner was rejected on the basis that the petitioner was already heard, and its objections to the Resolution Plan had been considered and rejected by the NCLT/NCLAT and the Supreme Court. The impugned act was an implementation step under a binding Plan, not an independent deprivation invoking Article 300A in isolation. 2.11 The Court emphasized that disputes regarding contractual breaches, valuation, or compensation, including any claim that the petitioner should be compensated for loss of its interests, are within the specialized domain of the NCLT and related fora under the IBC, where relevant proceedings are pending. Conclusions 2.12 The Court held that no independent constitutional infirmity under Articles 14 or 300A was made out against the Empowered Committee's decision. The State's consent was neither arbitrary nor unconstitutional, but a necessary and lawful step in implementing the approved Resolution Plan; any residual grievances must be agitated within the IBC forum, not in writ proceedings. Issue 3 - Alleged discrimination and arbitrariness in favour of the technical member/operator Interpretation and reasoning 2.13 The petitioner alleged that retention of the technical member/operator (EIH Ltd.) in the project, while petitioner's role as lead member was effectively extinguished, amounted to discrimination under Article 14. 2.14 The Court held that post-CIRP, the legal and commercial position of the technical member/operator and the lead member/shareholder were not similarly situated. The continuation of the operator and the structuring of operating arrangements were part of the commercial and operational choices recognized and embedded in the Resolution Plan. 2.15 As the differentiation arose from the statutory insolvency process and the commercial wisdom reflected in the Plan, and because the roles and obligations of the technical member and the petitioner were materially distinct, the Court found no element of 'hostile discrimination' or unequal treatment in a constitutional sense. Conclusions 2.16 The Court concluded that the alleged preferential treatment to the technical member/operator did not violate Article 14, as the differentiation was founded on distinct legal and factual positions under the Resolution Plan and the insolvency framework, and not on arbitrary or invidious classification. Issue 4 - Alleged violation of the Consolidated FDI Policy and challenge to 100% FDI in the project Interpretation and reasoning 2.17 The petitioner contended that allowing 100% FDI in an already developed infrastructure/hotel project was impermissible under the Consolidated FDI Policy and contrary to fundamental public policy of India, and therefore the impugned decision should be invalidated. 2.18 The Court held that questions of FDI compliance and grant of approvals fall within the remit of competent central authorities such as the Reserve Bank of India and the Department for Promotion of Industry and Internal Trade. Writ interference is justified only where clear and gross illegality in such regulatory sphere is demonstrated. 2.19 On the materials placed, the Court found no such clear illegality or violation of the FDI Policy attributable to the Empowered Committee's decision. The challenge was characterized as speculative and not supported by any concrete regulatory finding of breach. Conclusions 2.20 The Court concluded that alleged violations of FDI Policy, in the absence of demonstrable illegality and in view of the jurisdiction of central regulatory authorities, could not be a valid ground in writ jurisdiction to set aside the Empowered Committee's decision. Issue 5 - Re-litigation, finality of prior adjudications and imposition of costs Interpretation and reasoning 2.21 The Court recorded that earlier writ proceedings challenging substitution of the petitioner and related decisions (W.P. No. 17129 of 2020 and Writ Appeal No. 1135 of 2023) had been dismissed, and the Supreme Court had declined to interfere. Likewise, objections to the Resolution Plan had failed before the NCLT, NCLAT and Supreme Court. 2.22 The present writ petition, challenging the Empowered Committee's consent which was merely a step towards implementation of the same Resolution Plan, was viewed as an indirect attempt to reopen and reargue issues already adjudicated or necessarily concluded by those earlier decisions. 2.23 The Court held that such re-litigation of settled issues, under the guise of a fresh challenge to the Empowered Committee's minutes, was impermissible and contrary to the principles of finality and judicial discipline, especially within the structured IBC regime. 2.24 To deter such conduct and to discourage frivolous or obstructive litigation aimed at derailing implementation of an approved Resolution Plan, the Court deemed it appropriate to impose exemplary costs. Conclusions 2.25 The Court dismissed the writ petition as devoid of merit and as an impermissible attempt to re-agitate settled issues, and directed the petitioner to pay costs of Rs. 10 lakhs to the Prime Minister's National Relief Fund.