Some McDowell investors knock on SC door

Mumbai: A section of the shareholders of McDowell Holdings, formerly owned by Vijay Mallya, has approached the Supreme Court opposing the National Company Law Appellate Tribunal's decision to allow creditor Sun Star Hotels & Estate to proceed with the insolvency proceedings.

The shareholders of McDowell including Porinju Veliyath's Equity Intelligence and US investment firms Acacia Partners, and the financial creditor are locked in a legal battle over control of the company. The appeal in the Supreme Court was filed by 15.51% of shareholders.
NCLAT's Chennai Bench on February 2 dismissed their appeal on the grounds that the investors did not have the 'locus standi' to file an appeal at the appellate tribunal.
NCLAT said shareholders cannot be termed as "a person aggrieved" and that it cannot interfere with the insolvency process admitted by the National Company Law Tribunal (NCLT).

The Supreme Court, after hearing both parties on April 17, said NCLAT's order in the matter required reconsideration. The apex court directed the Bengaluru bench of the NCLT to hear the matter. It said, however, no final order must be passed by the NCLT.

Acacia Partners, McDowell and Sun Star Hotels and Estate did not respond to ET's queries. Veliyath, founder of Equity Intelligence said, "Some unscrupulous people are attempting to loot the public shareholders by misusing the loopholes of IBC (Insolvency and Bankruptcy Code). I feel this case will expose the loopholes in the system and could bring justice to over 47,000 shareholders of McDowell Holdings."

In April last year, the Bengaluru Bench of NCLT admitted a plea filed by Sun Star Hotels and Estate, a financial creditor of the erstwhile Mallya-promoted McDowell Holdings, claiming a default of ₹16.8 crore. In the NCLT, the company's minority shareholders argued that the corporate debtor is not an insolvent company, and it has sufficient means to repay the debt.

Although the company has no business, it holds 6.34 million shares in United Breweries worth ₹900 crore. Minority shareholders are demanding the company sell shares of United Breweries and distribute the money to them.

Shareholders have alleged that to regain control of McDowell, Mallya appointed three directors acting on behalf of the company even after being voted out in the shareholder meeting. In December 2021, the shareholders voted out three board members, and the company was left with two. On January 18, 2022, the NSE gave a one-month suspension notice citing insufficient directors. Since the company did not act, its shares were suspended from trading at NSE and BSE from February 18.

Shareholders of McDowell Holdings alleged they had offered to pay up ₹16.8 crore due to creditor Sunstar Hotels but the creditor declined to accept the payment as part of the settlement of the insolvency process.

In 2018, the Enforcement Directorate attached 15.73% of McDowell's promoter holding, and later these shares were transferred to the Debt Recovery Officer. UB Holdings, the erstwhile promoters of McDowell's, now holds a 2.27% stake in the company.