Shareholder's Loss Of Control In Hotel Project During CIRP Not Deprivation Of Property Under Article 300A: Telangana HC

The Telangana High Court has upheld the State's decision to grant consent for a change in control of a Hyderabad hotel project under an insolvency resolution plan, holding that a shareholder cannot claim a vested right to retain control over the corporate debtor and that any loss suffered is merely a commercial consequence of the insolvency process, not a deprivation of property under Article 300A.

"It cannot be construed as a deprivation of property dehors the authority of law. The appellant, being a shareholder of a company that has undergone insolvency resolution, cannot claim a vested or indefeasible right to continue in control of the corporate debtor or its assets. The loss occasioned to the appellant is in the nature of a commercial consequence of insolvency proceedings and not a compulsory acquisition by the State so as to attract a requirement of compensation under Article 300A,” the court observed.

A Division Bench of Chief Justice Aparesh Kumar Singh and Justice G.M. Mohiuddin held that the insolvency resolution process under the Insolvency and Bankruptcy Code constitutes a “procedure established by law” under Article 300A, under which the assets of the corporate debtor, Golden Jubilee Hotels Private Limited, are governed by the approved resolution plan and bind all stakeholders.

The case traces back to a five-star hotel project in Madhapur, Hyderabad, conceived on a Build-Operate-Transfer model. The bid was won by a consortium led by the appellant, which subsequently set up Golden Jubilee Hotels Private Limited as the special purpose vehicle to run the project.

Things began to unravel when financial troubles hit the project company, eventually leading to its admission into the Corporate Insolvency Resolution Process on February 27, 2018. A resolution plan put forward by the fourth respondent secured approval from the National Company Law Tribunal in 2020, though its implementation hinged on the State government's consent for a change in shareholding and control.

That consent came in 2025. The State's Empowered Committee cleared the proposal but attached several conditions, including payment of outstanding dues, revised lease rentals, withdrawal of arbitral claims, and continuation of the existing operator. The appellant moved court, calling the decision arbitrary and a violation of its rights. The challenge did not find favour, with the writ petition being dismissed along with costs of Rs 10 lakh.

Dealing with the core issue, the High Court made it clear that the State was not handing out a fresh contract or conferring any largesse. Its role, the Court said, was that of a stakeholder acting within the framework of the Insolvency and Bankruptcy Code while facilitating implementation of the approved resolution plan.

“The State, in granting its consent vide decision dated 22.09.2025, was not exercising its power to distribute State largesse, but was acting as a stakeholder bound by the statutory framework of the IBC and in compliance with the terms of the approved resolution plan,” the court said.

The bench held that the project vested in the special purpose vehicle, a distinct legal entity, and that the appellant's rights were purely derivative of its shareholding, which stood extinguished upon insolvency resolution.

The Court did not accept the argument that the State had altered the resolution plan. It pointed out that the plan itself leaves operational choices to the successful resolution applicant, including whether to continue with the existing operator.

The conditions imposed by the State, it said, fall within that commercial space and do not change the substance of the plan.

The plea for a fresh public tender was also turned down. According to the Court, the fourth respondent had already been selected through a structured process under the Insolvency and Bankruptcy Code.

That process, it noted, cannot be treated as comparable to the State distributing largesse through a separate tender exercise.

As for the objection based on the Consolidated FDI Policy, the Court chose not to go into it. It said questions of compliance with foreign investment norms are for the relevant regulatory authorities to examine, not for the writ court in these proceedings.

It also rejected the plea that the challenge arose from a fresh cause of action, holding that the State's decision was merely a consequential step in the implementation of the approved resolution plan and that the issues had already been settled in earlier rounds of litigation.

The appeal was accordingly dismissed, with the court directing the appellant to deposit the costs with the Telangana State Legal Services Authority within six weeks.

For Appellant: Advocates Suraj Prakash, learned Counsel representing Vanaparthi Vaishali

For Respondents: Advocate General A. Sudarshan Reddy duly assisted by SGP I.V. Siddhivardhana for respondent Nos. 1 to 3 and 5.; Senior Advocate Dr. Abhishek Manu Singhvi, with Advpcates Gyanendra Kumar Seni and Rajesh Maddy for respondent No. 4; and DSG N. Bhujanga Rao appearing for respondent No. 7.