Meanwhile, the National Company Law Tribunal (NCLT), which heard the matter following two applications moved by ITC against Hotel Leelaventure (Leela), seeking urgent hearing and the waiver of the requirement of minimum threshold of 10 per cent shareholding for filing a petition under Section 241 of the Companies Act, posted the case for further hearing to June 18. ITC’s petition is on the grounds of oppression and mismanagement.

“While these representations are being examined by Sebi, in view of the paucity of time involved and in the interest of investors in securities, you are advised to ensure that none of the transactions proposed in the postal ballot notice dated March 18, 2019, is acted upon till further directions from Sebi,” said the market regulator in a letter to Leela.

In the March 18 postal ballot notice, Leela had sought shareholders’ approval for the sale of four hotels and a property to Brookfield. The voting period ended today (April 24).

The tribunal has served notices on Leela and JM Financial Asset Reconstruction Company (ARC), which owns a 26 per cent stake in the company, and asked them to file their reply within three weeks to which rejoinders can be filed subsequently.

Since the deal has been stayed by the market regulator, the NCLT is not in urgency to take a decision. The tribunal in the next hearing will hear arguments of ITC as to why a waiver should be granted for its petition to be admitted under Section 241, which provides relief in case of oppression. The NCLT did not admit the case as Leela and JM objected to the fact that admitting it would mean granting waiver to ITC, which they wish to contest in the next hearing. A shareholder can file a petition alleging oppression and mismanagement if it owns at least a 10 per cent stake in a company. ITC’s counsel argued that while the company had held an 11.78 per cent shareholding in Leela, its shareholding fell below 10 per cent after JM Financial ARC converted its debt into equity in September 2017. ITC currently holds 7.92 per cent in the company which is below the threshold.

A lawyer appearing on behalf of Brookfield said it would file an intervention as the ITC petition against Leela did not make the Canadian private equity firm a party to the case.

The petition filed by ITC against Leela sought the cancellation of the issue and allotment of 163.9 million equity shares in September 2017, constituting 26 per cent in the hotel company, to JM Financial ARC, which converted part of its loan into equity for about Rs 275 crore.

Moreover, it sought mandatory injunctions restraining Hotel Leela, its promoters, directors and JM Financial ARC from the implementation of the decisions taken at Leela’s board meeting on March 18, where it approved the sale and transfer of assets of four hotels (New Delhi, Chennai, Bengaluru and Udaipur) and one property (land parcel in Agra) to Brookfield for Rs 3,950 crore announced in March.

ITC alleged that the Brookfield transaction was prejudicial, oppressive and even fraudulent aimed at stripping Leela of its value, leaving it as a shell company with only liabilities residing therein and benefitting the promoters who would receive at least Rs 300 crore in simultaneous and associated side deals. The minority shareholders, on the other hand, will receive nothing and will be left holding worthless shares with no underlying business or assets left within, it alleged.

ITC also sought the removal of Leela promoters Vivek Nair and Dinesh Nair, and directors Vinay Kapadia and Vijay Sharma from the board.