Tobacco-to-hotels conglomerate ITC on Friday moved the Supreme Court against the order of the Securities Appellate Tribunal (SAT) that allowed sale of Hotel Leelaventure’s assets to Canadian firm Brookfield Asset Management. A Bench led by Justice Arun Mishra sought response from Sebi, Hotel LeelaVenture and its promoter companies, JM Financial Asset Reconstruction Co, which owns a 26% stake in Leela, and others on ITC’s appeal seeking setting aside of the tribunal’s order.

ITC, which holds 7.92% in the indebted luxury hospitality chain, argued that the sale of assets to Brookfield could not have been allowed because of related-party transactions. JMF ARC was in technical breach of Regulation 3 of Takeover Regulations and was required to make an open offer as it was not entitled to exemption under Regulation 10(2), senior counsel AM Singhvi argued. However, the Sebi’s view was reversed by the tribunal on September 26, he said.

Opposing ITC’s appeal, senior counsel Mukul Rohatgi, appearing for Hotel Leela, said the transaction is already over and Rs 4,000 crore which the hotel chain got has already been distributed among its lenders.

“JMF ARC having acquired 26% shares of Hotel Leelaventure in a clear violation of Regulation 3, without making any open offer and not being exempt either under Regulation 10(2), is enjoying the fruits of its illegal conduct in gross violation of Takeover Regulations, to the complete exclusion and oppression of minority shareholders. This is in violation of both letter and spirit of Takeover Regulations and ought not to be permitted, lest it has far reaching disastrous consequences upon the interests of minority shareholders and securities laws in the country,” ITC said in its appeal.

The appeal also said in addition to the 26% shareholding, there is “the highly significant and admitted pledge of an additional 25.28% of the promoters’ shareholding in Hotel Leelaventure to JMF ARC. Pertinently, the right to invoke the pledge over the promoters’ shareholding had already crystallised, thus putting JMF ARC in control over the management decisions taken by promoter directors with an aggregate control of 51% shareholding in Hotel Leelaventure.”

The SAT on September 26, while rejecting ITC plea, had also vacated its interim order barring Hotel Leela to declare ballot result for approval of the sale of its assets to Brookfield. Sebi had earlier also allowed JMF ARC to vote on the deal.

In March, Hotel Leelaventure had declared that it was selling its four properties and a land parcel to Brookfield for around `4,000 crore. The sale was approved by Leela’s board in March but the deal hit a roadblock after minority stakeholders – ITC and LIC – complained to Sebi that JM Financial ARC was a related party and could not vote on the board’s resolution approving the deal.