Mumbai: In a major setback for Talwalkars Healthclubs, the Bombay High Court has ordered the appointment of a court receiver to sell equipment from about 50 gyms of the company after Tata Capital approached the court to recover dues.
India’s only pure-play listed gym company Talwalkars Healthclubs owes around Rs 36 crore to Tata Capital, which it had borrowed to take on lease various items of equipment required in fitness gymnasiums in June 2014.
“Given the fact that there is no workable solution in sight to secure Tata Capital’s claim, the only available option seems to be to allow the petitioner to put these items to sell at the locations that are open and accessible,” said Justice Gautam Patel in the order of December 19.
“However, the proceeds from these sales will have to be disclosed and in the first instance will have to be brought into court. Once deposited with the prothonotary and Senior Master, they will be invested until further orders of the Court. It will be open to the petitioners to offer the items for sale on an as-is-where-is basis at their respective locations,” the order said.
As per the order, the gym is spread over nearly 103 locations across the country. “It now appears that at least 40 of the locations — perhaps more — are closed and inaccessible both to Tata Capital and Talwalkars (and of course to the Court Receiver),” the court observed in its ruling.The order also said that this is because the licensors of these premises have refused Talwalkars’ entry because of disputes under the respective licence agreement, possibly non-payment of licence fees by Talwalkars. Some of the Tata Capital-owned gym equipment is in those closed premises.
According to a person close to the development, this is a pathbreaking order, where at the ad interim stage the court has permitted Tata Capital to sell all the equipment of Talwalkars Health Clubs on as is where is basis is lying at 50 working gymnasiums across India.
The Mumbai-based gym chain is also now directed to furnish security by way of deposit or bank guarantee for the entire claim of Tata Capital of Rs 36 crore. The court has also directed Talwalkars Healthclubs to disclose all other assets on oath as per the format directed by the court.
However, the ruling will become operational only after January 8, 2020, which is also the next date of hearing, so that the company can come up with ‘acceptable alternative’ to repay its dues.
When contacted, Vikram Trivedi, managing partner of law firm Manilal Kher Ambalal & Co, who is representing Tata Capital, refused to comment since the matter is sub judice. Law firm Crawford Bayley & Co is advising Talwalkars in the dispute.
The company’s stock has fallen 96 per cent from its December 31, 2018 price of Rs 113.8 to Rs 3.16 on Thursday. The company has been struggling with high debt for some time, however with defaults and several of its gyms shutting down, its sales in the June 2019 quarter fell to Rs 13 crore from Rs 53 crore a year earlier, with it reporting a loss of Rs 40 crore. It has not released its September-quarter results.