Talwalkars Health Club: Bombay HC Appoints Court Receiver for Gym Equipment and Machinery
Moneylife Digital Team 22 November 2019
The Bombay High Court (HC) has appointed a court receiver for all equipment and machinery of Talwalkars Health Club Ltd after the company was found defaulting on repayments worth Rs36.85 crore to Tata Capital Financial Services Ltd.
 
In an order passed on 19 November 2019, Justice Gautam Patel says, "...I believe an order of appointment of a receiver to take formal possession of these items of machinery is necessary. In fact I am told that an investigative audit is currently under way. Once that is completed, and if found satisfactory, the respondent (Talwalkars Health Club) will be in a position to restructure its other debts and to address the present claim. There is no objection to the appointment of a receiver." 
 
The HC appointed its court receiver for all the equipment, plant and machinery and all movables of Talwalkars Health Club. It also allowed Tata Capital Financial Services to appoint a person from their organisation or an independent person or agency to visit each of these locations to inventory and cross-check or tally the list. 
 
Tata Capital Financial Services had provided a loan of Rs36.85 crore to enable Talwalkars Health Clubs to take on lease various items of equipment required in its fitness gymnasiums. 
 
The lease agreements were executed between Tata Capital Financial Services and Talwalkars Better Value Fitness Ltd. However, in December 2018, the National Company Law Tribunal (NCLT) approved a scheme of arrangement between Talwalkars Better Value Fitness and Talwalkars Lifestyle Ltd. The demerged company then transferred its entire gymnasium business to Talwalkars Lifestyle. Thereafter, by an agreement on 20 May 2019 between Tata Capital, Talwalkars Health Club and Talwalkars Better Value, all the liabilities of Talwalkars Better Value were transferred to Talwalkars Health Club.
 
However, Talwalkars Health Club failed to make a payment of Rs2.64 crore towards its dues to Tata Capital Financial Services, which prompted the Tata group company to approach the HC. 
 
Justice Patel says, "Having regard to the fact that the total indebtedness of the respondent to the petitioner is today in the region of approximately Rs36 crore and that it is an admitted position that the respondent is facing some financial difficulties, which it is even now attempting to resolve with its other creditors, I believe an order of appointment of a receiver to take formal possession of these items of machinery is necessary."
 
As reported by Moneylife in October 2019, it is already known that Talwalkar Lifestyles Ltd (now split into two companies) had been defaulting on interest payments, has massive borrowing and nearly three-fourths of the promoter shareholding is pledged. But that is not the reason why statutory auditors and independent directors of its listed companies rushed for the exit, exactly when the stock price began to crash around July. 
 
We learn that the fall of the Talwalkars, India’s largest fitness group, is not about a business gone bad due to the economic slowdown. Like DS Kulkarni, and Punjab and Maharashtra Cooperative Bank (PMC Bank), this appears to be a case of brazen fudging of turnover and membership numbers and cooking up profits, to play the market-cap game, to keep raising more money and piling on debt. Some large investors are categorical that this is the case. (Read: What Made Talwalkars So Unfit for Shareholders and Lenders)
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