Velan Hotels Limited has received a significant development in its ongoing entry tax litigation, with the Madras High Court disposing of the company's writ petition and providing specific directives for the next course of action. The case involves a ₹28.68 lakh tax demand related to an Audi Q7 vehicle imported in 2006.

Court Order Details

The Hon'ble High Court of Madras has disposed of the writ petition filed by Velan Hotels and issued a comprehensive order with three key provisions:

The court's decision provides the company with immediate relief from recovery proceedings while establishing a clear timeline for the appeal process.

Background of the Dispute

The litigation centers around an entry tax demand totaling ₹28.68 lakh for an Audi Q7 motor vehicle imported by the company in 2006. The Assistant Commissioner (ST), Central-1, Assessment Circle, Tirupur issued the demand order after a delay of nearly nineteen years from the vehicle's entry into the local area on August 10, 2006.

Financial Breakdown

The total tax demand comprises the following components:

The interest component represents the largest portion of the demand, having accumulated over the extended period since the original due date of September 20, 2006.

Next Steps and Timeline

Following the court's order, Velan Hotels now has a 30-day window to file an appeal before the Appellate Authority. The company benefits from a 60-day stay on recovery proceedings, providing breathing room to pursue the appellate process. However, the company must secure an appropriate stay order from the Appellate Authority to prevent recovery actions beyond the initial 60-day period.

Regulatory Compliance

This disclosure represents the latest update in a series of communications, following earlier intimations dated January 31, 2026, and March 2, 2026. The company has committed to providing regular updates on material developments until the matter is resolved, in compliance with SEBI regulations regarding litigation disclosures.

Velan Hotels Limited announced its unaudited financial results for the third quarter of FY26, revealing continued operational challenges with suspended business activities since March 2020. The Tirupur-based hotel company reported significant losses across all reporting periods, reflecting the ongoing impact of halted revenue-generating operations.

Financial Performance Overview

The company's financial performance for Q3 FY26 showed deteriorating results compared to the previous year. Key financial metrics demonstrate the sustained impact of operational suspension on the company's financial health.

Expense Structure and Cost Components

Despite suspended operations, the company continues to incur various operational expenses. The expense breakdown reveals the primary cost drivers affecting the company's financial position during the reporting period.

Debt Settlement and Asset Reconstruction

The company continues its debt settlement process with RARE Asset Reconstruction Limited. As per the financial statements, Velan Hotels has remitted ₹82.52 crores to the ARC up to March 31, 2025, from asset disposal proceeds. The company's accounts were categorized as NPA by Allahabad Bank and Andhra Bank in 2014, with debts subsequently assigned to the ARC in April 2017.

Statutory Compliance and Outstanding Obligations

The company faces delays in meeting statutory obligations, with dues relating to Goods & Services Tax, Value Added Taxes, and Service Tax overdue by more than 12 months. However, progress has been made in settling certain obligations:

• Paid ₹27.95 lakhs for Provident Fund, Sales Tax, and TDS dues
• Remitted ₹22.02 lakhs relating to Goods and Service Tax
• Plans to settle remaining statutory dues upon completion of asset sales

Board Decisions and Corporate Governance

The Board of Directors meeting held on February 4, 2026, addressed several key matters. The directors approved the unaudited financial results for Q3 FY26 and reviewed the Limited Review Report issued by statutory auditors Krishaan & Co. Additionally, the Board updated the Related Party Transaction policy to ensure compliance with current regulatory requirements.

Going Concern and Future Outlook

The auditors have highlighted material uncertainty regarding the company's ability to continue as a going concern. The company's ability to repay debts depends entirely on realizations from asset sales, with the net worth having been eroded as reflected in the financial statements. The company continues exploring options to sell revenue-generating assets to settle outstanding liabilities, though the timeline and success of these efforts remain uncertain.