McLeod promoter to move NCLAT challenging NCLT order on insolvency

Aditya Khaitan, a promoter of McLeod Russel India, the country’s largest bulk tea producer, has filed an appeal in the appellate tribunal against a National Company Law Tribunal (NCLT) order initiating insolvency proceedings in the company.

On August 6, the New Delhi Bench of the NCLT passed an order admitting an application by Techno Electric & Engineering, a power infrastructure company, for initiating corporate insolvency resolution against McLeod Russel after defaulting on a Rs 100 crore loan at 14 per cent interest.

Khaitan has moved an appeal in the National Company Law Appellate Tribunal (NCLAT) as a member of the suspended board of directors of McLeod Russel. The appeal is listed for hearing on August 25.

Khaitan declined to comment. In the NCLT, McLeod had argued that the balance sheet of Techno for the financial year 2018-2019 shows that there was a loan of Rs 100 crore, which was not reflected thereafter, which means a refund is done of Rs 100 crore or the debt has been assigned to someone else.

Techno had filed the application under Section 7 of the Insolvency and Bankruptcy Code (IBC). The clause allows a financial creditor to file an application for initiating corporate insolvency resolution against a corporate debtor before the Adjudicating Authority when a default has occurred.  

The NCLT order mentioned that an application under Section 7 of the Code was acceptable so long as the debt is proved to be due and there has been occurrence of existence of default.

The NCLT, in its order said that it was satisfied that the present application was complete and the applicant (Techno) was entitled to claim outstanding financial debts from the respondent (McLeod) and that there has been default in payment of the financial debt.

The defaulted amount is more than Rs 100 lakh being the minimum threshold limit fixed by the Code, it noted.

“The Adjudicating Authority is inclined to admit this petition and initiate CIRP against the respondent. Accordingly, the petition is admitted,” said the order.

The trigger for the application by Techno was a loan agreement with McLeod that goes back to 2018. It was to provide an inter corporate deposit (ICD) of Rs 100 crore to McLeod subject to the condition that the same would be utilised for the purpose of repayment of all loans relating to four tea estates due to banks and financial institutions to ensure that all encumbrances created on the estates were released. McLeod had also mortgaged a property.

However, the title deeds relating to the estates were not handed over to Techno and the loan amount was not repaid by the due date of March 31, 2019.

As per the NCLT order, Kanchan Dutta has been appointed as the interim resolution professional (IRP), who has taken control of the operations and management of the company. According to the IBC timeline, the committee of creditors will have to be formed in 30 days.

McLeod’s total debt in FY21 stood at Rs 1835.40 crore. The company was in the process of working out a debt resolution plan with lenders and some had signed inter-creditor agreement (ICA) before the insolvency application filed by Techno was admitted in NCLT.

McLeod – at a glance
 

Estates: 31 estates in Assam, 2 in West Bengal

India production: 42 million kg (FY20)

Production across India, Africa and Vietnam: 73 million kg