NCLAT allows withdrawal of CIRP for McLeod Russel India, says IRP

The National Company Law Appellate Tribunal (NCLAT) on Monday allowed withdrawal of the country’s largest bulk tea producer, McLeod Russel India, from corporate insolvency resolution process (CIRP) following an out-of-court settlement between the promoters of the company and IL&FS Infrastructure Debt Fund.

Interim resolution professional (IRP), Ritesh Prakash Adatiya, said that the appellate tribunal has taken on record the settlement between the promoters of McLeod Russel and IL&FS and closed the CIRP. The order was not uploaded at the time of publishing the article.

It may be mentioned that on February 10 the NCLT Kolkata Bench had admitted an application by IL&FS Infrastructure Debt Fund for initiating CIRP against McLeod Russel in connection with a default in payment going back to 2019. The amount as on November 12, 2019 was Rs 347.47 crore, of which the principal amount was about Rs 252.66 crore.

Sources close to the development indicated that the settlement between McLeod promoters and IL&FS included a combination of payment of an amount and land. “According to the terms of the settlement about 75-80 per cent will be recovered by the financial creditor but it will be contingent on the sale of land,” they said.

Though CIRP had been initiated against McLeod Russel, it didn’t progress much as the NCLAT had passed an interim order on an appeal filed by promoter, Aditya Khaitan, staying further steps in the process. The appeal was against the NCLT order admitting the insolvency application from IL&FS.

Even with the stay, operations of McLeod continued to be under the IRP. Closure of CIRP would put control of the firm back in the hands of the Khaitans.

The largest tea producer, McLeod Russel, is the most important asset in the Brij Mohan Khaitan group currently. But debt issues had the company in a spot the past few years.

In August 2021, the NCLT, New Delhi Bench, had admitted an application by Techno Electric & Engineering Company under Section 7 of the IBC. But the application was withdrawn after a settlement with the promoters.

Once out of insolvency, debt restructuring with banks that has been under discussions is expected to pick up pace. McLeod's bank debt is understood to be in the range of Rs 1,600 crore.