NCLT admits application for initiating CIRP against McLeod Russel

The National Company Law Tribunal (NCLT), New Delhi Bench, on Friday, admitted an application for initiating a corporate insolvency resolution process (CIRP) against McLeod Russel India, the largest bulk tea producer in the country.

In a stock exchange filing, the company said that an application had been filed by Techno Electric & Engineering Company against it before the NCLT under Section 7 of the Insolvency and Bankruptcy Code (IBC), and the matter was admitted in an order dated August 6, 2021. By the order, Kanchan Dutta had been appointed as the interim resolution professional (IRP) under the provisions of the IBC, the filing mentioned.

Once the world’s largest tea producer, McLeod Russel, part of the Brij Mohan Khaitan group company, is now India’s largest with about 31 estates in Assam and two in West Bengal. Across India, Africa and Vietnam, it produces around 73 million kg of tea. The trigger for the application by Techno was a loan agreement with McLeod that dates 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 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.

The tribunal in its order said that it was satisfied with the present application, which was complete in all respects and the applicant is entitled to claim outstanding financial debts from the respondent and that there has been a default in payment of the financial debt.

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

Techno’s is not the only application to be filed against McLeod under IBC. A bank, too, had filed an application earlier.

Lenders had also initiated a debt resolution process under the Reserve Bank of India (RBI) circulated dated June 7, 2019. The company had mentioned in its notes to results for the quarter ended March that the inter-creditor agreement (ICA) for arriving at and implementing the resolution plan has been confirmed and signed by certain lenders and was in the process of being approved by remaining lenders.

However, some lenders also invoked pledged shares to the effect that promoter holding in the company stands at around 10.07 per cent at the end of June quarter; it was at 17.48 per cent at the end of March quarter and 25.82 per cent a year back. McLeod ran into a debt of nearly Rs 2,000 crore as it extended support to a group company, McNally Bharat Engineering. To pare debt, the company sold a clutch of tea gardens after a board decision in May 2018.

Between the year ending March 31, 2019 and March 31, 2020, McLeod disposed of about 17 estates for around Rs 764 crore. In the process, it lost its crown as the world’s largest tea producer.