McLeod faces NCLT test
A creditor has hauled McLeod Russel India Ltd before the National Company Law Tribunal in an attempt to initiate a corporate insolvency resolution process (CIRP) against the firm under the Insolvency & Bankruptcy Code.
Techno Electric & Engineering Co Ltd moved the petition on Monday before the Calcutta bench of NCLT while seeking to recover a Rs 100-crore loan that the bulk tea producer had taken. McLeod had defaulted on repayments.
The two-member bench has listed the matter for further hearing on September 18 and has served a notice to McLeod. This is the third case that the Calcutta-based engineering, procurement and construction (EPC) company Techno Electric & Engineering has slapped against MRIL.
In April 2019, it had moved Calcutta High Court seeking an injunction on the sale of certain gardens and a land parcel at Sunny Park linked to the loan. Later, it moved another petition before HC, seeking an injunction on the sale of all other McLeod gardens.
On September 22, 2018, Saffron Enclave Private Ltd, a group firm of Padam Prakash Gupta- owned Techno Electric & Engineering Co Ltd, executed a non-binding term sheet to buy four tea estates — Addaborai, Dirai, Mahakali and Rajmali in Assam — from McLeod.
Six days later, Techno lent Rs 100 crore to MRIL on the condition that the money will be used to repay the loans taken from banks and financial institutions with respect to those four tea estates. The term sheet was valid for 120 days.
McLeod was to hand over the title deeds of the four estates, which would serve as the collateral against the loan, within 90 days. Techno alleged that McLeod had failed to do so.
Moreover, McLeod informed the bourses on April 22 that it had executed an agreement for the sale of Addabarie, Dirai and Mahakali estates to Luxmi Tea for Rs 150.45 crore after the non-binding term sheet with Saffron Enclave expired on March 31.
Techno moved the high court thereafter and the court stayed the sale of the Rajmali tea estate and the Sunny Park property. Techno, however, claimed the collateral was not enough to cover the loan.
Kamal K. Baheti, chief financial officer and wholetime director of McLeod, did not respond to questions sent by this newspaper. Gupta could not be reached for comment.
However, corporate sources said McLeod could look to settle the dispute with Techno before the matter escalates. If the case is admitted by NCLT, banks and financial institutions that have lent to McLeod could face an uphill task to recover their loans. Moreover, asset sales undertaken by the company in the past year could be called into question if the CIRP is initiated.
McLeod plans to restructure its loan book to tide over the crisis which has been blamed on the state of the tea industry and the mounting losses at group firm McNally Bharat.