McLeod Russel India's promoter, Aditya Khaitan, has appealed the National Company Law Tribunal's decision to initiate insolvency proceedings against the country's largest bulk tea producer.
On 6 August Khaitan filed an appeal with the National Company Law Appellate Tribunal (NCLAT) against the ruling of the NCLT's Delhi bench. On 25 August the matter is likely to be heard before the NCLAT.
The NCLT ruling came after Techno Electric & Engineering filed a case against McLeod Russel under section 7 of the Insolvency and Bankruptcy Code, 2016 after the bulk tea manufacturer failed to repay an Rs. 100 crore loan that was due on 31 March 2019. After ruling that there had been a debt default, the NCLT Delhi bench granted the application after concluding that it was full in all respects and that Techno was entitled to collect the outstanding financial debt from McLeod.
Khaitan's challenge is tenable, according to legal experts, on two grounds. First, he'll probably claim that McLeod Russel owes no money to Techno, which was pushed by Calcutta industrialist P.P. Gupta because his company had assigned the loan to an unknown entity.
He might also argue that Techno has a property title as collateral for the loan. No default is claimed to have happened because the dues could have been recovered by selling the secured asset.
McLeod had made similar arguments before the NCLT, but they were not warmly received. McLeod had not made a challenge concerning the amount of the delinquency or the existence of the loan amount, according to the bench.
On 11 November 2019, McLeod's counsel relied on a conference call in which Gupta, Chairman and CEO of Techno, told investors that the firm no longer had a loan exposure to McLeod.McLeod further claimed that the Rs. 100 crore loan was mentioned in Techno's financial accounts in 2018-19, but that it was not shown after that since it was assigned to someone else.
McLeod, on the other hand, was unable to produce records to support its allegation that the loan had been assigned to someone. Techno has also filed an affidavit with the NCLT stating that the loan was still outstanding.
The 6 August order stated, "The purported arrangement involving a loan of the respondent is an internal arrangement of the applicant and will not influence the respondent's duty to clear the dues of the applicant company.”
The property in question, located in the wealthy south Calcutta district of Sunny Park, remains in the possession of the Khaitan's. Sources said the value of the property would not be enough to meet the loan risk.
While Khaitan is preparing an application, interim resolution expert Kanchan Dutta has taken over McLeod. Creditors have also been asked to submit claims, according to public notification.
According to reports, McLeod has a loan exposure of Rs. 1,800 crore. It had taken out a loan to help McNally Bharat Engineering. While the majority of the bankers agreed to restructure the debt outside of the insolvency system, it was unable to do so before the NCLT issued its order.