Mcleod promoters, creditor talk settlement
The Khaitan family, the promoter of Mcleod Russel India, is in discussions with financial creditor Techno Electric & Engineering for a settlement, which could take the country’s largest tea producer out of the insolvency proceedings.
Multiple sources close to the development said negotiations between the two parties were on and the finer details were being worked out.
Mcleod Russel Chairman Aditya Khaitan and Techno Electric Managing Director P P Gupta did not comment on the matter.
A settlement deed would have to be signed, which would then be placed before the National Company Law Tribunal (NCLT) for its approval.
The discussions were initiated after the first hearing of the appeal filed by Khaitan in the National Company Law Appellate Tribunal (NCLAT) on August 25 against the NCLT order initiating insolvency proceedings. The NCLAT admitted the appeal but did not grant an immediate stay on the constitution of a committee of creditors (COC).
Senior counsel for Khaitan, Abhishek Manu Singhvi, had said in the NCLAT that the appellant had a good case, and therefore the constitution of the COC might be stayed.
However, the tribunal said that it would consider the application for stay after the filing of reply by the respondent (Techno). Techno was given 10 days to file its reply.
The Mcleod Russel stock has been touching the upper circuit every day since the order came. On Wednesday, it closed at ~24.45 on the BSE, up 4.94 per cent.
There were limited options before the Mcleod promoters to take the company out of the insolvency proceedings without an interim stay. A settlement with Techno was one.
“Time was running out because the COC had to be constituted,” said a source aware of the matter.
According to the Insolvency and Bankruptcy Code (IBC) rules, the COC is to be constituted after the verification of claims.
The last date for the submission of claims was August 20.
On August 6, the NCLT’S New Delhi Bench admitted an application filed by Techno for initiating the insolvency process and an interim resolution professional was appointed.
The trigger for the application was a loan agreement of 2018 with Techno for providing ~100 crore inter-corporate deposit (ICD).
The agreement was subject to the condition that it would be utilised for the purpose of repayment of all loans relating to four estates due to banks and financial institutions to ensure that encumbrances created on the estates were released. Mcleod had also mortgaged a property.
However, the title deeds relating to estates were not handed over to Techno and the loan amount was not repaid by the due date of March 31, 2019.
Sources close to the development said a settlement with Techno would pave the way for Mcleod’s debt resolution with banks. Banks had initiated the resolution process under the Reserve Bank of India (RBI) circular dated June 7, 2019. Mcleod owes banks around ~1,800 crore.
Most of the banks had signed an inter-creditor agreement for arriving at and implementing the resolution plan. Some were in the process of being approved when Mcleod was admitted for the CIRP.
The process can be completed once the CIRP is closed, indicated sources.