Khaitan family-led Williamson Magor group will do “whatever is necessary” to thwart the initiation of insolvency proceedings against debt-laden tea major McLeod Russel, two sources familiar with the matter told FE.

The admission of group company McLeod for a corporate insolvency resolution process (CIRP) has wrecked Khaitans’ efforts to execute an “exclusivity agreement” with Carbon Resources to negotiate a mutually agreeable mechanism to offer a proposed “one-time settlement” of the company’s debt to lenders.

The Khaitans are likely to consider both the options—approaching NCLAT and an out-of-court settlement—to pull the company out of the insolvency process.

The Kolkata bench of the National Company Law Tribunal (NCLT) last Friday admitted IL&FS Infrastructure Debt Fund’s insolvency petition for initiating CIRP against McLeod Russel India, the country’s largest tea producer.

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IL&FS Infra Asset Management Limited (IIAML), an asset management company, manages IL&FS Infrastructure Debt Fund (IIDF). IIDF, a financial creditor to McLeod, filed the petition under Section 7 of the Insolvency and Bankruptcy Code (IBC) against the company for a default in payment of Rs 347.47 crore as on November 12, 2019.

Passing the order on February 10, the tribunal appointed Ritesh Prasad Adatiya as the interim resolution professional (IRP) of the corporate debtor to carry out the functions as per the IBC.

“Surely, the group will try to take McLeod out of CIRP either judicially or through an out-of-court settlement. But it is too early to comment on it. The promoters will get a month’s time before the formation of the committee of creditors (CoC). Within this time, the group will do whatever is necessary,” according to a source.

A judicial approach to stop initiation of insolvency proceedings against the tea company will require the Khaitans to move National Company Law Appellate Tribunal (NCLAT) against the NCLT order.

“A decision will have to be taken. Lawyers will have to go through the order. Two options are available—approaching NCLAT and an out-of-court settlement with IL&FS Infrastructure Debt Fund. We will consider both the options,” another source told FE.

This is the second instance when the tea maker being admitted for insolvency proceedings. In August 2021, NCLT, New Delhi, had admitted an insolvency application filed by Techno Electric & Engineering under IBC for a default on repayments of term loans of around Rs 100 crore.

The tribunal later gave its approval to withdrawal of CIRP against McLeod after the promoters reached a settlement with Techno Electric, providing a major relief to financially-stressed Williamson Magor group.

Last month, the board of the tea maker had approved the execution of an “exclusivity agreement” with Carbon Resources, which had made a non-binding offer to its lenders to acquire a controlling stake, to negotiate and evaluate a mutually agreeable mechanism for the company to offer a proposed “one-time settlement” of its debt to the lenders.

The board approved the execution of the exclusivity agreement with Carbon for a period of 60 days to exclusively discuss, negotiate and evaluate a mutually agreeable mechanism for the company to offer a proposed one-time settlement of the debt.

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“The exclusivity agreement for the proposed one-time settlement is out of view now as McLeod goes into insolvency proceedings. The company cannot do such things under IBC. Once it comes out of IBC, the process whichever was on can be resumed,” said the first source.

Khaitans have only around 6.25% stake in Mcleod Russel, whose debt stands at over Rs 1,700 crore. Kolkata-based Carbon Resources, which manufactures carbon products, had earlier picked up a 5.03% stake in the tea company from the open market.

Carbon Resources officials were not available for a comment on the latest development.

For the Khaitan family, regaining control of McLeod Russel seems to have become the foremost aim at present. In July last year, the Burman family, promoters of Dabur India, reclassified itself as the promoters of dry cell battery maker Eveready Industries, replacing Khaitans.