Providing interim relief to the Khaitans, the erstwhile promoters of debt-laden McLeod Russel, the National Company Law Appellate Tribunal (NCLAT) on Wednesday said the interim resolution professional (IRP) appointed for the tea major should not take any further steps in the corporate insolvency resolution process (CIRP). It listed the matter for further hearing on March 27.
Earlier, promoter Aditya Khaitan had moved the NCLAT against the NCLT’s order admitting the company for insolvency. The Kolkata bench of the National Company Law Tribunal (NCLT) had on February 10 admitted IL&FS Infrastructure Debt Fund’s insolvency petition against McLeod Russel India, the country’s biggest tea producer. It appointed Ritesh Prasad Adatiya as the IRP of the corporate debtor. Powers of the board of directors were suspended and a statutory moratorium under Section 14 of the IBC commenced.
After hearing the submissions of the counsels for Khaitans and IL&FS Infrastructure Debt Fund, the NCLAT principal bench comprising Justice Ashok Bhushan (chairperson) and Barun Mitra (member technical), held that: “…in pursuance of the impugned order passed by the adjudicating authority (NCLT) dated February 10, 2023, IRP shall not take any further steps in the corporate insolvency resolution process. However, the corporate debtor shall be run as a going concern including the day to day operations.”
The bench also ordered that the IRP shall run the insolvent company with assistance of the suspended directors, officers and employees.
Submitting before the bench, counsels appearing for the erstwhile promoters contended that the appellant had given a letter of comfort and shortfall undertaking, both of which cannot be treated to be any corporate guarantee. It was submitted that in so far as the indemnity was provided in shortfall undertaking, the said clause was never invoked, hence no financial debt and application filed under Section 7 could have been maintainable.
Abhinav Vashisth, senior counsel, along with Abhijeet Sinha and Rishav Banerjee, appeared for the erstwhile promoters of Mcleod Russel.
Refuting the submission of the counsels for Khaitans, the counsel for IL&FS Infrastructure Debt Fund (IIDF) contended that the letter of comfort and shortfall undertaking can be treated as guarantee. It was further submitted that indemnity was also invoked. Advocate Krishnendu Datta appeared for IL&FS Infrastructure Debt Fund.
IL&FS Infra Asset Management, an asset management company, manages IIDF. A financial creditor to McLeod Russel, IIDF had filed the petition under Section 7 of the IBC for a default in payment of Rs 347.47 crore as on November 12, 2019.
This is the second instance of the tea maker being admitted for insolvency proceedings. In August 2021, NCLT, New Delhi, had admitted an insolvency plea filed by Techno Electric & Engineering for default on repayments of term loans of around Rs 100 crore. The tribunal later gave its approval for withdrawal of CIRP against McLeod after the promoters reached a settlement with Techno Electric.