Karur KCP Packkagings started as a trading unit and later expanded to a network enterprise, supplying gunny bags to cement industries.
The Chennai bench of the National Company Law Tribunal (NCLT) has ordered insolvency process against Tamil Nadu-based publicly-listed packaging company Karur KCP Packkagings on a petition moved by Karur Vysya Bank (KVB). The bank moved the NCLT alleging default of `121-crore debt and sought insolvency proceedings against the company.
Claiming that the outstanding amount was `121.22 crore as on September 2018, apart from $18.33 million (`131.976 crore) standby letter of credit limit with the packaging firm, KVB said the packaging firm has been a long standing customer of the bank and it had sanctioned various types of loans to the company.
The loans sanctioned include `52.75 crore under a consortium arrangement, another `39.99 crore outside of consortium, a standby letter of credit to the tune of $30 million and an inland letter of credit and foreign letter of credit exceeding and a deposit loan to an extent of `5.80 crore. The company had provided various documents as collateral security to the bank and the consortium of banks.
The NCLT order observed that after availing various loans under various heads and executing the documents in favour of the bank, the company did not maintain financial discipline. Its borrowal accounts remained continuously irregular despite repeated requests and several reminders by the bank.
Due to continuous default by the company, its accounts were classified as non-performing assets (NPAs) by the bank on December 7, 2017.
The bank initiated Sarfaesi proceedings against the company, and consortium leader State Bank of India issued a separate demand notice on behalf of other member banks on May 2018, in which KVB’s dues were not included. The banks have taken symbolic possession of the properties on August 1, 2018.
The packaging company said the credit facilities were renewed on February 2017, but later classified the debt as an NPA. While the company did not contest the bank’s application on merits, submitted that some dispute is still pending in this regard at the Debts Recovery Tribunal (DBT), Madurai.
However, taking into account arguments from both the parties, the NCLT admitted the CIRP application and appointed an interim resolution professional, declaring a moratorium on various actions, including transferring, alienating or disposing of the legal right or beneficial interest of the company, among others.
Karur KCP Packkagings started as a trading unit and later expanded to a network enterprise, supplying gunny bags to cement industries. It has manufacturing unit at Mayanur, Karur, Tamil Nadu. The company went public in 1995.