Aditya Khaitan, promoter of McLeod Russel India, has challenged the National Company Law Tribunal’s order to start insolvency proceedings against the country’s largest bulk tea producer.
Khaitan filed an appeal before the National Company Law Appellate Tribunal (NCLAT) against the order handed down by the Delhi bench of the NCLT on August 6. The matter is likely to come up for hearing before the NCLAT on August 25.
The NCLT order was issued on a petition moved by Techno Electric & Engineering under section 7 of the Insolvency and Bankruptcy Code, 2016 against McLeod Russel after the bulk tea producer failed to repay a Rs 100 crore loan that had fallen due on March 31, 2019.
NCLT, Delhi had admitted the application after being satisfied that it was complete in all respects and Techno was entitled to claim the outstanding financial debt from McLeod after determining that there had been a debt default.
Legal eagles believe Khaitan’s challenge is tenable on two grounds. First, he is likely to argue that McLeod Russel does not owe the money to Techno, promoted by Calcutta-based businessman P.P. Gupta, as his company had assigned the loan to an unknown entity.
He could also argue that Techno has the title of a property as security against the loan. No default is said to have occurred as the recovery of the dues could have begun by disposing of that secured asset.
Aditya Khaitan could not be reached for comment.
Udit Gupta, advocate for Techno, also declined to comment but confirmed the matter has been listed for next week.
McLeod had made these arguments before the NCLT as well but it did not cut much ice. The bench had observed that McLeod had neither raised a dispute over the quantum of the default or the existence of the loan amount.
McLeod’s counsel had relied on a conference call of Gupta, chairman and MD of Techno, where he told investors on November 11, 2019 that the company no longer had a debt exposure to McLeod.
McLeod had also argued that Techno’s financial statements had disclosed the Rs 100 crore loan in 2018-19, but it was not reflected thereafter as it had been assigned to someone else.
However, McLeod could not come up with documents to buttress its claim that the loan had been assigned to someone. Techno had also submitted an affidavit before the NCLT saying that the loan remained on its books.
“The alleged arrangement regarding a loan of the respondent is an internal arrangement of the applicant which will not affect the liability of the respondent to clear the dues of the applicant company,” the August 6 order read.
The property in question, located in the upscale south Calcutta neighbourhood of Sunny Park, remains in the possession of the Khaitans. Sources said the value of the property would not be enough to cover the loan exposure.
While an application is being moved by Khaitan, interim resolution professional Kanchan Dutta, has taken charge of McLeod. A public announcement has also been made asking creditors to submit their claims.
McLeod is understood to have a loan exposure of Rs 1,800 crore. It had borrowed the money to support McNally Bharat Engineering. While most of the bankers had agreed to restructure the loan outside the insolvency framework, it could not be done before the NCLT issued its order.