McLeod Russel India Ltd Withdraws Insolvency Application, Settles with IL&FS IDF: NCLAT Decision Ends Proceedings
The National Company Law Appellate Tribunal (NCLAT) has granted permission for the withdrawal of an application filed by the promoters of McLeod Russel India Ltd. This decision follows the acknowledgment of a settlement reached between the promoters and IL&FS Infrastructure Debt Fund (IDF), effectively bringing an end to the insolvency proceedings.
While the official order is yet to be uploaded, reliable sources have confirmed that the bench, consisting of Justice Ashok Bhushan (chairman of NCLAT) and Barun Mitra (member technical), has allowed the withdrawal of the application, thereby concluding the corporate insolvency resolution process at McLeod. Ritesh Prakash Adatiya, interim resolution professional (IRP) for McLeod, stated, “The bench heard the matter, took note of the settlement reached between the promoters of McLeod and IL&FS IDF, and allowed the appeal to be withdrawn. Once I get the order, I will hand the company back to the promoters.”
However, it remains uncertain whether the IRP needs to follow up on the withdrawal application filed before the National Company Law Tribunal, Calcutta, as it depends on the NCLAT’s order expected on Monday, as per sources.
Beyond the legal jargon, this development at the appellate tribunal signifies that the Khaitan family will regain control of India’s leading bulk tea producer, effectively averting the threat of insolvency once again. This marks the second instance where they have successfully rescued McLeod from corporate insolvency resolution proceedings within a span of two years.
Details regarding the settlement have been kept confidential, but sources suggest that IL&FS IDF may have secured the full outstanding principal from the promoters. The deal involves approximately Rs 50 crore in cash payment and the transfer of land worth around Rs 200 crore. The insolvency case originated from a Rs 252.66-crore loan that IL&FS IDF had provided to two holding companies of the Khaitan family, namely Babcock Borsig Ltd and Williamson Magor & Co Ltd, back in 2017.
McLeod had previously issued a “shortfall undertaking” in favor of IL&FS Infra Debt Fund regarding the loan. However, the two promoter group companies defaulted on their debt obligations, leading IL&FS to file a petition against the tea producer under Section 7 of the Insolvency and Bankruptcy Code (IBC).
On February 10, the Calcutta bench of the NCLT initiated McLeod’s corporate insolvency resolution process. Aditya Khaitan, the chairman of the company, subsequently filed an application before the NCLAT seeking a stay on the process. While the appellate tribunal granted the stay, it retained the IRP in charge of the company.
Now that McLeod has effectively exited the corporate insolvency resolution process, attention will once again shift to the long-pending debt restructuring with the banks. The banks have proposed a one-time settlement for dues worth Rs 1,600 crore.
Prior to McLeod’s initiation of the corporate insolvency resolution process, the company had entered into exclusive talks with Carbon Resources to explore an alternative one-time settlement with the banks.
It is likely that these negotiations will resume, but the promoters must first resolve outstanding matters with other creditors, such as KKR, before proceeding with the debt settlement with the banks.