NCLT admits insolvency plea against Indian tea company McLeod Russel [Read Order]

The National Company Law Tribunal (NCLT), Delhi has admitted an insolvency application against Indian tea producer McLeod Russel India Limited moved by Techno Electric and Engineering Co. Ltd, which has claimed that McLeod defaulted on a Rs 100 crore inter-corporate loan (Techno Electric and Engineering Co. Ltd. v. McLeod Russel India Limited)..A Bench of Judicial Member PSN Prasad and Technical Member Narender Kumar Bhola also imposed a moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) by its order passed on August 6. .“We are satisfied that the present application is complete in all respects and the applicant (Techno Electric) is entitled to claim outstanding financial debts from the respondent (McLeod Russel) and that there has been default in payment of the financial debt. Consent of the IRP is enclosed in the petition. The defaulted amount is more than Rs 100 lakhs being the minimum threshold limit fixed by the Code. Under such circumstances, this Adjudicating Authority is inclined to admit this petition under initiate CIRP against the respondent. Accordingly, this petition is admitted," stated the order..Techno Electric had approached the NCLT to initiate insolvency proceedings claiming that McLeod had failed to abide by a 2018 loan agreement. .The agreement concerned the grant of an inter-corporate deposit of Rs 100 crores to McLeod subject to the condition that the same would be utilised by McLeod for the purpose of repayment of loans relating to four tea estates, i.e Addabarie Tea Estate, Mahakali Tea Estate, Dirai Tea Estate and Rajmai Tea Estate due to banks and financial institutions to ensure that all encumbrances created on the four tea estates are released by the banks and financial institutions..In order to secure the repayment of the loan amount, McLeod had agreed that original title deeds of the four tea estates, which were in possession of ICICI Bank, would be handed over to Techno Electric after the repayment of loans availed by McLeod from banks and financial institutions..McLeod is, however stated to have failed to hand over the original title deeds and replay the entire loan amount within the due date of March 31, 2019..In opposing the IBC proceedings, McLeod had claimed that there is no default as per the Loan Agreement. It was submitted that the amount has not become due yet as the recovery is first supposed to be done from secured assets. It was argued that the securities were sufficient to clear the liabilities and that there will be no arrears left to the recovered from McLeod..Techno Electric countered that the clause on this aspect had been misinterpreted and that it only protects McLeod when there is a failure to recover the default amount from secured assets. In this case, it was submitted that Techno Electric has not opted to sell the secured assets..“The objections raised by respondent (McLeode) regarding sufficient security is not sustainable as proceeding under this Code is not money recovery proceeding. The other objection raised about removal of loan amount from Balance Sheet will also not help respondent ... The respondent by giving option to realise the securities made it clear that the loan amount has not been repaid and thus a default had been committed," the Court ultimately opined..The Court proceeded to admit the insolvency plea. Kandchan Dutta was appointed as Interim Resolution Professional (IRP)..Techno Electric was represented by Senior Advocate PS Narasimha and advocates Udit Gupta, Kumar Anurag Singh, Masoom Shah, Suresh Mongia and Anup Jain..McLeod was represented by Senior Advocate Virendra Ganda and advocates Eshna Kumar, Santosh Kumari, Ritoban Sarkar, Vishal Ganda, Aditya Maheshwari, Prithvi Singh, Ayandeb Mitra and Anoushka Sarkar.[Read Order]