The Khaitan family received a reprieve of four weeks from the National Company Law Appellate Tribunal (NCLAT) in the ongoing corporate insolvency resolution process of McLeod Russel India Ltd, effectively stalling the formation of a committee of creditors till the next hearing.

A bench led by NCLAT chairperson Justice Ashok Bhushan and technical member Barun Mitra said the “interim resolution professional (IRP) shall not take any further step” in the CIRP.

However, the bench also added that the IRP shall run the company with the assistance of suspended directors, officers and employees on a going concern basis.

On February 10, India’s largest bulk tea producer McLeod was admitted for CIRP by a bench of the National Company Law Tribunal of Calcutta, following an appeal by IL&FS Infrastructure Debt Fund, which had lent Rs 252.66 crore to two of the holding companies of the Khaitan family viz. Babcock Borsig and Williamson Magor in 2017.

McLeod had executed a ‘shortfall undertaking’ in favour of IL&FS Infra Debt Fund. The two promoter group firms had defaulted in servicing the debt obligations.

Corporate sources suggest the intervening four weeks will allow the Khaitans, promoters of McLeod, to work out a settlement with IL&FS Infrastructure Debt Fund.

In 2021, McLeod was dragged to CIRP by Techno Electric & Engineering. However, the Khaitans wriggled out of the situation by settling with the creditor. Before the NCLAT on Wednesday, counsel for Aditya Khaitan, the erstwhile chairman of McLeod, argued that the appellant had given a letter of comfort and shortfall undertaking, both of which cannot be treated to be any corporate guarantee.

Insofar as the indemnity is provided in shortfall undertaking, the said clause was never invoked.

Hence, there shall be no financial debt and an application filed under section 7 could not have been maintainable, the counsel said.

Counsel for IL&FS contended that a letter of comfort and shortfall undertaking can be treated as guarantee and the indemnity was invoked. Hearing both sides, the bench noted submissions raised by the parties needed consideration.

“The matter will be heard again on March 27. Meanwhile, IRP will continue to be in control and employees would provide assistance,” said Ramya Hariharan, founder of Citadel Law Chambers, who represented IL&FS.

Rishav Banerjee, one of the counsel who appeared for the promoters, described the order as an ‘interim relief’.

“No further action can be taken by the IRP and CoC cannot be formed,” he added.