The corporate insolvency process of McNally Bharat Engineering Co Ltd has run into trouble after the successful bidder stumbled in implementing the approved resolution plan within the prescribed time.
BTL EPC Ltd, a Shrachi group entity, had emerged as the successful resolution applicant trumping Naveen Jindal-led Nalwa Steel & Power in a keenly contested bidding for McNally in December 2023.
After BTL could not implement the plan, the committee of creditors of McNally has filed an application before the Calcutta bench of National Company Law Tribunal to seek appropriate directions and recourse with respect to the approved resolution plan and the corporate insolvency resolution process (CIRP) of McNally Bharat.
Sources said BTL is litigating that there would be a major tax hit if it acquires the loss-making McNally Bharat by implementing the resolution plan and in effect, it would not be a financially viable proposition. The applicant has also approached the NCLT seeking appropriate direction in this matter and offered to submit a tax report prepared by top consultancy firm Deloitte.
According to the plan approved by the NCLT in December, BTL offered to stump up ₹441.11 crore to the creditors of engineering, procurement and construction (EPC) company McNally, which formerly belonged to B.M. Khaitan family-led Williamson Magor Group.
The plan translated to 12.05 per cent recovery for the secured financial creditors who had an admitted claim of ₹3,514.65 crore on McNally.
In contrast, the unsecured financial creditors were getting only ₹3.46 crore, which translates to 0.15 per cent recovery of ₹1,282.59 crore of the admitted claim. McNally was admitted for CIRP in 2020.
According to the timeline proposed by BTL in the resolution plan, the applicant was to infuse ₹155 crore towards admitted claims and contingent claims.
The first milestone payment of ₹61.18 crore was to be made in 60 days and the others within 150 days and 240 days. A large part of the approved resolution plan was in the form of a bank guarantee of ₹251 crore.
While the applications filed by CoC and BTL EPC are being heard before the tribunal, there were signs as early as March that the implementation of the resolution plan is not as per timeline.
The record date was fixed on March 26 to write down the equity shares of listed McNally but the plan was cancelled on March 22.
According to the plan, the entire shareholding (32.79 per cent) of erstwhile promoters shall stand extinguished, while the public shareholders will see their holding reduced to 5 per cent from 62.21 per cent after the issue of fresh shares to BTL.
Apart from raising questions on tax incidence, the BTL management appeared to be worried about the drain of quality manpower from McNally. Srinivash Singh, the MD and a veteran of McNally, left the company on October 30, citing personal grounds.
When the Calcutta bench approved the resolution plan in December, BTL boss Ravi Todi had told this newspaper that turning around McNally, which is engaged in material handling business focusing on the coal and power sector and complementing BTL, would not be an easy task. With the new legal twists, it looks like the revival of McNally could still be some time away.
