Techno Electric & Engineering Co Ltd has moved the Delhi bench of the National Company Law Tribunal seeking to restore the corporate insolvency resolution process (CIRP) against debt-laden McLeod Russel India Ltd, citing breach of a consent agreement that allowed the bulk tea producer to avoid bankruptcy three years ago.

The bench of judicial member Mahendra Khandelwal and technical member Rahul Bhatnagar heard the petition on September 18 and directed McLeod to reply to the application filed under Section 11 of NCLT rules and posted the matter for November 4.

The development comes at a time the long pending debt resolution process of McLeod could take a new turn with talks between commercial banks, who are creditors of the company, and state-backed National Asset Reconstruction Co Ltd (NARCL) slowly gaining momentum.

Techno is hoping to join a long list of creditors, such as State Bank of India, IndusInd Bank, HDFC Bank and Indian Bank, who are pursuing CIRP against the company.

However, the banks are also rumoured to be exploring if they can assign the loan to NARCL.

Techno’s move stands out as it was the first to enforce bankruptcy proceedings against McLeod successfully, before the two companies reached an out of court settlement in September 2021, leading the National Company Law Appellate Tribunal to allow the withdrawal of CIRP against the tea producer.

It would now be up to the NCLT bench if the CIRP, which was withdrawn three years back, can be restored, given that such cases are not common.

Even though there are a few instances, it could take months before NCLT adjudicates on the matter. Techno had managed to recover 70 per cent of its dues from McLeod, unlike the banks, who are still pursuing to admit their respective cases, let alone recover anything. When contacted, Udit Gupta, counsel for Techno, declined to comment.

According to the consent agreement, McLeod Russel was to settle dues of Techno Electric for a total consideration of ₹100 crore which would be payable in a mix of cash and equity. Techno claimed before the NCLT, Delhi that McLeod is in breach of the terms as it failed to pay ₹30 crore worth of equity to Techno.

One of the consent agreement clauses stipulated that in case of default or breach of terms, CIRP will be triggered again by the financial creditor against the corporate debtor.

Sources said McLeod linked the issuance of equity to Techno to a comprehensive debt resolution which has been hanging fire for long. The process will get a leg up, if NARCL manages to buy out the loans from the banks, making the state controlled bad debt buyer the only major creditor of McLeod apart from J.C. Flowers Asset Reconstruction Pvt Ltd.

The NARCL deal, if and when it happens, is unlikely to resolve the issue with Techno which is a financial creditor but not commercial lenders such as banks. But it
would give the McLeod promoters, the Khaitan family of Calcutta, breathing space to negotiate.