More trouble appears to be brewing for debt-laden McLeod Russel as Yes Bank has moved the National Company Law Tribunal (NCLT) against the company, once the biggest bulk tea producer in the world, because of a loan default.
Earlier, Techno Electric & Engineering, another financial creditor to the company, had filed an insolvency petition after it had defaulted on repayments of Rs 100-crore loan. Notably, in July this year, Yes Bank had acquired 9.47% shares in battery maker Eveready Industries by invoking pledged shares following loan default by McLeod Russel. Both Eveready Industries and McLeod Russel are parts of Kolkata-based Williamson Magor Group, which is current under financial stress.
Yes Bank has now filed an insolvency petition before the Kolkata Bench of the NCLT under Section 7 of the Insolvency and Bankruptcy Code (IBC), alleging a loan default of around Rs 500 crore. A Bench of the tribunal heard the matter on Monday. The matter will again come up for hearing on February 3, 2020.
"Yes Bank had given loans to McLeod Russel under various loan facilities, including working capital loan and term loans. Now, the bank has filed an insolvency petition against the company for the (default of) term loans," company sources told FE. When contacted, Yes Bank said it cannot comment on a specific client.
The tea plantation company’s short and long-term debts stand at around Rs 1,700 crore. Earlier, it had sold tea estates in Assam and the Dooars to cut debt. According to the latest annual report of McLeod Russel, its financial creditors are ICICI Bank, HDFC Bank, State Bank of India, Yes Bank, RBL Bank, Axis Bank, Allahabad Bank, UCO Bank and United Bank of India, among others.
Incidentally, the NCLT Kolkata Bench is scheduled to take up the matter of Techno Electric & Engineering’s insolvency petition against McLeod for further hearing later this week. Following the insolvency petition filed by Techno Electric, the Bench on September 3 passed an interim order of a status quo of assets of McLeod as disclosed in the financial statement for the year ended March 31, 2019. After the tea company urged the NCLT not to continue the interim order as it had very serious ‘repercussion’ and negative ‘ramifications’ for its operations, the tribunal "modified" the interim order of status quo, providing some relief.
Last month, the Calcutta High Court had vacated its ad-interim order of injunction, which had restrained both McLeod Russel and Eveready Industries from transferring, alienating or encumbering any of its assets till the application filed by IL&FS was disposed of. The high court in September this year had passed an ad-interim order of injunction restraining Eveready, McLeod and Williamson Magor & Co from transferring, alienating or encumbering any of their assets till the application filed by IL&FS was disposed of.