McLeod Russel India, the largest bulk tea producer in India, is reportedly close to reaching an out-of-court settlement with IL&FS Infrastructure Debt Fund to avoid insolvency proceedings. The Khaitan family, who are the promoters of McLeod, have been in negotiations with IL&FS since the company was admitted to the corporate insolvency resolution process by the Calcutta bench of the National Company Law Tribunal on February 10. It has been reported that the talks have progressed, and a deal may be reached soon. The CIRP process has been temporarily stayed by the National Company Appellate Law Tribunal, Delhi, after the Khaitans moved the higher legal forum challenging the lower tribunal order.
The legal reprieve has allowed the Khaitans to reach out to IL&FS and negotiate a deal. According to sources, the Khaitans may have offered some land assets as part of the deal. The insolvency case relates to a loan of INR 252.66 crores that IL&FS Debt Fund had lent to two holding companies of the Khaitan family – Babcock Borsig and Williamson Magor & Co Ltd in 2017. McLeod had executed a shortfall undertaking in favour of IL&FS Infra Debt Fund in relation to the loan. The two promoter group companies had defaulted in servicing the debt obligations, leading to IL&FS filing a petition against the tea producer under the Insolvency & Bankruptcy Code.
This is not the first time the Khaitans have saved the company from insolvency. In 2021, McLeod was dragged to the CIRP by Techno Electric & Engineering, but the Khaitans settled with the creditor. McLeod is the last major asset that the Khaitans continue to control, having lost control of two other operating companies, Eveready Industries India and McNally Bharat Engineering Co Ltd over the past two years. The Burman family of Dabur is now in control of Eveready, while McNally is going through a CIRP process.
The Khaitans have a lot at stake in retaining control of McLeod, and it is understandable that they would go a long way to do so. The negotiations with IL&FS Infrastructure Debt Fund have reportedly progressed, and a settlement may be reached soon. However, the final outcome of the negotiations remains to be seen, and the matter will come up for hearing on Tuesday at the NCLAT.