NCLT admits insolvency proceedings against McNally Sayaji Engineering

Abishek Law | | Updated on: Feb 17, 2021
image caption

Financial creditor ICICI Bank moved the tribunal

McNally Sayaji Engineering, an unlisted subsidiary of the Khaitain family-run McNally Bharat Engineering, is facing corporate insolvency proceedings. The insolvency process was admitted after ICICI Bank, a financial creditor, moved to the National Company Law Tribunal (NCLT).

McNally Sayaji was granted loans by ICICI Bank to the tune of ₹ 50 crore. Nearly half of the term loan (₹ 25 crore) was disbursed in June 18, 2015. The remaining facility of ₹ 25 crore was disbursed on June 27, 2015. This apart , there was working capital facility that was renewed from time to time.

The corporate debtor (McNally Sayaji) having committed default in making the payment of the loan amount of ₹ 45,84,41,659.02 and having failed till date to make the re-payment of the said loan with interest, being ₹ 74,85,66,318.41 , this application deserves to be admitted, the NCLT observed.

The NCLT has also appointed a resolution professional to carry out the corporate insolvency resolution proceedings and declared a moratorium on new cases against the company under provisions of the Insolvency and Bankruptcy Code, 2016.

Loan default

McNally Sayaji Engineering is a manufacturer of crushing, screening, grinding, material handling and mineral processing equipment. It serves core sector industries like iron ore, coal, steel, zinc and copper, limestone, rare earths and other mineral businesses. It has four manufacturing units, one each at Kumardhubi (Jharkhand), Assansol (West Bengal), Bengaluru and Vadodara.

“We find that the application of the financial creditor being complete in all respects and there being no denial of the default having taken place in repayment of the debt due to the financial creditor (ICICI Bank). In these circumstances, we have no hesitation in admitting the application and in ordering initiation of CIRP against the Corporate Debtor (McNally Sayaji),” the order added.

“An application for initiation of corporate insolvency resolution process, filed by ICICI Bank in its capacity as financial creditor, before the NCLT- Kolkata branch against the material subsidiary of the company, McNally Sayaji Engineering Ltd (Corporate Debtor) has been admitted vide its order dated February 11, 2021,” McNally Bharat Engineering Company Ltd (the parent company) said in a stock market notification recently.

According to Purajit Roy, CFO, McNally Sayaji Engineering, the resolution process has been going on for some time and other lenders including the State Bank of India, had vetted the process. A rating agency had also been appointed for verification of the accounts. Other lenders include, IDBI, DBS and Kotak Mahindra Bank.

An investor who was subsequently brought in had also proved his “bonafideness” and the company was EBITDA positive (to the tune of ₹ 15 crore) for the nine-month-period (December 2020). “The legal team is exploring if there is possibility of an appeal against the NCLT order,” he told BusinessLine.

Adverse Opinion by Auditors

Meanwhile, the independent auditors of McNally Sayaji Engineering, as per the annual report 2019-20, gave an adverse opinion raising doubts over the latter’s ability to meet financial commitments and to lenders.

They also said there was “material uncertainty which may cast a significant doubt on the company's ability to continue as a going concern”.

“The ability of the company to continue as a going concern is solely dependent on the acceptance of the debt-restructuring proposal,” the auditors’ report mentioned.

Published on February 17, 2021

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