Promoters of Dharani Sugars regain control as NCLT accepts settlement Proposal

Dharani Sugars and Chemicals Ltd (DSCL), a listed company, successfully emerged from the corporate insolvency resolution process, as the National Company Law Tribunal (NCLT) Chennai Bench accepted the promoter’s settlement proposal, enabling the withdrawal of the resolution process (RP).

With the NCLT order, control of DSCL returns to promoter Palani G Periasamy (PGP). This marks PGP’s second successful case before the NCLT, having regained control over Appu Hotels, which operates Le Royal Meridien Hotels in Chennai and Coimbatore.

“NCLT order allowing our proposal for DSCL affirms our commitment and consistent efforts for the revival of sugar and allied businesses. NCLT order has paved the way for PGP group, the original promoters for regaining control of DSCL,” said Periasamy, Chairman, DSCL.

Chennai-headquartered Dharani Sugars aims to resume operations at its three factories located in Vasudevanallur, Polur, and Kallakurichi in Tamil Nadu, collaborating with over 35,000 cane growers to sustain its contribution to Tamil Nadu’s sugar economy. The company expects to restart operations in 2-3 months after refurbishing idle equipment and process machinery.

Better prospects

“The Indian sugar sector’s growth prospects are promising, given the rising demand for sugar and the government’s focus on producing ethanol as an alternative fuel and power from bagasse,” Periasamy added.

Dharani Sugars faced losses from 2016-19 due to consecutive rainfall failures and associated factors, leading to reduced capacity utilisation, substantial losses, and a liquidity crisis. The loans of the consortium of lenders could not be paid. Admitted into the CIRP by the NCLT Chennai Bench in July 2021, the company’s promoters attempted to revive it by repaying bank loans and exiting the process.

Despite paying 35 per cent of the agreed amount to the consortium lenders and submitting a proposal under IBC Rules’ section 12A, the promoters couldn’t secure the remaining funds on time. Consequently, the NCLT Chennai Bench issued liquidation orders on March 18, 2023. Challenged in the Supreme Court, the liquidation order was stayed in August 2023.

In September 2023, lenders led by Indian Bank placed a ₹619 crore (NCLT admitted claim) loan for sale at an offer price of ₹222.5 crore. Under the Swiss Challenge auction process, the Central government-owned bad-loan bank NARCL (National Asset Reconstruction Company Ltd) emerged as a successful bidder. NARCL took over the loans of 10 lenders excluding those from IREDA and the Sugar Development Fund (SDF).

The 12A proposal was approved by the Committee of Creditors consisting of NARCL, IREDA & SDF with a voting of 92.6 per cent, and the lead bank Bank the proposal to withdraw the CIRP process through the Resolution Professional.

The 12A proposal was approved by the NCLT Chennai Bench and it pronounced the order on May 9, 2024. As a result, the original promoters have taken over the control and management of the affairs of the company. The powers of the Board of Directors are restored with immediate effect.

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