BackNCLT wants Assam Co. bidding norms revised
The NCLT order on Assam Co. directs the resolution professional and the company’s lenders to reconsider the qualifying conditions in the interest of fair play
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Kolkata: A suitor for Assam Co. India Ltd—the country’s oldest surviving and perhaps most prized tea company (in terms of assets), now going through insolvency resolution—has successfully petitioned the National Company Law Tribunal (NCLT) to dilute eligibility conditions for bids.
Mumbai-based M.K. Shah Exports Ltd, a leading exporter of tea, had moved the Guwahati bench of the tribunal, arguing that the condition that bidders must have a minimum tangible net worth of Rs400 crore could potentially lead to sub-optimal resolution of insolvency.
M.K. Shah cited the financials of leading tea producers such as Warren Tea Ltd, James Warren Tea Ltd, Goodricke Group Ltd and Jay Shree Tea & Industries Ltd, and argued that the tangible net worth of each of these companies was less than Rs300 crore. M.K. Shah itself had a tangible net worth of Rs200 crore, according to its filings with the tribunal.
“This means that none of the major players in the tea industry in India will be able to participate in the insolvency resolution process", the tribunal observed in its order, while declaring that the minimum tangible net worth requirement of Rs400 crore was “arbitrary and illegal".
The 26 April NCLT order directed the resolution professional and the company’s lenders to reconsider the qualifying conditions “in the interest of fair play".
Resolution professional T. Kannan declined to comment, saying the verdict was being reviewed by law firm Khaitan & Co. If he chooses to challenge the verdict, he could take the line that at least five top tea companies have already submitted expressions of interest (EoIs). The last date for submitting EoIs was 26 April.
Plantation companies that have submitted EoIs are Luxmi Tea Co. Ltd, Warren Tea, M.K. Shah, Dhunseri Tea & Industries Ltd and the Apeejay Surrendra Group.
However, some of these companies may not eventually be allowed to bid unless the qualifying conditions are altered.
Two asset reconstruction companies and another firm with interest in coal have also shown interest in Assam Co., according to two persons familiar with the bids who asked not to be named.
Surprisingly, even The Chatterjee Group (TCG), led by US-based technocrat Purnendu Chatterjee, has submitted an EoI to rescue Assam Co., one of the last surviving businesses started in 1839 by Dwarkanath Tagore, grandfather of poet Rabindranath Tagore, in partnership with the erstwhile East India Co.
Vivek Goenka, president of Warren Tea, confirmed his interest in Assam Co. and said his company is looking to expand both in plantations and hospitality. A spokesperson for Luxmi Tea said that an EoI had been submitted. TCG’s Chatterjee could not be contacted, while Dhunseri Group chairman C.K. Dhanuka said he, too, was a contender. Karan Paul, chairman of Apeejay Surrendra Group, also confirmed that he is interested in the 14 estates of Assam Co.
Assam Co., which has a total admitted debt of Rs1,453 crore, currently produces at least 10 million kg of tea a year.
The combined yield of the gardens has contracted in recent years due to poor maintenance, according to the managing director of one of the largest tea companies that chose not to bid. It may take years of hard work and substantial investments to nurse the estates back to health, this person said, asking not to be identified.
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