NCLT accepts union's bid to take over crisis-hit Reid & Taylor
The Mumbai bench of the National Company Law Tribunal (NCLT) has accepted a bid by an unregistered union of the premium apparel brand Reid & Taylor India to take over the firm, stalling liquidation and has posted the matter for further hearing on January 8. Reid & Taylor, owned by the Kasliwal family-run S Kumar Group, which is also facing bankruptcy proceedings, owes over Rs 4,100 crore to banks and other lenders. The committee of creditors had on December 14, 2018, decided to go in for liquidation as no resolution plan was submitted even though it got eight expressions of interest.
Its lenders and financial creditors include Finquest Financial Solution which is the largest with close to Rs 800 crore of claims, Union Bank of India, Punjab National Bank, IL&FS Financial Services, IDBI Bank and L&T Finance etc. That apart Edelweiss ARC, which has taken the company to NCLT in March 2018, Arcil and JM Financial ARC also have exposure in Reid & Taylor which sells premium suits, jackets, trousers, shirts, T-shirts, among others. Its brands used to be endorsed by actors like Pierce Brosnan and Amitabh Bachchan during its heydays.
Edelweiss ARC (an assignee of debt by the Exim Bank) moved the NCLT initiating insolvency process following an Rs 66-crore loan default. A similar liquidation petition was filed by Finquest Financial Solutions, seeking repayment of Rs 775 crore. The NCLT bench consisting of Bhaskara Pantula Mohan and V Nallasenapathy also asked the resolution professionals-- Animesh Bisht, and Harpreet Singh Gupta of EY--to get the bids from the two foreign investors--SP Growth Partners of Hong Kong and an unnamed British investor-- on or before January 7 and present the proposal to the tribunal the next day when they will hear the matter again.
The tribunal also directed the investor to provide the details of its net worth, which the RP has fixed at Rs 50 crore and Rs 250 crore of assets under management to be eligible to bid for the bankrupt firm. The company has around 1,200 employees and has a plant in Mysuru, which is running at under 30 per cent of its installed capacity now and thus incurring cash losses. Accepting the interest of the employees to take over the company, and thus stall liquidation which the creditors want, the tribunal noted that the company owes over Rs 4,100 crore to lenders while the liquidation value is very meagre.
"Considering the background and the quality of the products produced by the company, which are sold at a very high premium, we are of the view that an opportunity may be given to the union to avoid liquidation. "As liquidation will get only a meagre value, the creditors will be most affected and the workmen will be losing their livelihood," the tribunal said in an order passed on January 1 on an RP proposal from the union submitted on December 19, 2018.
The bench cited a recent Supreme Court order in the Arcelor Mittal case wherein the apex court had said observed that the corporate debtor consists of several employees and workmen whose daily bread depends on the outcome of RP. And so if there is a resolution applicant who could continue to run the company as a going concern, every effort must be made to try and see that this is made possible. Accordingly, "the main objective of the IBC is resolution rather than liquidation. If the liquidation is ordered that too when the liquidation value is very meagre, nobody gains.
"Considering the primary objective of the code which prefers resolution even at the remotest of possible opportunity, this bench is inclined to afford an opportunity to the investor identified by the union to submit a plan to the RP even at the cost of excluding the time taken so far," the tribunal said. The tribunal also directed the RP to maintain regular contact with both the interested investors from HK and Britain, and check their eligibility.
Lenders had earlier received expressions of interest from Arcil, Invest ARC, Kotak Mahindra Bank-promoted Phoenix ARC, Suraksha ARC and Acre ARC that's backed by SSG Capital of Singapore. That apart, foreign funds like Eight Capital and Carlyle had also submitted expressions of interest. Reid & Taylor's parent company S Kumar Nationwide too is facing bankruptcy proceeding. While IDBI Bank has initiated insolvency proceedings against S Kumar Nationwide which owes over Rs 7,570 crore to lenders, Edelweiss ARC referred Reid & Taylor to the insolvency court.
Nitin Kasliwal, the promoter of S Kumars Nationwide, was declared a willful defaulter by most lenders and thus he is not eligible to participate in the resolution plan. In 2008, Singapore's GIC had invested Rs 900 crore for a 25.4 per cent stake, valuing the brand at Rs 3,540 crore. The company runs a factory in Mysuru and employs about 1,200 personnel.
(With inputs from agencies.)