The National Company Law Tribunal (NCLT) has directed the removal of Prag Distillery Pvt. Ltd., a wholly owned subsidiary of Tilaknagar Industries Limited, from the liquidation proceedings. In addition, the NCLT order permits the reinstatement of the board of directors to resume management operations. Located in Andhra Pradesh, Prag Distillery has an annual bottling capacity of approximately six lakh cases.
Tilaknagar Industries Ltd, known for the Mansion House brand, had previously reached an agreement with Standard Chartered Bank, the financial creditor of Prag Distillery, to settle all outstanding dues owed by the subsidiary. Pursuant to this agreement, Tilaknagar Industries made a payment of $2.25 lakh to Standard Chartered Bank on behalf of Prag Distillery.
Prag Distillery was admitted for the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code (IBC) in June 2017 by NCLT’s Mumbai bench. The application had been filed by Standard Chartered Bank (SCB), its financial creditor. It had defaulted on its loan repayments to the bank and its financial position was unsustainable and it was likely to become insolvent in the near future, nor did it have a viable business plan to turn around its financial situation.
In August 2018, NCLT ordered the liquidation of Prag. It was also alleged by the liquidator in 2019 that Prag filed an application with the NCLT alleging that certain preferential transactions had been carried out by the directors of the company prior to the initiation of the CIRP process. It was alleged that a transfer of ₹43.85 crore in preferential transactions had happened to Tilaknagar Industries Ltd during 2015-16 and 2016-17.
The liquidator expressed concern that these transactions had harmed the creditors of PDL and should be prevented. Upon investigation, the NCLT determined that the preferential transactions were indeed conducted and had adversely affected the interests of PDL’s creditors. Consequently, the NCLT issued an order to nullify the preferential transactions.
Now, TI, its parent company, had also entered into a settlement agreement with the only other financial creditor of Prag Distillery, DCB Bank Ltd., and settled their dues in full.
In addition, the company paid an amount of about ₹14 crore in full to settle all the operational creditors of Prag. Three of them had filed their claims before the liquidator. It has also settled all the dues owed to its subsidiary’s employees. Prag has about 100 employees.
Standard Chartered Bank approached the liquidator to withdraw the application filed against Prag Distillery which was approved by stakeholders with 100% votes. Pursuant to the same, the liquidator filed an application at NCLT for withdrawal from liquidation.
In an exercise of its discretionary power, the NCLT pronounced the order stating that Prag Distillery Pvt Ltd is out of liquidation and paved the way for the reinstatement of the company’s Board of Directors.