Dharani Sugars' promoter gets another chance to win it back

Government-owned National Asset Reconstruction Company (NARCL) emerged as the winning bidder for the debt of Dharani Sugars and Chemicals at an uncontested Swiss auction, paving the way for the promoter to submit a fresh settlement offer with the new lender, said people aware of the development.

The Supreme Court had stayed a liquidation order of the sugar maker given by the National COmpany Law Tribunal (NCLT).

The National Company Law Appellate Tribunal, too, had upheld the NCLT order.


Lenders did not receive any counteroffer for the ₹222.5 crore binding offer by NARCL, which triggered a Swiss challenge auction held on September 18.

Officials from Dharani Sugars declined to comment on the matter.

Dharani Sugars, which was admitted for insolvency in July 2021, had admitted claims of ₹707 crore. The resolution professional received two plans but 91.9% of lenders rejected both on May 18, 2023. A minimum of 66% of lenders must approve a plan to be endorsed by the tribunal.

Separately, at the start of this calendar year, the promoter of Dharani Sugars submitted a ₹292-crore settlement to lenders under Section 12A of the Insolvency and Bankruptcy Code (IBC), the people cited above said. This section allows the NCLT to permit lenders to withdraw a company from corporate insolvency if 90% of lenders approve it.

Palani G Periasamy, the promoter of Dharani Sugars, deposited ₹92 crore with lenders under the no-lien account; however, lenders insisted that the remaining ₹200 crore should be deposited immediately, the people said. Since the promoter was unable to arrange the funds immediately, the promoter's plan under Section 12A was not put before the lenders for voting, they said.

The Chennai bench of the NCLT, on June 27, ordered the liquidation of Dharani Sugars on the grounds that the resolution process had crossed the maximum stipulated limit of 330 days, the two resolution plans were rejected and there was no formal offer from the promoter under Section 12A before the lenders.

On July 11, NCLAT upheld the NCLT order; however, the Supreme Court stayed the appellate tribunal's order. The promoter will get yet another chance to make a settlement offer to NARCL, its new lender, under Section 12A.

NARCL's offer, comprising payment in a combination of cash and security receipts, equates to a recovery of 36% for 10 lenders. The NARCL's ₹222.5 crore offer does not include the Indian Renewable Energy Development Agency (IREDA), Sugar Development Fund (SDF) and the ECB portion of ICICI Bank.

Dharani Sugars shot to fame after defeating the Reserve Bank of India in a landmark Supreme Court case that changed the rule of the game in the country's distressed loan market.

Petitioners from the power sector and Dharani Sugars won a case against the RBI for mandating banks to admit companies to debt resolution under the IBC within six months of default if they fail to reach an out-of-court resolution.