Bankruptcy proceedings to begin against Warana Dairy

A cancelled 2011 contract for supplying flavoured milk to 1,500 schools in Mumbai and frequent drought in Maharashtra has brought a 53-year-old co-operative dairy, Warana Dairy and Agro Industries Ltd, to the brink of bankruptcy, according to the company’s filings in the National Company Law Tribunal (NCLT).

Punjab National Bank (International) Ltd has taken Warana Dairy, which supplies milk and milk products to Maharashtra and exports them to a few countries, to NCLT over a Rs 40-crore loan default that was due for repayment in March 2020.

The NCLT on September 16 passed an order admitting PNB International’s plea to initiate insolvency proceedings against Warana Dairy. The tribunal also appointed Rakesh Bothra as the interim resolution professional (IRP) in the case. The case will now be heard by the NCLT on November 11.

According to the plea of PNB International, Warana has defaulted on a $5 million loan given to the dairy firm in 2013. The bank said that as early as 2015, the account of Warana Diary became a non-performing asset (NPA). In October 2018, the bank recalled its loan to Warana due to non-payment of the outstanding loan. Subsequently in January 2019, the dairy firm approached PNB International with a one-time settlement offer of Rs 10 crore, which the bank rejected.

Now the diary firm has claimed that the bank had sanctioned and disbursed only Rs 27 crore in 2013 and the company has already paid back Rs 10.39 crore. The company said an “irregular cash flow”, “drought “ in Maharashtra and “changes” in the rates of milk and milk products by the state government affected its production of milk, leading to a financial crunch at the company.

The company also said it was “facing severe liquidity crunch due to change in the government policy and cancellation of contract of supply of 2 lakh packages of milk to 1,500 schools in Mumbai”. Now the NCLT has directed Warana to not alienate or sell any of its assets. It also said the supply of essential goods or services to Warana Dairy will not be terminated, suspended or interrupted during the resolution process initiated under the Insolvency and Bankruptcy Code.