Madras Times - NCLT Chennai Orders Insolvency Proceedings Against Orchid Pharma Founder K Raghavendra Rao

The Chennai bench of the National Company Law Tribunal (NCLT) has ordered the initiation of insolvency resolution proceedings against K Raghavendra Rao, the founder and former managing director of Orchid Pharma Ltd, and his wife R Vijayalakshmi. The tribunal ruled that the couple, acting as personal guarantors for the company’s loans, failed to meet their debt obligations despite various financial facilities being extended to them.

The order, passed on October 16 and uploaded to the NCLT website on October 27, demands a total repayment of Rs 256.29 crore from Rao and Vijayalakshmi. This sum includes the principal amount, accrued interest, and other penalties associated with the unpaid dues. The tribunal noted that the guarantors did not comply with debt payments even after receiving cash credit, term loan facilities, capital term loan facilities, and funded interest term loans.

This legal action comes nearly six years after Orchid Pharma was transferred to the Dhanuka Group through a bankruptcy process. Although the company itself underwent insolvency proceedings starting in 2017, this new order targets the personal financial liability of its former leadership. The NCLT has directed the creditors of Vijayalakshmi to submit their claims to the resolution professional on or before December 4.

Once the insolvency process is admitted, a moratorium will apply to all of the guarantor’s debts. A repayment plan will then be prepared by the debtor in consultation with the resolution professional, which creditors will vote on. If no plan is approved, creditors retain the right to move for bankruptcy.

Raghavendra Rao was a prominent figure in the Indian pharmaceutical industry, founding Orchid Chemicals & Pharmaceuticals on July 1, 1992. He received the Padma Shri in 2011 for his contributions to trade and industry. The company entered insolvency in 2017 following a petition by lender Lakshmi Vilas Bank. The first resolution attempt failed when the NCLT annulled a plan proposed by Ingen Capital.

In the second round, the NCLT approved Dhanuka’s resolution plan on June 25, 2019. Although the National Company Law Appellate Tribunal (NCLAT) later set this approval aside, the Supreme Court reversed the NCLAT’s decision. Consequently, Dhanuka Laboratories Ltd formally took control of Orchid Pharma on March 31, 2020.

The current order against Rao and his wife highlights the enduring financial liabilities associated with the company’s past insolvency. By targeting the personal guarantors, the tribunal seeks to recover the substantial dues that remained unpaid even after the corporate restructuring was completed.

D.Kumar--MT