BIFR & EGOM take steps to revive NTC mills

Following steps, as approved by the Board for Industrial and Financial Reconstruction (BIFR) and Empowered Group of Ministers (EGOM), have been taken to make the company profitable:(i) To bring down the administrative cost of NTC, 9 subsidiary-corporations of NTC have been merged with NTC Holding Company, making it a single company with a single Board of Directors, as against 10 Companies for NTC in the past.(ii) 67 unviable mills have been closed and compensation paid to the surplus employees of these closed mills who opted for Modified Voluntary Retirement Scheme (MVRS).(iii) By offering MVRS to the surplus employees, the number of employees in NTC has been brought down to 12234. Under this scheme, 59,179 employees have availed voluntary retirement.(iv) 22 mills have been identified for modernization by NTC itself. Out of these, 15 mills have so far been modernized. In addition to this, modernisation of 16 mills through Joint Venture (JV) route has also been finalized.This information was given by the Minister of State for Textiles, Shri E.V.K.S. Elangovan in a written reply in the Lok Sabha on December 22, 2008.

CABINET APPROVES FINANCIAL RESTRUCTURING OF KONKAN RLY

Improves Net Worth of the Corporation
In a move that bodes well for Konkan Railway Corporation, the Cabinet Committee on
Economic Affairs (CCEA) has approved KRCL’s proposal on financial restructuring, thus
enabling the Corporation to continue as a PSU even after discharge of its debt liabilities. The
proposal, recommended by the Board of Directors and the Ministry of Railways, was
submitted through BRPSE (Board for Reconstruction of Public Sector Enterprises) for
approval of CCEA (Cabinet Committee on Economic Affairs).
Konkan Railway is the first and the only railway project in the country to be executed on BOT
basis. To enable timely completion of the project, while the Corporation had to resort to
commercial borrowings on a high interest rate, it was not extended any concession like
exemption from payment of dividend during construction phase. Due to this, the debt liabilities
kept mounting. Add to that the losses incurred due to non-materialization of the projected
traffic growth along the route. The Corporation, being a public utility project, was extended
loans by the Ministry of Rlys to meet its debt liabilities.
As per the financial restructuring proposal, the cost of debt provided by Ministry of Railways,
together with interest accrued thereon, will be converted into preferential shares redeemable
at the end of 15 to 20 years. The dividend payable will be non-cumulative at the dividend rate
Ministry of Railways (MoR) pays to Government of India. Any future loans provided by
Ministry of Railways to KRCL will also be converted into non-cumulative redeemable
preferential shares.
The financial assistance will be restricted to the next three years i.e. financial year 2008-09 to
2010-11. In debt servicing, the full interest amount and 50% of the redemption amount will be
made available to KRCL as and when due. These funds paid to KRCL will also be converted
into preferential shares redeemable after 15 years.
Restructuring of the finances would improve the Net Worth and Debt-Equity ratio of KRCL and
make it into a profit making organization soon. The Corporation would be able to meet its
liabilities in future provided the traffic business plan materializes. Therefore the Board of
Directors recommended reviewing the proposed arrangement before the lapse of three years,
as there may be a cause to extend this arrangement for a few more years keeping in view the
unforeseeable future. With this now, Konkan Railway will also be able to bid for big
infrastructure projects.

BRPSE working on revival package for Burn Standard

Working on the revival package for Kolkata-based Burn Standard & Company, which is under the Board for Industrial and Financial Reconstruction (BIFR), the Board for Reconstruction of Public Sector Enterprises (BRPSE) is mulling to ask the Railway ministry and the Steel Authority of India (SAIL) to take over its two wagon manufacturing units and one refractory unit, respectively. Nitish Sengupta, chairman of the BRPSE, who met Burn Standard officials here today, said that the board will now see if there was any legal snag that could stall the process of a take-over of the units. Burn Standard had two wagon manufacturing facilities, one at Howrah and another at Burnpur in Burdwan district of West Bengal. Its refractory unit was located at Salem in Tamil Nadu.
"The interest amount on the loans taken by the company is very high. It could be to the tune of Rs 150 crore," Sengupta said.
"We do not want to shut down or give grants to sick PSEs. Instead, companies should either look at tying up with a private partner or listing at the bourses wherever possible," he added.

Revival of NTC Mills

So far National Textile Corporation (NTC) has closed 67 unviable mills under Industrial Disputes (ID) Act, 1947 as per rehabilitation scheme sanctioned by the Board for Industrial and Financial Reconstruction (BIFR) and approved by Government. At present, there is no proposal to revive, reopen and modernize the above closed mills under public-private partnership. The original Revival Scheme was approved by the BIFR subsidiary-wise in April, 2002. Subsequently, a Modified Scheme (MRS-08) for NTC has been approved by BIFR on 05.09.2008. As per MRS-08, the period of implementation of revival scheme for NTC has been extended upto 31.03.2009. The total cost of MRS-08 is Rs.9102 crores which is self financing. The resources are to be generated by sale of assets of closed mills and surplus assets of viable mills. Through MRS-08, BIFR has approved closure of 12 more mills. MRS-08 has also recommended writing off of Government loan and waiver of interest thereon, as on 31.03.2007. In addition, various reliefs and concessions on Income Tax, Wealth Tax, Capital Gain Tax etc. have also been approved by BIFR. This information was given by the Minister of State for Textiles, Shri E.V.K.S. Elangovan in a written reply in the Rajya Sabha today. *******

BIFR to clear PPL package in December

The Board for Industrial and Financial Reconstruction ( BIFR) is all set to clear the revival package of Paradeep Phosphate Limited ( PPL) in the first week of December 2008. The operating agency State Bank of India ( SBI) has finalised the revival work and the notice period for clearance ends on November 30, 2008. The revival package may include proposals for restructuring the current equity from Rs 575 crore to Rs 715 crore with the fresh infusion of capital of Rs 140 crore by the promoters.
It would also have suggestions for concessions and reduction of interest on outstanding loans of around Rs 250 crore to keep afloat in future. The loans were accumulated as a government concern between 1993 and 2002.
PPL currently has a private holding of 80.45 per cent through Zuari Maroc Phosphate Limited ( ZMPL) and a union government holding of 19.55 per cent. It’s authorised capital is Rs 1000 crore.
With a face value of Rs 1000 per share, PPL’s assets till 2005-06 were around Rs 1004.84 crore and liabilities of about Rs 620.05 crore.
During this period, the company’s accumulated losses were Rs 771 crore and it has total resource fund ( trf) of Rs 1455 crore by way of secured and unsecured loans of Rs 226.35 crore and Rs 653.35 crore and a paid up of Rs 575.45 crore.
PPL has about Rs 900 crore of funds locked up with the Centre by way of fertiliser subsidy and a portion of the government’s share as owner of the company in the total amount of loss incurred since 2001-02.
The company was referred to BIFR in 2002-03 and after making a series of losses for consecutive four years it managed to turn round in 2005-06. There was, however, a periodic decrease in losses since 2001-02 to 2004-05.
The company achieved a remarkable feat when its net profit rose by a whopping 808 per cent from Rs 12.7 crore in 2005-06 to Rs 109.27 crore in 2006-07.
In 2006-07, the company achieved an annual production of 13.08 lakh tonnes and a sale of 13.18 lakh tonnes of DAP, NPK , NPK ( 10:26:26) and NPK ( 20:20:20) raising the total income to Rs 2067.2 crore from the earlier Rs 1971.3 crore.
PPL’s imports, however, are still 70 per cent of its turnover. It imports sulphure, rock, phosphate, ammonia, sulphuric acid from Morocco, Tunisia and Indonesia.

Corporate Insolvency Laws : Time to Change

With the globalisation of the Indian economy, the sphere of Corporate Insolvency Laws has widened collosally.
With the globalisation of economy, the issues relating to corporate insolvency have assumed greater significance and a need has been felt for long for bringing about reforms in this branch of law. Moreover, with the Indian economy having been opened up for investment by foreign creditors and, internationally, the Indian corporate also making investments in companies outside, the realm of cross-border insolvency law has multiplied colossally.
In the year 1999, the Government of India set up a High Level Committee headed by Justice V.B. Balakrishna Eradi,[2] a superannuated Judge of Supreme Court of India for remodeling the existing laws relating to insolvency and winding up of companies and bringing them in time with the international practices in this field.
Recommendations of the Committee
The Committee recommended that:
The jurisdiction, power and authority relating to winding up of companies should be vested in a National Company Law Tribunal which should be vested with the functions and power with regard to rehabilitation and revival of sick industrial companies, a mandate presently entrusted with BIFR under SICA.
The 1956 Act should be suitably amended to take the power away from High Court and the transfer of the pending winding up proceedings to the Tribunal.
The adoption of the international trend in law relating to corporate bankruptcy, namely, sell the assets first as quickly as possible, and relegate to a later stage the adjudication of claims and distribution of proceeds.
An in depth assessment of the office of Official Liquidators, in view of inadequate and incompetent manpower and absence of latest office equipments and technologies.
A liquidation Committee consisting of creditors of the company on the lines of Section 141 of the Insolvency Act, 1986 of UK[3] be set up to assist the Liquidator.
The repeal of SICA and recommended the ameliorative, revival and reconstructionist procedures obtaining under it to be reintegrated in a suitably amended form in the structure of the 1956 Act except that there is no stand still provision like Section 22 of SICA.
Part VII of the Companies Act, 1956 should incorporate a new substantive provision to adopt the UNCITRAL Model Law[4] as approved by the United Nations and the Model Law itself may be incorporated as a Schedule to the Companies Act, 1956, which shall apply to all cases of Cross-Border insolvency.
Adopt the necessary principles enunciated under the heading "Legal Framework", "Orderly and Effective Insolvency Procedures Key issues", [5] to bring the provisions of the Companies Act, 1956 in line with international practices.
The Committee completed its work and submitted its report to the Central Government in the year 2000.In August 2001, the Companies (Amendment) Bill, 2001 and the Sick Industrial Companies (Special Provisions) Repeal Bill, 2001 were introduced in the Parliament of India.
The Bills, if passed in their present form will bring the curtains down on the Sick Industrial Companies (Special Provisions) Act, 1985 and will restructure the Companies Act, 1956 in a big way leading to the new regime of tackling corporate rescue and insolvency procedures in India with a view to creating confidence in the minds of investors, creditors, labour and shareholders.
Scheme of Insolvency Laws
The stream of insolvency laws can be segregated chiefly under two heads: Personal Insolvency, which deals with individuals and partnership firms governed by Provisional Insolvency Act, 1920 and Presidency Towns Insolvency Act, 1908 and Corporate Insolvency, whose consequence is winding up of the company under the Companies Act, 1956.
In the process of liberalization, deregulation and adopting market economy, India is experiencing a massive growth of retail loans to individuals, housing loans and credit card users. On account of phenomenal rise in retail lending it will be necessary in the near future to give a re-look at the personal insolvency laws to ensure that any insolvency proceedings against individuals are also expeditiously decided.
However, the basic tenets of corporate insolvency can be classified as: restoring the debtor company to profitable trading where it is practicable; to maximize the return to creditors as a whole where the company itself cannot be saved; to establish a fair and equitable system for the ranking of claims and the distribution of assets among creditors, involving a redistribution of rights; and to provide a mechanism by which the causes of failure can be identified and those guilty of mismanagement brought to book; placement of the assets of the company under external control; substitution of collective action for individual pursuits; avoidance of certain transactions and fraudulent conveyances, dissolution and winding up etc.
In context of corporate laws, the word insolvency has neither been used nor defined. However, Section 433 (e) covers a company, which is unable to pay its debts, and thus constitutes a ground for winding up of the company. Inability to pay its debts would be a case where, a company's entire capital is lost in heavy losses and no accounts are prepared and filed and no business is done for one year. In such circumstances, the Registrar of Companies makes out a case of inability to pay debts. These debts however, would only include debts, incurred after the legal incorporation of the Company. Inability to pay debts has even been amplified in Section 434 wherein, a creditor with a due of Rs. 500 [6] or more serves a demand by registered post and the company neglects to pay, secure or compound the same in 3 weeks, in cases where the execution of a decree returned unsatisfied and also where the Court is otherwise satisfied that the company is unable to pay its debts.
Sick Industrial Companies
A sick industrial company means an industrial company (being a company registered for not less than five years and employing fifty or above workmen), which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth.[7] Net worth has been defined as the sum total of the paid up capital and free reserves.[8]
Sick Industrial Companies Act requires that when an industrial company has become a sick industrial company, the Board of Directors of the said company shall, within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which a company has become a sick industrial company, make a reference to the Board for Industrial and Financial Reconstruction for determination of the measures which shall be adopted with respect to the company. However, if the Board of Directors has sufficient reasons even before finalisation of accounts to form an opinion that the company has become a sick industrial company, it shall, within sixty days after it has formed such an opinion, make a reference to the BIFR.[9]
Moreover, SICA is basically and predominantly remedial and ameliorative in so far as it empowers the quasi judicial body, Board for Industrial and Financial Reconstruction to make appropriate measures for revival and rehabilitation of potentially viable sick industrial companies and for liquidation of non-viable companies. But, where the BIFR comes to the conclusion that it is not possible to revive the company and that it is just and equitable that the company should be wound up, it shall record and forward its opinion to the concerned High Court, on the basis of which the Court, may order winding up of the company and may proceed and cause to proceed with the winding up of the sick industrial company in accordance with the provisions of the Companies Act, 1956.[10]
If a corporate debtor is in difficulty it is likely that he would approach the senior lenders for some rehabilitation, waiver of compound or penal interest, funding of the interest dues on a zero coupon rate or at concessional terms. It would prepare a scheme of arrangement or rehabilitation plan with the assistance of experts or an advisor, which it would submit, to the senior lenders.
RBI has police guidelines for revival of sick industrial companies and the role to be played by lead institutions or Operating Agencies appointed by the SICA for reviving industries declared to be sick under SICA. When a lender appoints an outside expert, the Court of the Board for Industrial & Financial Reconstruction (BIFR) would normally have to intervene to render help to such expert or advisor to collect information on an unrestricted basis. Depending upon the extent of the industrial sickness and the accumulated arrears or losses, it is likely that the records of the company would be in disarray. In such circumstances reconstruction of accounts on the basis of actual transactions is laborious and difficult to achieve. Large accounting firms render costly services and lenders are wary of appointing high cost expensive services in a rehabilitation scheme. Usually the lenders, if they are public financial institutions rely upon their own in-house expertise and staffing to ferret information.
Under the provisions of Companies Act, 1956,[11] several measures have been prescribed for revival of a company. Even in the case of non-scheduled industries, not governed by Schedule I of the Industries (Development and Regulation) Act, 1951 and consequently, under the SICA; the provisions of Section 391 & 394 of the Companies Act for proposing a scheme of rehabilitation and reconstruction is normally recoursed.
Institutional Machinery
High Court is the Court of proper jurisdiction for handling winding up proceedings and power sought to be transferred to the NCLT with the onset of reforms by way of a proposed Bill. The official liquidator is the liquidator in compulsory winding up. Where a winding up order has been made or where a Provisional Liquidator has been appointed, the Liquidator shall take into his custody or under his control all the property, effects and actionable claims to which the company is or appears to be entitled. All the property and effects of the company shall be deemed to be in the custody of the Court as from the date of the order for the winding up of the company.[12] The Creditors Committee on inspection may be appointed .In relation to corporate insolvency, the official liquidator as an officer of the Court or the Court receiver as an officer of the Court are dealing with insolvency related procedures.
Pursuit of Individual Claims
In the sphere of insolvency laws in India, where all the suits are stayed on making of the winding up order, parties may pursue individual claims in certain circumstances.
Winding up procedure implies all personal rights be converted into right to prove debt in winding up.
Under section 446, stay on all suits and the winding up Court to decide all suits by or against the company.
A secured creditor may enforce security interest without a suit and therefore, real rights of secured creditors are protected.
Criminal proceedings or proceedings against directors or officers are not stayed.
Income tax proceedings will continue against the liquidator.
The Stacking Order of Priorities
The debts due as workmens dues and the claims of the secured creditors sacrificed to workmen have an overriding preferential claim or priority to all debts.[13] The debts payable shall be paid in full unless the assets are insufficient to meet them in which case they shall abate in equal proportions.
In the dying stages of winding up proceedings, there is stacking of priorities running from the secured creditors from out of their assets securing their claims, subject to the pari passu claims of the workmen, further, the costs and expenses of winding up under Section 530 (6), then, the preferential creditors under Section 530 (1), the floating charge holders and the unsecured creditors.
There are other statutory preferential payments for taxes, revenues and cesses, wages or salary for past due prior to winding up or for period not exceeding 4 months when there is a continuing employment for the beneficial winding up and for provident fund, pension and other claims.[14]
Rules of insolvency for valuation of annuities and contingent liabilities as are prescribed by the Provincial Insolvency Act and the Presidency Town Insolvency Act continue to apply.
Also, any transfer of property, delivery of goods, payment, execution or other act relating to the property made, taken or done by or against the company within 6 months prior to commencement of winding up be deemed a fraudulent preference.[15]
Compromises & Arrangements
Apart from the lengthy and time consuming winding up procedure, all the companies liable to be wound up under the Companies Act may resort to the alternative of compromise or arrangement. The Court may make orders to enforce these remedies[16] and where a meeting of creditors or class of creditors or members or any class of members is called upon, certain disclosures shall be made. The orders passed by the Courts include transfer of property to another company and to facilitate amalgamation, merger and demergers. Even reduction of capital to the extent that the capital is lost, or capital is in surplus is permitted.
An Analysis
The institution of BIFR has hardly satisfied the call for revival and rehabilitation of sick industrial undertakings and SICA has proved to be a complete failure. The lenders i.e. the banks and financial institutions, find SICA to be the biggest obstacle on their road map to recovery of dues. The existing legal framework of corporate insolvency faces several follies, which may be rectified once the proposed amendments are notified in the Official Gazette.
Procedural delays
There are inherent defects both, procedural and legal in proceedings before BIFR. The BIFR takes nearly one year to determine whether a company is sick. Thereafter, it takes around one year to formulate revival strategy. Consideration of the same also takes substantial time since banks and financial institutions have their own hierarchy in decision making, leading to avoidable delays. The decisions by the banks are also neither transparent, nor subject to judicial review. By the time decisions are taken and communicated, the plan, which had been conceived, has lost its viability resulting in failure of revival schemes even after sanction.
Lack of timely commencement of proceedings
Under the existing law, a company can approach the BIFR for adopting steps for its revival, on erosion of its entire net worth. The erosion of entire net worth is too late a stage to attempt restructuring as by the time the net worth is eroded the company is too sick to be revived and has lost its resilience to restructure and revive itself.
Poor enforcement mechanism
The mechanism for its implementation is so poor that violations take place fearlessly leaving no fear for law. The misuse of the said forum in making an entry by manipulating must be curbed by strict penal consequences for such misuse, which should be demonstrably used to ensure that no entity attempts to misuse these provisions. However, this aspect and solution to this problem has to be found out in the proposed legislation.
Misuse of protection against recovery proceedings
Under SICA, an automatic stay operates against all kind of recovery and distress proceedings against all creditors once the reference filed by the company is registered. This is the principal drawback of the existing legislation as this has led to BIFR becoming a haven for defaulting companies. Erring debtors have misused SICA to seek protection and moratorium from recovery proceedings. The companies are able to enter easily into the reference, sometimes by manipulating their accounts to reflect net worth erosion and are then able to attract immunity against the recovery action by the creditors and this benefit is then attempted to be perpetuated. Registration of reference is dependent upon the erosion of net worth and this can be achieved by accounting manipulations. The provisions for suspension of legal proceedings are misused and perpetuated.
This problem arises due to the fact that unscrupulous promoters enter into the process of rehabilitation by manipulating sickness; take undue benefits arising out of delay in decision making of BIFR. If the reference is rejected, a fresh reference is filed with respect to accounts for the next year and the cycle goes on endlessly. There is no fear of reprisal or punitive action against the companies indulging in this malpractice.
Lack of extra territorial jurisdiction
Indian insolvency laws do not have any extra-territorial jurisdiction, nor do they recognize the jurisdiction of foreign courts in respect of branches of foreign banks operating in India. Therefore, if a foreign company is taken into liquidation outside India, its Indian business will be treated as a separate matter and will not be automatically affected unless an application is filed before an insolvency Court for winding up of its branches in India.
The recommendations of the Eradi Committee have been translated into the Companies (Amendment) Bill, 2001 and the Sick Industrial Companies (Special Provisions) Repeal Bill, 2001 to mend these defects in the existing laws and the end result being tribunalization of justice. The Companies (Amendment) Bill, 2001 proposes amendment of Article 323B of the Constitution of India and provisions of Part VII of the Companies Act, 1956 for setting up of a National Company Law Tribunal (NCLT) and its Appellate Tribunal. The Bill proposes repeal of SICA and abolition of Company Law Board.
Though tribunalisation of justice is now a recognised trend, the Indias experiences with Tribunals have nothing to boast about. They have largely failed to serve the purpose with which they are set up. NCLT would be burdened with workload of enormous magnitude and in the process would be likely to lose focus on revival and rehabilitation of sick entities. Lastly, the misuse of the said forum in making an entry by manipulating/feigning sickness must be curbed by strict penal consequences for such misuse, which should be demonstrably used to ensure that no entity attempts to misuse these provisions. However, this aspect and solution to this problem has to be found out in the proposed legislation.
At present the Government is considering the adoption of UNCITRAL Model Law on Cross-Border Insolvency to meet the demands of globalisation of economy and to deal with international insolvency. This will radically change the orientation of Indian law and make it suitable for dealing with the challenges arising from globalisation and increasing integration of Indian economy with the world economy.
The increasing incidence of cross-border insolvencies reflects the continuing global expansion of trade and investment. However, national insolvency laws have by and large not kept pace with the trend, and they are often ill equipped to deal with cases of a cross-border nature. This frequently results in inadequate and inharmonious legal approaches, which hamper the rescue of financially troubled businesses, are not conducive to fair and efficient administration of cross-border insolvencies, impede the protection of the assets of the insolvent debtor against dissipation, and hinder maximisation of the value of those assets.[17]
While drafting the substantive and procedural rules of bankruptcy, international standards for both national and cross-border insolvency should be taken into consideration which, based on Indian situation, should be suitably incorporated.
Conclusion
In the process of deregulation and liberalization, number of restrictions on undertaking industrial activities has been withdrawn and relaxed. There is a need to take the process of liberalization a step further and recognize that so long as a company is acting in the interest of shareholders and otherwise observing the law of the land it should have the freedom to manage its affairs, merge, amalgamate, restructure and reorganize or otherwise plan its affairs as it considers best in the interest of the stakeholders. Interference by the Government or court or any tribunal should only be in the event of any detriment to the shareholders or under the Competition Act to prevent monopolies or restrictive trade practices. While undertaking reforms in the Insolvency Laws there is a need to change the focus from strict regulation of the activities of companies to granting freedom to the industry in conducting its business activities and lay down norms for protection of interest of stakeholders.

HEC set to resume social projects

Ranchi, Nov. 13: With preparations afoot to commemorate its golden jubilee year on November 15, the Heavy Engineering Corporation Ranchi (HEC) today promised that it would resume funding schools and colleges, revamp its existing hospital into a multi-speciality centre and work towards setting up of a medical college.
“HEC has been forced to put on hold many of its social projects owing to its dismal financial liquidity. That does not mean that we have shelved our responsibilities altogether. The account books are already on the right tracks . As soon as the financial reserves of the corporation improves, it stands committed to usher in a golden era for Ranchi and the state,” HEC director(personnel) M.R. Venugopal told The Telegraph.
Venugopal said that HEC had been funding many of the schools established on its sprawling campus in the Dhurwa besides carrying out a number of welfare programmes in the surrounding villages. The corporation was also funding generously the plant hospital which was regarded as one of the best in Ranchi not very long ago.
However, Venugopal appealed to all employees and trade unions to cooperate with the corporation, sink all differences and refrain from resorting to agitation and join hands to ensure a rapid turnaround of the company.
Set up in 1958 as the mother of all industries, to aid setting up of one steel plant in the country under every five year plan, the corporation was referred to Board for Industrial and Financial Reconstruction (BIFR) twice for perpetually running into losses. Finally in 2005, BIFR ordered a permanent closure of HEC and initiation of liquidation proceedings.
Things have finally begun to look up for HEC with the corporation recording net profits since 2006 onwards in addition to securing record work orders from Steel Authority of India, Coal India, Neelachal Ispat, ISRO and the railways and defence sector.
In September this year, acknowledging HEC's persistent efforts at a complete turnaround, the Centre accorded its assent for a complete financial restructuring that included writing off the central loans and raising HEC’s cash credit limits by Rs 100 crore, Venugopal said.

NTC to shut down three textile mills

The National Textile Corporation (NTC) has decided to close its two textile units in Punjab and one in Rajasthan. This decision comes in the wake of the approval of Industrial Board of Financial Reconstruction (BIFR) which has concluded twelve NTC mills to be unviable for operations and approved closure of the same.The mills are Kharar Textile Mills, Kharar and Suraj textile mills, Malout, both in Punjab and Shri Bijay Cotton Mills in Bijaynagar, Rajasthan. The Chairman cum Managing Director of NTC has written to the Labour Ministry informing about the closure with an assurance that the sacked employees would be given very attractive retirement terms. This is the second mill of NTC to be closed in Kharar after the closure of the Panipat Woolen Mills in 2003. These closures come contrary to statements made by the Prime Minster assuring the country of safeguarding interests of employees in public and private sector companies due to recessionary trends, a fall out of the global financial crisis

The National Textile Corporation (NTC) has decided to close its two textile units in Punjab and one in Rajasthan. This decision comes in the wake of the approval of Industrial Board of Financial Reconstruction (BIFR) which has concluded twelve NTC mills to be unviable for operations and approved closure of the same.The mills are Kharar Textile Mills, Kharar and Suraj textile mills, Malout, both in Punjab and Shri Bijay Cotton Mills in Bijaynagar, Rajasthan. The Chairman cum Managing Director of NTC has written to the Labour Ministry informing about the closure with an assurance that the sacked employees would be given very attractive retirement terms. This is the second mill of NTC to be closed in Kharar after the closure of the Panipat Woolen Mills in 2003. These closures come contrary to statements made by the Prime Minster assuring the country of safeguarding interests of employees in public and private sector companies due to recessionary trends, a fall out of the global financial crisis

Liquidity crunch likely to delay lifeboat for central PSUs

NEW DELHI: The revival process of 83 central public sector enterprises (CPSEs) is likely to be delayed due to the liquidity crunch. Public sector banks have said that they would not be in position to participate in bailing them out by waiving interests and infusing fresh capital. The government has approved Rs 9192.69 crore bailout package to revive 32 CPSEs. The package has cash assistance of Rs 2,013 crore and non-cash assistance of Rs 7,179.69 crore. The package has been extended to the sick firms on recommendation of the Board for Reconstruction of Public Sector Enterprise (BRPSE). The latest setback has come for Mining & Allied Machinery Corp (MAMC), which owes Rs 520.68 crore to State Bank of India (SBI). The bank has rejected its application for interest waiver. “Traditionally, PSU banks have been lenient with sick PSUs and have been offering loans at considerably lower interest rates. They also waived off interests in case companies went sick. However, due to the financial crisis, banks are facing liquidity crunch,” an official in the ministry of heavy industries said. Currently, there are 29 PSUs under the ministry that have been declared sick. The refusal to bail out ailing PSUs forced the government to divest up to 74% stake in HMT Bearings. “It’s not that the banks are asking for higher interest rates from PSUs. Already, we take into account that the company is sick and under financial strain. However, given the current situation, it is not possible to offer freebies like full waiver of interest charges or repayment of principal amount only after the company has turned profit making,” an SBI official said. The government had recommended that the revival of sick PSUs should be taken by the concerned administrative ministry and it should prepare a financial and business restructuring plan. The revival scheme includes waiver of loan and interest, conversion of loan into equity, fresh cash infusion and change of management. Some companies such as Easter Coalfields, Praga Tools and Hindustan Antibiotics for which the revival scheme was approved have started making profit since the last financial year. The PSUs are planning to request banks to spread their loan period over a longer term and allow part-payment of the interest if the full outstanding amount cannot be waived off.

BRPSE seeks bigger role for DPE

In view of the delay in taking the proposals for revival of PSUs to the Cabinet for approval, the Board for Reconstruction of Public Sector Enterprises has requested the government to enhance the role and responsibilities of the department of public enterprises (DPE).
The DPE works as the secretariat to the board while the responsibility to obtain Cabinet approval for revival package of a PSU lies with its administrative ministry.
The board on Wednesday unanimously decided to request the government to hand over the task to DPE, sources said.

HMT Bearings likely to be referred to BRPSE soon

The department of heavy industries is set to take HMT Bearings to the Board for Reconstruction of Public Sector Enterprises (BRPSE) shortly. HMT Bearings had posted the lowest accumulated losses among HMT group of companies in 2003-04.
The department’s move is in line with the government’s policy as outlined in the mandate for BRPSE - that revival of only viable PSEs need to be attempted, and capital infusion to units that are unlikely to regain health, should be avoided.
HMT group of public sector undertakings (PSUs) had reported total accumulated losses of about Rs 1290 crore last year. HMT, which was divided into five separate units in 2000 has only one profit-making concern - HMT International, which recorded a turnover of about Rs 20 crore in 2003-04.
HMT Bearings recorded the least accumulated losses of Rs 16 crore, out of all the concerns. The maximum accumulated losses have been recorded by HMT Watches at Rs 415 crore and its 2,200 employees have not received any salary since August 2004. The government had injected some funds in 2002, but the PSU is still in the red.
The company suffers from severe domestic competition which it is unable to meet. “Its machinery is around 35 years old,” sources say. Thus, reviving the company is not going to be easy and it also now depends on how much funds the government has to adhere to its commitment to revive PSUs rather than winding them up.
HMT Ltd, which is engaged in the production of machine tools, watches, tractors, printing machinery etc, has accumulated losses of Rs 400 crore. Its 2,500 employees have, however, been receiving their salaries.
The Hindustan Machine Tools, which has about 4,500 employees has accumulated losses of about Rs 380 crore. The company has received Rs 40 crore budgetary support and all statutory dues of the company have been cleared this month.
“However, it is HMT Chinar Watches which needs utmost attention,” sources point out. It has accumulated losses worth Rs 80 crore and has had no production for the past one year. “Though its 650 employees received salaries till August 2004, no production has taken place,” sources said.

Corporate Insolvency Laws

Keeping in mind the important points about income tax india, we hope this article on income tax india proves to be very informative to you. Use these points well.
income tax india For Your Reading PleasureCorporate Insolvency Laws in IndiaWith the globalisation of the Indian economy, the sphere of Corporate Insolvency Laws has widened collosally.
With the globalisation of the Indian economy, the sphere of Corporate Insolvency Laws has widened collosally.
With the globalisation of economy, the issues relating to corporate insolvency have assumed greater significance and a need has been felt for long for bringing about reforms in this branch of law. Moreover, with the Indian economy having been opened up for investment by foreign creditors and, internationally, the Indian corporate also making investments in companies outside, the realm of cross-border insolvency law has multiplied colossally.
In the year 1999, the Government of India set up a High Level Committee headed by Justice V.B. Balakrishna Eradi,[2] a superannuated Judge of Supreme Court of India for remodeling the existing laws relating to insolvency and winding up of companies and bringing them in time with the international practices in this field.
Recommendations of the Committee
The Committee recommended that:
The jurisdiction, power and authority relating to winding up of companies should be vested in a National Company Law Tribunal which should be vested with the functions and power with regard to rehabilitation and revival of sick industrial companies, a mandate presently entrusted with BIFR under SICA.
The 1956 Act should be suitably amended to take the power away from High Court and the transfer of the pending winding up proceedings to the Tribunal.
The adoption of the international trend in law relating to corporate bankruptcy, namely, sell the assets first as quickly as possible, and relegate to a later stage the adjudication of claims and distribution of proceeds.
An in depth assessment of the office of Official Liquidators, in view of inadequate and incompetent manpower and absence of latest office equipments and technologies.
A liquidation Committee consisting of creditors of the company on the lines of Section 141 of the Insolvency Act, 1986 of UK[3] be set up to assist the Liquidator.
The repeal of SICA and recommended the ameliorative, revival and reconstructionist procedures obtaining under it to be reintegrated in a suitably amended form in the structure of the 1956 Act except that there is no stand still provision like Section 22 of SICA.
Part VII of the Companies Act, 1956 should incorporate a new substantive provision to adopt the UNCITRAL Model Law[4] as approved by the United Nations and the Model Law itself may be incorporated as a Schedule to the Companies Act, 1956, which shall apply to all cases of Cross-Border insolvency.
Adopt the necessary principles enunciated under the heading "Legal Framework", "Orderly and Effective Insolvency Procedures Key issues", [5] to bring the provisions of the Companies Act, 1956 in line with international practices.
The Committee completed its work and submitted its report to the Central Government in the year 2000.In August 2001, the Companies (Amendment) Bill, 2001 and the Sick Industrial Companies (Special Provisions) Repeal Bill, 2001 were introduced in the Parliament of India.
The Bills, if passed in their present form will bring the curtains down on the Sick Industrial Companies (Special Provisions) Act, 1985 and will restructure the Companies Act, 1956 in a big way leading to the new regime of tackling corporate rescue and insolvency procedures in India with a view to creating confidence in the minds of investors, creditors, labour and shareholders.
Scheme of Insolvency Laws
The stream of insolvency laws can be segregated chiefly under two heads: Personal Insolvency, which deals with individuals and partnership firms governed by Provisional Insolvency Act, 1920 and Presidency Towns Insolvency Act, 1908 and Corporate Insolvency, whose consequence is winding up of the company under the Companies Act, 1956.
In the process of liberalization, deregulation and adopting market economy, India is experiencing a massive growth of retail loans to individuals, housing loans and credit card users. On account of phenomenal rise in retail lending it will be necessary in the near future to give a re-look at the personal insolvency laws to ensure that any insolvency proceedings against individuals are also expeditiously decided.
However, the basic tenets of corporate insolvency can be classified as: restoring the debtor company to profitable trading where it is practicable; to maximize the return to creditors as a whole where the company itself cannot be saved; to establish a fair and equitable system for the ranking of claims and the distribution of assets among creditors, involving a redistribution of rights; and to provide a mechanism by which the causes of failure can be identified and those guilty of mismanagement brought to book; placement of the assets of the company under external control; substitution of collective action for individual pursuits; avoidance of certain transactions and fraudulent conveyances, dissolution and winding up etc.
In context of corporate laws, the word insolvency has neither been used nor defined. However, Section 433 (e) covers a company, which is unable to pay its debts, and thus constitutes a ground for winding up of the company. Inability to pay its debts would be a case where, a company's entire capital is lost in heavy losses and no accounts are prepared and filed and no business is done for one year. In such circumstances, the Registrar of Companies makes out a case of inability to pay debts. These debts however, would only include debts, incurred after the legal incorporation of the Company. Inability to pay debts has even been amplified in Section 434 wherein, a creditor with a due of Rs. 500 [6] or more serves a demand by registered post and the company neglects to pay, secure or compound the same in 3 weeks, in cases where the execution of a decree returned unsatisfied and also where the Court is otherwise satisfied that the company is unable to pay its debts.
Sick Industrial Companies
A sick industrial company means an industrial company (being a company registered for not less than five years and employing fifty or above workmen), which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth.[7] Net worth has been defined as the sum total of the paid up capital and free reserves.[8]
Sick Industrial Companies Act requires that when an industrial company has become a sick industrial company, the Board of Directors of the said company shall, within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which a company has become a sick industrial company, make a reference to the Board for Industrial and Financial Reconstruction for determination of the measures which shall be adopted with respect to the company. However, if the Board of Directors has sufficient reasons even before finalisation of accounts to form an opinion that the company has become a sick industrial company, it shall, within sixty days after it has formed such an opinion, make a reference to the BIFR.[9]
Moreover, SICA is basically and predominantly remedial and ameliorative in so far as it empowers the quasi judicial body, Board for Industrial and Financial Reconstruction to make appropriate measures for revival and rehabilitation of potentially viable sick industrial companies and for liquidation of non-viable companies. But, where the BIFR comes to the conclusion that it is not possible to revive the company and that it is just and equitable that the company should be wound up, it shall record and forward its opinion to the concerned High Court, on the basis of which the Court, may order winding up of the company and may proceed and cause to proceed with the winding up of the sick industrial company in accordance with the provisions of the Companies Act, 1956.[10]
If a corporate debtor is in difficulty it is likely that he would approach the senior lenders for some rehabilitation, waiver of compound or penal interest, funding of the interest dues on a zero coupon rate or at concessional terms. It would prepare a scheme of arrangement or rehabilitation plan with the assistance of experts or an advisor, which it would submit, to the senior lenders.
RBI has police guidelines for revival of sick industrial companies and the role to be played by lead institutions or Operating Agencies appointed by the SICA for reviving industries declared to be sick under SICA. When a lender appoints an outside expert, the Court of the Board for Industrial & Financial Reconstruction (BIFR) would normally have to intervene to render help to such expert or advisor to collect information on an unrestricted basis. Depending upon the extent of the industrial sickness and the accumulated arrears or losses, it is likely that the records of the company would be in disarray. In such circumstances reconstruction of accounts on the basis of actual transactions is laborious and difficult to achieve. Large accounting firms render costly services and lenders are wary of appointing high cost expensive services in a rehabilitation scheme. Usually the lenders, if they are public financial institutions rely upon their own in-house expertise and staffing to ferret information.
Under the provisions of Companies Act, 1956,[11] several measures have been prescribed for revival of a company. Even in the case of non-scheduled industries, not governed by Schedule I of the Industries (Development and Regulation) Act, 1951 and consequently, under the SICA; the provisions of Section 391 & 394 of the Companies Act for proposing a scheme of rehabilitation and reconstruction is normally recoursed.
Institutional Machinery
High Court is the Court of proper jurisdiction for handling winding up proceedings and power sought to be transferred to the NCLT with the onset of reforms by way of a proposed Bill. The official liquidator is the liquidator in compulsory winding up. Where a winding up order has been made or where a Provisional Liquidator has been appointed, the Liquidator shall take into his custody or under his control all the property, effects and actionable claims to which the company is or appears to be entitled. All the property and effects of the company shall be deemed to be in the custody of the Court as from the date of the order for the winding up of the company.[12] The Creditors Committee on inspection may be appointed .In relation to corporate insolvency, the official liquidator as an officer of the Court or the Court receiver as an officer of the Court are dealing with insolvency related procedures.
Pursuit of Individual Claims
In the sphere of insolvency laws in India, where all the suits are stayed on making of the winding up order, parties may pursue individual claims in certain circumstances.
Winding up procedure implies all personal rights be converted into right to prove debt in winding up.
Under section 446, stay on all suits and the winding up Court to decide all suits by or against the company.
A secured creditor may enforce security interest without a suit and therefore, real rights of secured creditors are protected.
Criminal proceedings or proceedings against directors or officers are not stayed.
Income tax proceedings will continue against the liquidator.
The Stacking Order of Priorities
The debts due as workmens dues and the claims of the secured creditors sacrificed to workmen have an overriding preferential claim or priority to all debts.[13] The debts payable shall be paid in full unless the assets are insufficient to meet them in which case they shall abate in equal proportions.
In the dying stages of winding up proceedings, there is stacking of priorities running from the secured creditors from out of their assets securing their claims, subject to the pari passu claims of the workmen, further, the costs and expenses of winding up under Section 530 (6), then, the preferential creditors under Section 530 (1), the floating charge holders and the unsecured creditors.
There are other statutory preferential payments for taxes, revenues and cesses, wages or salary for past due prior to winding up or for period not exceeding 4 months when there is a continuing employment for the beneficial winding up and for provident fund, pension and other claims.[14]
Rules of insolvency for valuation of annuities and contingent liabilities as are prescribed by the Provincial Insolvency Act and the Presidency Town Insolvency Act continue to apply.
Also, any transfer of property, delivery of goods, payment, execution or other act relating to the property made, taken or done by or against the company within 6 months prior to commencement of winding up be deemed a fraudulent preference.[15]
Compromises & Arrangements
Apart from the lengthy and time consuming winding up procedure, all the companies liable to be wound up under the Companies Act may resort to the alternative of compromise or arrangement. The Court may make orders to enforce these remedies[16] and where a meeting of creditors or class of creditors or members or any class of members is called upon, certain disclosures shall be made. The orders passed by the Courts include transfer of property to another company and to facilitate amalgamation, merger and demergers. Even reduction of capital to the extent that the capital is lost, or capital is in surplus is permitted.
An Analysis
The institution of BIFR has hardly satisfied the call for revival and rehabilitation of sick industrial undertakings and SICA has proved to be a complete failure. The lenders i.e. the banks and financial institutions, find SICA to be the biggest obstacle on their road map to recovery of dues. The existing legal framework of corporate insolvency faces several follies, which may be rectified once the proposed amendments are notified in the Official Gazette.
Procedural delays
There are inherent defects both, procedural and legal in proceedings before BIFR. The BIFR takes nearly one year to determine whether a company is sick. Thereafter, it takes around one year to formulate revival strategy. Consideration of the same also takes substantial time since banks and financial institutions have their own hierarchy in decision making, leading to avoidable delays. The decisions by the banks are also neither transparent, nor subject to judicial review. By the time decisions are taken and communicated, the plan, which had been conceived, has lost its viability resulting in failure of revival schemes even after sanction.
Lack of timely commencement of proceedings
Under the existing law, a company can approach the BIFR for adopting steps for its revival, on erosion of its entire net worth. The erosion of entire net worth is too late a stage to attempt restructuring as by the time the net worth is eroded the company is too sick to be revived and has lost its resilience to restructure and revive itself.
Poor enforcement mechanism
The mechanism for its implementation is so poor that violations take place fearlessly leaving no fear for law. The misuse of the said forum in making an entry by manipulating must be curbed by strict penal consequences for such misuse, which should be demonstrably used to ensure that no entity attempts to misuse these provisions. However, this aspect and solution to this problem has to be found out in the proposed legislation.
Misuse of protection against recovery proceedings
Under SICA, an automatic stay operates against all kind of recovery and distress proceedings against all creditors once the reference filed by the company is registered. This is the principal drawback of the existing legislation as this has led to BIFR becoming a haven for defaulting companies. Erring debtors have misused SICA to seek protection and moratorium from recovery proceedings. The companies are able to enter easily into the reference, sometimes by manipulating their accounts to reflect net worth erosion and are then able to attract immunity against the recovery action by the creditors and this benefit is then attempted to be perpetuated. Registration of reference is dependent upon the erosion of net worth and this can be achieved by accounting manipulations. The provisions for suspension of legal proceedings are misused and perpetuated.
This problem arises due to the fact that unscrupulous promoters enter into the process of rehabilitation by manipulating sickness; take undue benefits arising out of delay in decision making of BIFR. If the reference is rejected, a fresh reference is filed with respect to accounts for the next year and the cycle goes on endlessly. There is no fear of reprisal or punitive action against the companies indulging in this malpractice.
Lack of extra territorial jurisdiction
Indian insolvency laws do not have any extra-territorial jurisdiction, nor do they recognize the jurisdiction of foreign courts in respect of branches of foreign banks operating in India. Therefore, if a foreign company is taken into liquidation outside India, its Indian business will be treated as a separate matter and will not be automatically affected unless an application is filed before an insolvency Court for winding up of its branches in India.
The recommendations of the Eradi Committee have been translated into the Companies (Amendment) Bill, 2001 and the Sick Industrial Companies (Special Provisions) Repeal Bill, 2001 to mend these defects in the existing laws and the end result being tribunalization of justice. The Companies (Amendment) Bill, 2001 proposes amendment of Article 323B of the Constitution of India and provisions of Part VII of the Companies Act, 1956 for setting up of a National Company Law Tribunal (NCLT) and its Appellate Tribunal. The Bill proposes repeal of SICA and abolition of Company Law Board.
Though tribunalisation of justice is now a recognised trend, the Indias experiences with Tribunals have nothing to boast about. They have largely failed to serve the purpose with which they are set up. NCLT would be burdened with workload of enormous magnitude and in the process would be likely to lose focus on revival and rehabilitation of sick entities. Lastly, the misuse of the said forum in making an entry by manipulating/feigning sickness must be curbed by strict penal consequences for such misuse, which should be demonstrably used to ensure that no entity attempts to misuse these provisions. However, this aspect and solution to this problem has to be found out in the proposed legislation.
At present the Government is considering the adoption of UNCITRAL Model Law on Cross-Border Insolvency to meet the demands of globalisation of economy and to deal with international insolvency. This will radically change the orientation of Indian law and make it suitable for dealing with the challenges arising from globalisation and increasing integration of Indian economy with the world economy.
The increasing incidence of cross-border insolvencies reflects the continuing global expansion of trade and investment. However, national insolvency laws have by and large not kept pace with the trend, and they are often ill equipped to deal with cases of a cross-border nature. This frequently results in inadequate and inharmonious legal approaches, which hamper the rescue of financially troubled businesses, are not conducive to fair and efficient administration of cross-border insolvencies, impede the protection of the assets of the insolvent debtor against dissipation, and hinder maximisation of the value of those assets.[17]
While drafting the substantive and procedural rules of bankruptcy, international standards for both national and cross-border insolvency should be taken into consideration which, based on Indian situation, should be suitably incorporated.
Conclusion
In the process of deregulation and liberalization, number of restrictions on undertaking industrial activities has been withdrawn and relaxed. There is a need to take the process of liberalization a step further and recognize that so long as a company is acting in the interest of shareholders and otherwise observing the law of the land it should have the freedom to manage its affairs, merge, amalgamate, restructure and reorganize or otherwise plan its affairs as it considers best in the interest of the stakeholders. Interference by the Government or court or any tribunal should only be in the event of any detriment to the shareholders or under the Competition Act to prevent monopolies or restrictive trade practices. While undertaking reforms in the Insolvency Laws there is a need to change the focus from strict regulation of the activities of companies to granting freedom to the industry in conducting its business activities and lay down norms for protection of interest of stakeholders.

HEC may build N-equipment through JV route

NEW DELHI: Heavy Engineering Corporation (HEC), the sick public sector company that is now back on its feet, is nursing a nuclear ambition. The PSU
is planning to foray into the manufacture of nuclear equipment with a global firm under the joint venture (JV) route. According to HEC sources, the company, which was established in 1958 as the largest integrated engineering industrial complex in India, is in talks with General Electric (GE), Alstom and Areva, among others, for the proposed JV. HEC would hold a majority stake in the JV. Only recently, the Ranchi-based company joined hands with Bharat Heavy Electricals (Bhel) for a casting and forging venture. “We’re certainly looking for diversification into the nuclear equipment business. However, it’s too early to share the details,” HEC chairman and managing director JK Pillai said. The company will soon be signing a memorandum of understanding (MoU) with power major NTPC, whereby HEC will handle NTPC’s ash and coal handling plants. “There is a synergy between the two public sector companies. We’ll soon be signing the MoU with NTPC in this regard,” Mr Pillai said. “We’ll also be expanding our business in the areas of defence and space. We are looking for public and private partners in these two areas,” he added. The company supplied equipment for Chandrayaan-I, India’s first moon mission and is manufacturing the biggest satellite launch pedestal for the Indian Space Research Organisation (Isro) for its GSLV MK-III project. There has been a turnaround in the fortunes of HEC in the last two years. After more than a decade of poor performance and being referred to the Board for Industrial and Financial Reconstruction (BIFR), the company bounced back and reported a net profit of Rs 2.86 crore in the year 2006-07. It achieved gross sales of Rs 416.28 crore during the financial year 2007-08 and a net profit of Rs 3.46 crore.

BRPSE board hints at tough revival policy for sick units

The Board for Reconstruction of Public Sector Enterprises (BRPSE) set up four years ago by the UPA government, to suggest among other things, revival strategies for sick public sector units, has finally begun taking some hard decisions.
The Board is exploring the possibility of a joint venture (JV) initiative for chronically sick Hindustan Cables Limited (HCL) either with a public or private sector enterprise, failing which the government would take up complete disinvestment of HCL after clearing the balance sheet of the company.
In its first three years of existence, under Prahlad K Basu’s leadership, the Board had recommended thousands of crores worth write-offs and fresh loans to 51 out of the sick 52 PSUs it was given charge of.
The Board had recommended closure in the case of just one PSU, Bharat Opthalmic Glass. An exasperated ministry of heavy Industries and public enterprises replaced Basu with former revenue secretary Nitish Sengupta in December 2007.
Minister of state for heavy industries and public enterprises Raghunath Jha told Parliament on Thursday the Board had approached some PSUs which have synergies with HCL for joint venture possibilities, but they did not respond.
The BRPSE has also published advertisements inviting expression of interest (EOI) for ventures with HCL or its individual units.
Companies like Mineral and Metals Trading Corporation and Bharat Electronic Ltd have shown interest in purchasing land in the Hyderabad plant of the ailing HCL. Some of the other companies that have expressed interest in buying or developing land and infrastructure in the Hyderabad unity of HCL are National Mineral Development Corporation and Engineering Projects ( India ) Ltd. Rashtriya Ispat Nigam Ltd said that they are interested in JV partnership and has sought six months time to submit a concrete proposal. But if these don’t translate into a feasible transaction, the Board would recommend a complete disinvestment of the PSU.
Jha also said that the Centre has approved a revival package for Andrew Yule & Co. Limited (AYCL) and as part of the package, AYCL would repay the loan granted to it by divesting its 26% stake in Tide Water Oil Company Limited. The disinvestment process is in the initial stages and EOIs from companies have not been invited yet. There are about 83 sick PSEs which have been referred to the BRPSE of which 32 PSEs have been given revival package

Kirloskar Brothers acquires The Kolhapur Steel Ltd

Kirloskar Brothers Ltd has now announced with reference to the earlier announcement dated on September 19, 2007, regarding taking over the management of The Kolhapur Steel Ltd (TKSL), that in accordance with the orders passed by the Honourable Board for Industrial and Financial Teconstruction (BIFR) on May 14, 2008.

The unsecured loan of the existing promoters was converted by allotment of equity shares of TKSL.

Further, funds infused by Kirloskar Brothers Ltd for revival of TKSL, have been appropriated by allotment of equity shares of TKSL to Kirloskar Brothers Ltd (KBL) - the new promoter.

KBL has acquired all the Equity shares of Rs 10/- each of The Kolhapur Steel Ltd from the existing promoters by executing a Share Purchase agreement on August 02, 2008 and as per the said orders passed by BIFR.

The share capital of TKSL has been reduced by reducing the nominal value of equity shares from Rs 10/- to Re 1/- each.

As a result, KBL holds 95.95% equity shares of paid up capital of The Kolhapur Steel Ltd and TKSL has become a subsidiary Company of KBL with effect from August 02, 2008.

HC sends Kanoria Jute back to BIFR

Revival of Kanoria Jute Mill has got a glimmer of hope as Calcutta High Court today asked Board for Industrial and Financial Reconstruction (BIFR), which has earlier rejected a revival package, to reconsider the matter.

Justice Jayanta Biswas sent back the matter to BIFR for fresh consideration after allowing a writ petition by a workers' union that challenged the BIFR order, which was also upheld by Appellant Authority for Industrial and Financial Reconstruction (AAIFR).

BIFR had rejected a revival package by a promoter after he failed to prove his bonafide and deposit a certain amount with a bank, following which the jute mill, which employs over 1,500 workers, went into liquidation.
Kanoria Jute Mill Sangrami Sramik Union, a workers' union, went to AAIFR appealing against the order. The appellate body also rejected the appeal holding that revival of the mill was not possible and upheld the BIFR order for liquidation.

The union moved a writ petition before the high court challenging the BIFR and AAIFR orders claiming that the rejuvenation of the mill was possible with a proper revival package.

Indian Bank, the prime lenders of the mill, opposed the plea and prayed for its liquidation. Hearing all the parties, Justice Biswas sent it back to BIFR for reconsideration.

NTC Revival Plans

Twenty two mills will be modernized by National Textiles Corporation (NTC) itself by inducting new machineries, rationalization of manpower, capital restructuring etc. Out of forty mills, remaining 18 mills will be modernized through Joint Venture route. Private partners to run 5 of these mills have been finalized. This was stated by the Minister of State for Textiles, Shri E.V.K.S. Elangovan, in the Rajya Sabha today, in a written reply to a question by Shri Amir Alam Khan.

Giving further details of the Modified Rehabilitation Scheme, 2006 approved by BIFR and Group of Ministers (GOM), the Minister informed the House that out of the total 52 mills, 12 mills have been identified for further closure where there was no production activity and most of the employees opted for benefits of Modified Voluntary Retirement Scheme (MVRS). Out of these, 2 mills have been closed, raising the number of closed mills from 65 to 67.

National Textiles Corporation (NTC) was incorporated in 1968 with the main objective of managing the affairs of 16 sick textile mills taken over by the Government. NTC took over more sick textile mills under 3 Nationalization Acts. (1974, 1986 & 1995), raising its number upto 119 mills in 1995. As per the Rehabilitation Scheme, 2002, the Board for Industrial and Financial Reconstruction (BIFR) approved revival of 53 viable mills and closure of 66 unviable mills. 65 unviable mills were closed under the Act. 2 Mills (one viable and one unviable) located in the Union Territory of Puducherry have been transferred to the Government of Puducherry. With this, NTC was left with 117 sick mills, i.e. 52 viable mills and 65 closed mills.

Finmin opposes Indian Drugs and Pharmaceuticals revival plan

NEW DELHI: The finance ministry has opposed the chemicals and fertilisers ministry’s proposal to spend Rs 4,500 crore of taxpayer’s money to revive the Indian Drugs and Pharmaceuticals (IDPL), an anaemic state-owned company with massive real estate holdings.

The finance ministry has instead suggested that it would be more desirable if the amount is used to set up new sophisticated manufacturing plants. This amount would be sufficient to set up about 20 manufacturing units at a cost of more than Rs 200 crore per company, the finance ministry has said. The revival plan was earlier approved by the Board for Reconstruction of Public Sector Enterprises (BRPSE) and a group of ministers is now looking into it.

The finance ministry is of the view that earlier attempts to revive PSUs by infusion of fresh funds have not been successful. Revival of sick PSUs is a politically-sensitive issue and is often not based on sound economics.

The finance ministry is opposed to the plan as merely pumping public money into an archaic structure without a holistic approach will not turn around the company in a competitive environment. Bringing a strategic partner looks a little difficult as a possible private partner may be more interested in the real estate assets of the company than running the drug maker.

The real estate assets of the company at prime locations in Muzaffarpur, Chennai, Bhubaneshwar, Gurgaon, Hyderabad and Rishikesh are estimated to be worth more than the turnover of India’s about Rs 33,000-crore pharma industry. There could be very few buyers like DLF or Reliance, which could afford to buy such property.

If the land is sold, the taxpayer could look forward to malls and other facilities coming up there instead of a drug-manufacturing plant. One idea mooted by industry experts is to let the profit-making joint ventures of the company such as Karnataka Antibiotics & Pharmaceuticals (KAPL) or the Rajasthan Drugs and Pharmaceuticals (RDPL) to manage the loss-making parent company. They said a think-tank should be formed to explore innovative solutions by leveraging the company’s real estate strength.

India - Revival plan launched for Balaramapuram mill

The State-owned Trivandrum Spinning Mill Limited at Balaramapuram, which was under the regime of the official liquidator appointed by the High Court, has been handed over to the Kerala State Textile Corporation (KSTC) as part of a revival plan drawn up by the government.

Industries Minister Elamaram Karim handed over the keys of the institution, popularly known as Balaramapuram Spinning Mill, to KSTC Chairman P. Nandakumar and Managing Director M. Ganesh at a function held at the mill on Tuesday.

The Minister said as per the revival plan, the company would resume production in May which would also coincide with the programmes arranged in connection with the second anniversary of the government.

The company with 25,000 ring spindles used to employ about 500 people and produce two tonnes of yarn per day. However, it became a sick unit in the 90s and was closed down partially in 1998, and totally in 2002. It was taken over by the official liquidator in 2004 as per the orders of the High Court.

Almost all employees had opted for the voluntary retirement scheme (VRS). The court had suggested that the government should submit a specific scheme if it was planning to revive the mill.

Accordingly, the State government submitted a revival scheme which was approved by the High Court. The scheme envisages an investment of Rs.4.37 crore, of which Rs.1.28 crore will be raised by selling some of the assets of the company.

Handed over to Kerala State Textile Corporation

Revival envisages Rs.4.37-crore investment

HOC's excess land to be used for Speciality Chemicals plant

The government today said a value-added plant may be set up on the 500 acre vacant land of Hindustan Organic Chemicals complex at Rasayani in Raigad district of Maharashtra.
Hindustan Organic Chemicals (HOC), a loss-making public sector company, was given a revival of package of Rs 250 crore six months back. HOC has another unit located in Koch, which is making profit.
"We want to use the 500 acre unidolised land in the 1,000 plus acre campus for producing value-added products," Union Chemicals and Fertilisers Minister Ram Vilas Paswan said during his visit to the HOC complex here today.
HOC complex is spread over 1,061 acre in the Raigad district, 50 kilometres from Mumbai.
HOC is planning to produce Speciality Chemicals and has invited expression of interest from private parties for a joint venture.
"We have got some encouraging responses for Expression of Interest invited," HOC's Chairman and Managing Director Arvind S Didolkar said while talking about company's plan to move towards manufacturing of Speciality Chemicals from Commodity Chemicals.
The company's Raigad-based unit is making a loss of around Rs 50 crore per annum, but after the revival package, it is expected to make profit in another 3-4 years.
"The Company has retired all the high cost debt and now we have also started the physical restructuring, which will be completed by 2010-11," Didolkar said.