m/s. shah alloys ltd. summary record of the proceeding - Board for ...

Case No..13/2010
M/S Shah Alloys Ltd
BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION
CASE NO. 1 3/2010 : M/S. SHAH ALLOYS LTD.
SUMMARY RECORD OF THE PROCEEDINGS OF THE HEARING HELD
ON 23.04.2012 BEFORE BENCH CONSISTING OF
SHRI NIRMAL SINGH, CHAIRMAN AND SHRI Y.K.GAIHA, MEMBER
BENCH
I
Present
M/s. Shah Alloys Ltd.
UBI
SBI
BOB
IDBI
PNB
BOM
Karur Vysya Bank Ltd.
OBC
IOB
Name and Designation of the
Representative S/Shri/Ms
Vivek Sibal, Advocate
R.V.Shah, CMD
Dr. H. M. Parikh, Consultant
Yashpal Mehta, Fin. Consultant
B Ghosh, Director
Chandrashekhar Paliwal, AGM
Dhiren Jain, CM
Jay Kan Prasad, DGM
Anil Tiwari, Advocate
J.C.Patel, Chief Manager
Neha Rastogi, Officer
Ranjitha Godbole, GM
Imran Khan, Manager
Surinder Kumar, Sr. Manager
Gaurav Tyagi, Law Officer
A. Gopinath, AGM
M. Balachandran, DGM
N.K. Grover, DCM
Inder Singh, Sr. Manager
*****
1.1 Ba s ed on its a u dited ba la n ce s h eet (ABS) a s on 30.9.2008 M/ s . Shah
Alloys Ltd . filed a referen ce with BIFR u / s 15(1) of SICA. Th e referen ce wa s
ta ken u p for con s idera tion s o a s to determ in e th e s ta tu s of com pa n y s
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Case No..13/2010
M/S Shah Alloys Ltd
s ickn es s on 31.5.2010 a n d 5.7.2010. In th e h ea rin g h eld on 31.8.2010, th e
Ben ch decla red th e com pa n y a s a s ick in du s tria l com pa n y u / s 3(1)(o) of
SICA a n d a ppoin ted Un ion Ba n k of In dia (UBI) a s Opera tin g Agen cy u / s
17(3) of SICA to prepa re a Dra ft Reh a bilita tion Sch em e (DRS) for th e
com pa n y, a s per Section 18 of SICA a n d th e en clos ed gu idelin es , based on
the DRS to be submitted by the company.
1.2 The hearing in the case was held on 30.11.2011(MA) before the Board.
1.3 In the last hearing held on 17.01.2012, the Bench issued the following
directions :-
(i) OA (UBI) to file a copy of TEV Stu dy report to th e Boa rd s office with in
a period of 15 days, with copies to all secured creditors of the company.
(ii) Th e com pa n y to n egotia te with a ll s ecu red creditors for s ettlem en t of
their dues and submit DRS to the OA within 30 days.
(iii) Th erea fter, UBI (OA) to con ven e a join t m eetin g of a ll con cern ed a n d
s u bm it a fu lly tied-u p DRS b efore th e Boa rd s office with in a period of 08
weeks.
(iv) Th e Ben ch Officer, Ben ch -I to delete th e n a m e of J in da l Steel & Power
Ltd from the mailing list, as they are unsecured creditors of the company.
(v) The next hearing in the case will be held on 24.04.2012.
2.1 In toda y s h ea rin g (23.04.2012), th e repres en ta tive of Un ion Ba n k of
In dia (UBI) (OA) s ta ted th a t TEV Stu dy report h a s been received on ly on
16.04.2012. OA (UBI) will convene a joint meeting of all the lenders and will
s u bm it its report with in a period of on e m on th . On a query from the Bench
w h eth er th e com pan y h as en tered in to s ettlem en t of its d ues , th e
repres en ta tive of OA (UBI) s ta ted th a t th ey a re n ot a wa re of a n y s u ch
settlement whether the company has done.
2.2 Th e repres en ta tive of SBI s ta ted th a t th ey h a d filed a n a pplica tion in
which certa in objection were ra is ed. He a dded th a t in th e Con cu rren t
Au ditors Report, it wa s observed th a t th e com pa n y du rin g two qu a rters
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Case No..13/2010
M/S Shah Alloys Ltd
en din g Sep 2011 a n d Dec 2011 h a s pa id Rs .30.6 9 crores to grou p company
(M/ s SAL Steels Ltd). Th e s a id pa ym en t were m a de in two in s ta llm en ts of
Rs .15.00 crores in Sep 2011 a n d a n oth er of Rs .15.69 crores in Dec 2011.
These payments were m a de to M/ s SAL Steels Ltd on a ccou n t of less
con s u m ption of power produ ced by M/ s SAL Steels Ltd. He a dded th a t a s
per th e a greem en t en tered between th e s ick com pa n y a n d M/ s SAL Steels
Ltd in 2005-06, th e s ick com pa n y is requ ired to pa y a tota l a m ou n t of
Rs .62.00 crores for towa rds les s dra wa l of power by th e s ick com pa n y. Ou t
of th is Rs .62.00 crores , th e s ick com pa n y h a s a lrea dy pa id Rs .30.69 crores .
Th e s ick com pa n y did n ot s h a re th is in form a tion a bou t such agreement
between th e s ick com pa n y a n d M/ s SAL Steel Ltd with th e Ba n ks a n d on ly
recen tly on Feb 2012 th is lia bility wa s obs erved th rou gh Con cu rren t
Au ditors report. Th u s , s u ch pa ym en t of du es to grou p com pa n ies a m ou n ts
to divergen ce of fu n ds .
Fu rth er, th e s ick com pa n y h a s in ves ted a pprox
Rs .95.00 crores in M/ s SAL Steel Ltd during 2005-06. However, in term s of
CDR pa ck a ge, M/ s SAL Steel Ltd wa s requ ired to pa y ba ck Rs .15.00 crores
to th e s ick com pa n y every yea r from FY 2010, wh erea s , th e s ick com pa n y
h a s a lrea dy pa id M/ s SAL Steel Ltd a s u m of Rs .30.69 crores . No
permission was taken from the secured creditors. On a qu ery from the Bench
w h eth er S BI w ou ld lik e to file w ritten s ubm is s ion s on th e line of s ubm is s ion s
m ad e in the hearin g, th e repres en ta tive of SBI a greed a n d s ta ted th a t th ey
will file written s u bm is s ion s brin gin g ou t th eir objection s with in a period of
two weeks.
2.3 Th e repres en ta tive of Ba n k of Ba roda (BOB) s ta ted th a t th ey received
th e copy of TEV Stu dy report on ly on 16.04.2012. OA (UBI) be directed to
convene a joint meeting at the earliest.
2.4 Th e repres en ta tive of IDBI s ta ted th a t th e tota l expos u re of a ll the
Ba n ks a n d In s titu tion in th e com pa n y a m ou n ts to Rs .614.00 crores plu s a n
interest thereof. She added that they support the objection raised by SBI on
th e ba s is of Con cu rren t Au ditors Report. Sh e a dded th e en tire tra n s a ction
lea ds to divers ion of fu n ds . Th e com pa n y h a s a lrea dy s ou gh t two
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Case No..13/2010
M/S Shah Alloys Ltd
res tru ctu rin g u n der CDR pa ck a ge i.e. in 2006 a n d 2009. Sh e requ es ted the
Ben ch th a t even th ou gh TEV Stu dy report h a s been received, IDBI requ es ts
th a t a n SIA (Special In ves tiga tive Au dit) be con du cted on th e a ccou n ts of
th e com pa n y on th e lin e of ca s h flow, debts etc. Th e com pa n y is s h owin g
h u ge debts ou t of wh ich a pprox 50% of these debts perta in s to th ree tra de
creditors , wh ich looks like th ey a re group companies or gen eric com pa n y,
wh ich n eeds to be a s certa in ed.
In terven in g, th e ld a dvoca te represen tin g
th e com pa n y s u bm itted IDBI n eed to file a ppropria te MA a pplica tion
rega rdin g th is .
regarding this.
Ben ch observed th a t IDBI ca n a ls o file written s u bm is s ion s
2.5 Th e repres en ta tive of Pu n ja b Na tion a l Ba n k (PNB) s ta ted th a t th ey
had received the copy of TEV Study report on 19.04.2012. PNB will analysis
and submit its comments in the joint lenders meeting.
2.6 Th e repres en ta tive of Ba n k of Ma h a ra s h tra (BOM) s ta ted th a t they
received th e copy of TEV Stu dy report yes terda y a n d will s u bm it its
comments in the joint lenders meeting, after analysis of the report.
2.7 Th e repres en ta tive of Ka ru r Vya s a Ba n k Ltd (KVBL) s ta ted th a t th ey
received the copy of TEV Study report only recently.
2.8 Th e repres en ta tive of Orien ta l Ba n k of Com m erce (OBC) s ta ted th a t
th ey h a d n ot received th e copy of TEV Stu dy report till da te. Th e ld
a dvoca te repres en tin g th e com pa n y s ta ted th a t th e com pa n y h a s a lrea dy
sent to all the creditors. The Bench obs erved th at a copy of TEV S tud y report
to be provided to OBC.
2.9 Th e repres en ta tive of IOB s ta ted th a t th e Ba n k h a s in ves ted in Bon ds
and go by the stand of OA (UBI).
2.10 Th e ld a dvoca te repres en tin g th e com pa n y s ta ted th a t M/ s MECON
Ltd h a s con du cted th e TEV Stu dy a n d s u bm itted its report. Th e com pa n y,
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Case No..13/2010
M/S Shah Alloys Ltd
in s pite of direction to OA (UBI) to circu la te a copy of TEV Stu dy report, th e
com pa n y h a s circu la ted th e copy of TEV Stu dy report to a ll th e s ecu red
creditors on 16.04.2012.
In th e TEV Stu dy report, on pa ge 9, it is n oted
that th e s ch em e is tech n ica lly a n d fin a n cia lly via ble. Th e ld a dvoca te
repres en tin g th e com pa n y a dded th a t th e com pa n y a grees with th e view
s u bm itted by IDBI th a t two CDR pa cka ge were fa iled a n d TEV Stu dy report
h a s recorded th is rea s on s of CDR fa ilu re. Th e report its elf s h ows th a t th e
com pa n y h a s followed a ll th e com m itm en t, wh erea s Ba n ks did n ot s ta n d to
th e com m itm en t of both CDR package.
IDBI wa s ta lkin g a bou t th ree
creditors , th e tota l ou ts ta n d in g a ga in s t th es e th ree tra de creditors on ly
a m ou n ts to Rs .90.00 la kh s a s a ga in s t th e tota l ou ts ta n din g of Rs .50.0 0
crores . Th e a llega tion of th e s ick com pa n y givin g m on ey to grou p com pa n y
M/ s SAL Steels Ltd is pu rely in term s of th e Power pu rch a s e agreement
en tered by th e s ick com pa n y in 2005-06, wh erein , M/ s SAL Steels Ltd
ca n n ot s ell th e power a lrea dy ea rm a rked for th e s ick com pa n y to a n y th ird
pa rty. At th e s a m e tim e, if th e s ick com pa n y does n ot con s u m e its requ ired
u tiliza tion , th e s ick com pa n y will pa y fixed ch a rges over th e s a m e. Th e ld
a dvoca te a dded th a t s in ce SBI is goin g to s u bm it a written s u bm is s ion s on
th e s u bm is s ion s m a de in th e h ea rin g, th e com pan y will file its reply to th e
written s u bm is s ion s of SBI. On a query from the Bench abou t th e w ork ing of
th e com pan y , th e ld a dvoca te repres en tin g th e com pa n y s ta ted th a t th e
com pa n y h a s a ch ieved a tu rn over of Rs .850.00 crores in th e FY 2011-2012
a t a n 30% ca pa city u tiliza tion . Th e com pa n y is m a kin g ca s h los s of a pprox
Rs.100.00 crores for the year. The company currently employs approx 3000
workers . La s tly, th e ld a dvoca te drew th e a tten tion of th e Ben ch to th e fa ct
th a t in s pite of TEV Stu dy con du cted a t th e in s ta n ce of len ders , SBI h a s
a ga in is s u ed n otice u / s 13(2) of SARFEASI Act, 2002 vide th eir letter da ted
14.02.2012 received on 16.02.2012. He a ls o a dded th a t SBI is h oldin g les s
th a n 75% of th e s ecu red debts .
Th e ld a dvoca te fu rth er a dded th a t th e
la bou r on s eein g th is n otice h a s gon e to Labour Cou rt of Gu ja ra t a n d
Labour Cou rt of Gu ja ra t h a s is s u ed a n in ju n ction , th a t la bou r h a s the first
ch a rge on th e s a le of a n y a s s ets by th e com pa n y. Th e ld a dvoca te fu rth er
a dded th a t du e to th is a ct of SBI, reh a bilita tion proces s h a s been

Case No..13/2010
M/S Shah Alloys Ltd
des ta bilized a n d lea d to grea t la bou r u n res t in th e com pa n y. Th e company
has not been able to pay the wages of the labour for the last 3-4 months.
2.11 Ha vin g con s idered th e s u bm is s ion s m a de in th e h ea rin g a n d m a teria l
on record, the Bench issued the following directions :-
(a) OA (UBI) to con ven e a join t m eetin g a n d s u bm it a fu lly tied-up
DRS, a fter exa m in in g th e TEV Stu dy report s u bm itted by MECON Ltd
to th e Boa rd office a n d OA with in a period of 45 da ys , a s a greed in
the hearing.
(b) Sta te Ba n k of In dia (SBI) to file written s u bm is s ion s on th e
objection ra is ed by th e con cu rren t Au ditors Report, a s a greed in th e
hearing, with in a period of two weeks with copy to OA (UBI) a n d th e
company. Th erea fter, th e com pa n y to file its reply on th e written
s u bm is s ion s of SBI, if a n y, with in a fu rth er period of two weeks with
copy to SBI and OA (UBI).
(c) IDBI to file written submissions as agreed in the hearing, if they
wis h rega rdin g SIA, with in a period of 15 da ys with copy to OA (UBI)
a n d th e com pa n y. Th erea fter, th e com pa n y to file its reply on th e
written s u bm is s ion s of SBI with in a fu rth er period of two weeks with
copy to IDBI and OA (UBI).
(d)
Th e com pa n y to n egotia te a n d en ter in to s ettlem en t with a ll th e
secured creditors.
(e)
Th e com pa n y to file copy of th e order of Labour Cou rt of
Gujarat, on the injunction order in respect of workers within 15 days.
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Case No..13/2010
M/S Shah Alloys Ltd
(f)
The company to provide a copy of TEV Study report to OBC.
(g) The next date of hearing in this case is fixed on 13.08.2012.
(YK GAIHA)
MEMBER
(NIRMAL SINGH)
CHAIRMAN
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