case no. 501/1997 - Board for Industrial & Financial Reconstruction

Case No. 501/1997M/a Hindustan Antibiotics LtdBOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTIONBENCH-I(MON-1)CASE NO. 501/1997 : M/S HINDUSTAN ANTIBIOTICS LTD (HAL)ALONGWITH M.A. NOS. 668, 673 & 756SUMMARY RECORD OF PROCEEDINGS OF THE REVIEW HEARINGHELD ON 31.1.2012 BEFORE THE BENCH CONSISTING OF SHRINIRMAL SINGH, CHAIRMAN AND SHRI Y.K. GAIHA, MEMBERPresentM/s Hindustan Antibiotics Ltd.(Applicant No. 673)IDBI(MA)Ellora Infrastructure Pvt.Ltd.(Applicant No. 668)Sales Tax Deptt., Govt.of Maharashtra(Applicant No. 756)Govt.of India,Deptt. of PharmaceuticalsBank of Maharashtra (BOM)Central Bank of India (CBI)Punjab National Bank (PNB)Vijaya BankUCO BankDIT(R)Name & Designation of theRepresentative(s)S/Shri/Shrimati/KumariPravin Kumar, MD-11/CS.SinghAS VaidyaVirendra Singh, D(F)Ramesh Harit, AGMBhagwan Chhaparwal, FCAMeena Sharma, AdvocateRama Ahluwalia, AdvocateRaja Sekhar Sundra, IAS, Jt.Secy.M.L.Sidana, DSGaurav Tyagi, Law OfficerManoj K.Aich, Sr. ManagerAnita Bhatia, Sr. ManagerA.S.Chakma, Law OfficerV.K.Maurya, Sr. ManagerD.R.Jain, Sr.Standing CounselHin du s ta n An tibiotics Officers As s cn . G.J.Mahajan, Gen. Secy.S.M.Pathan, Jt. Sec.*********1.1(i) A s ch em e for reviva l of th e s ick com pa n y M/ s Hin du s ta n An tibioticsLtd (HAL) wa s s a n ction ed by th e Boa rd, vide its order dt 05.06.07 (SS-07),h a vin g con s idered cu t-off-da te (COD) a s 31.03.06. Th e Boa rd a ppoin ted1

Case No. 501/1997M/a Hindustan Antibiotics LtdIDBI a s th e m on itorin g a gen cy (MA) to m on itor th e progres s th eimplementation of SS-07.(ii) As per the profitability/ viability projected in the SS-07, the companywa s expected to a ch ieve n et tu rn over of Rs 151 crore in 2008-09 a n d ea rnnet profit of Rs. 8.64 Crore. The net worth of the company was expected tobecom e pos itive in th e firs t yea r its elf a n d a ccu m u la ted los s es wou ld bewiped out in the year 2008-09.1.2 Fu rth er h ea rin gs in th e ca s e were h eld on 3.1 2.2009(MA),21.12.09(MA), 23.9.2010, 4.2.2011(MA), 7.3.2011(MA), 23.3.2011,2.5.2011(MA), 7.6.2011(MA), 23.6.2011(MA), 2.8.2011(MA), 10.8.2011(MA).Th e Ben ch vide order dt. 22.06.09 a pproved th e de-lin kin g of KAPL fromHAL to en a ble Deptt. of Ph a rm a ceu tica ls , M/ o Ch em ica ls & Fertilizers ,Govern m en t of In d ia to tra n s fer equ ity h eld by HAL in KAPL to th ePresident of India.1.3 In th e h ea rin g h eld on 23.3.2011, th e Ben ch observed th a t thecom pa n y a n d Ba n k of Ma h a ra s h tra (BoM) h a s to follow wh a t is a pprovedin th e SS-07. Th e Ben ch a ls o obs erved from th e SS-07 th a t a ll th eu n s ecu red creditors in clu din g th e Cen tra l Ra ilwa y to a ccept a m ou n t a spropos ed in th e DRS a t a ctu a l ou ts ta n din g a s on 31.03.2006 a n d com pa n yto pa y th e a m ou n t a ccordin gly. Ha vin g con s idered th e s u bm is s ion s m a deand material on record, the Bench issued the following directions:-a) Th e com pa n y to file m odified s ch em e in corpora tin g th e m eth ods ofpayment to be m a de to th e workers a n d th e im pact of th e Govt. loa nof Rs 30.17 crore on the projected profitability of the company, to theMA (IDBI), within a period of 4 weeks with a copy to the Board.b) On receipt of th e MDRS from th e com pa n y, MA (IDBI) to s cru tinizeth e s a m e a n d offer its views on th e MDRS with in fu rth er period of 2weeks.c) The company and representative of ESIC to reconcile the dues.d) Th e com pa n y to ta ke a con s idered view on th e s a le of a s s ets du lyrecom m en ded by ASC oth erwis e th e Ben ch m a y con s tra in ed to ta ke2

Case No. 501/1997M/a Hindustan Antibiotics Ltda ction a ga in s t th e CMD of th e com pa n y for viola tin g th e gu idelin es ofBIFR for sale of assets.e) The Bench also directed that the Secretary of the Board to call for theremarks of Special Director how he has taken divergent views in ASCand in the Board.1.4 Mis s Meen a R. Sh a rm a , Advoca te on beh a lf of M/ S ElloraIn fra s tru ctu re Pvt. Ltd. filed a Mis c. Applica tion No. 668 pra yin g th eBoard:-a. To direct th e Res pon den ts to s ell Plot No. P4, P5 & P6 a s per th e bidm a de by th em on 23.12.2010 a n d to s ign a n d execu te th e n eces s a ryDeed of Conveyance/Documents.b. To direct to ca ll for th e record pa per a n d proceedin gs of th e pres en tca s e a n d a fter goin g in to th e lega lity a n d propriety th ereof be plea s edto qu a s h a n d/ or s et a s ide th e im pu gn ed decis ion a s recorded in th e1 st Res pon den t s letter da ted 26.4.2011.c. To is s u e order of proh ibition or a n y oth er a ppropria te order ordirection proh ibitin g th e Res pon den ts from in vitin g a n d/ or offerin gth e s a id plot of la n d m en tion ed in th e ten der docu m en t to a n y oth er3 rd party.d. To direct th a t pen din g th e h ea rin g a n d fin a l dis p os a l of th e s a id MA,th e Res pon den ts by th em s elves , th eir serva n ts , a gen ts a n ds u bordin a te officers be res tra in ed from in vitin g a n y fu rth er offer oris s u in g ten der for s a le of th e s a id plot of la n d s itu a ted a t Pim pri,Wa grere, Pu n e, wh ich form s th e s u bject m a tter of th e ten der n oticeda ted 1.11.2010 a n d refer to a s s a id plot bea rin g No.P4, P5 a n d P6therein, to any other 3 rd pa rty or crea tin g a n y 3 rd pa rty righ t, in teres tover the said property.e. To call for record and proceedings of MA No.413 of 2011.f. Ad interim relief in terms of prayer clause (a) and (b) and (c) above begranted in favour of applicants.g. To provide for cost of this application.3

Case No. 501/1997M/a Hindustan Antibiotics Ltdd) In case the company fails to make the payment of arrears of sales taxdu es till fin a n cia l yea r 2004-05 forth with a m ou n tin g toRs.28,84,67,443/- (excluding interest and penalties) as per the termsof th e SS-07, th e Sa les Ta x Depa rtm en t, Sta te of Ma h a ra s h tra b ea llowed to ta ke coercive a ction a ga in s t M/ s .Hin du s ta n An tibioticsLtd. for th e recovery of th e s a les ta x du es of Sta te of Ma h arashtra(in clu din g in teres t a n d pen a lties ) u n der th e provis ion s of BST Act,1959.e) In ca s e th e du es a s per a s s es s m en t orders for th e period 2003-04,2004-05 a n d 2005-06 a re n ot con s idered u n der DRS by th e Hon bleBoa rd, th ey be con s idered ou ts ide DRS. Specific order is s oliciteda n d Sa les Ta x Deptt., Govern m en t of Ma h a ra s h tra be a llowed to ta kerecovery a ction a ga in s t M/ s .Hin du s ta n An tibiotics Ltd. for th erecovery of s a les ta x du es u n der th e provis ion s of BST Act, 1959 a sarrears of land revenue.1.7 In th e h ea rin g h eld on 2.12.2011 to h ea r MA Nos.6 6 8 & 6 7 3 , th eBench issued the following directions :-(a) Th e Com pa n y is directed to file a written s u bm is s ion s wh y a n a ctionu n der s ection of 33 of SICA be in itia ted a ga in s t th e Boa rd ofDirectors of th e com pa n y for n ot followin g th e ASC Gu id elin es , a scla im ed by th e a pplica n t com pa n y M/ s EIPL in Mis c. Applica tion(No.668/2011), within a period of one month with copy to MA (IDBI).(b) M/ s Ellora In fra s tru ctu re Pvt. Ltd (EIPL) is directed to file ca s e lawsupportin g th eir locu s -s ta n d i th a t on ce th e biddin g com pa n y onencashing the returned cheque of EMD continues to remain bidder.(c) MA (IDBI) is directed to file a deta iled report on th e is s u es ra is ed byth e a pplica n t com pa n y M/ s EIPL in Mis c. Applica tion(No.668/2011), within a period of one month.(d) PF Depa rtm en t is directed to a tten d n ext h ea rin g before th e Boa rd,with ou t fa il. PF Depa rtm en t is a ls o directed to file writtens u bm is s ion s with rega rd to is s u es ra is ed in Mis c. Applica tionNo.673/ 2011 filed by th e com pa n y with in a period of two weeks withcopy to MA (IDBI) and the Company.5

Case No. 501/1997M/a Hindustan Antibiotics Ltd(e)(f)The Company is directed to serve copy of Misc. Application alongwithSOP of toda y s h ea rin g on PF Depa rtm en t with in a period of on e weeka n d fu rn is h proof of s ervice before th e Ben ch in th e n ext da te ofhearing.Th e n ext da te of h ea rin g on Mis c. Applica tion No.668/ 2011 filed byM/ s Ellora In fra s tru ctu re Pvt Ltd a n d Mis c. Applica tionNo.673/ 2011 filed by th e s ick com pa n y is n ow clu bbed with th emain case, which is scheduled for hearing on 31.01.2012.2.1 In the hearing held today (31.1.2012), the representative of MA (IDBI)s ta ted th a t th ey h a d received MDRS from th e com pa n y on 18.01.2012, bu tit ca n n ot be proces s ed u n les s th e la n d is s u es a re settled. Th e Ben chobserved that MA (IDBI) to examine and submit its comments on the MDRSwithout linking it up with the sale of land.. The representative of MA (IDBI)a greed to th is a n d s ta ted th a t IDBI will expedite th e MDRS a t th e ea rlies t.Th e repres en ta tive of MA (IDBI) requ es ted th e Ben ch to gra n t (0 4) fou rweeks time to examine and submit its comments on MDRS.2.2 Th e repres en ta tive of PNB s ta ted th a t th e com pa n y h a d a lrea dya va iled two rollover of loa n (m a xim u m level perm itted u n der RBIgu idelin es ). Th e la s t da te of pa ym en t is 28.01.2012, a fter wh ich th eaccount of the company will be declared Non-performing Assets (NPA). Therepres en ta tive of th e com pa n y in terven ed a n d s ta ted th a t in teres t portionis bein g s erviced by th e com pa n y. Th e repres en ta tive of PNB s ta ted thatth e Letter of Credits (LC) is s u ed on beh a lf of th e com pa n y is a lrea dydevolved a n d th e du es a m ou n ts to Rs .1.00 crores a s on 01.01.2012. On aqu ery from Ben ch , th e repres en ta tive of PNB s ta ted th a t workin g ca pita lca n be with dra wn , bu t th e decis ion on th is will be ta ken by th e com peten ta u th ority of th e Ba n k. Th e repres en ta tive of th e com pa n y a ga in in terven eda n d s ta ted th a t irregu la rity with PNB will be s ettled with in a da y. On aqu ery from Ben ch a bou t th e ou ts ta n din g du es , th e represen ta tive of PNBstated that it amounts to Rs.40.00 crores and interest thereof.6

Case No. 501/1997M/a Hindustan Antibiotics Ltd2.3 Th e repres en ta tive of Ba n k of Ma h a ra s h tra s ta ted th a t th e Ba n k h a da lrea dy s a crificed n ea rly Rs .4.00 crores a n d th e a ccou n ts of th e com pa n yis NPA, as the company is not paying dues.2.4 The representative of Vijaya Bank stated that the Bank are extendingLC a n d workin g Ca pita l fa cility a n d th e a ccou n t is regu la r. On a qu eryfrom Ben ch a bou t th e tota l credit a va iled by th e com pa n y, th erepres en ta tive of Vija ya Ba n k s ta ted th a t th e Ba n k h a s exten ded credit ofRs.17.00 crores.2.5 Th e repres en ta tive of UCO Ba n k s ta ted th a t th e Ba n k h a s a lrea dya va iled (02) two perm is s ible rollover a n d th e la s t da te of pa ym en t is05.03.2011. Th e tota l ou ts ta n din g du es a ga in s t th e com pa n y a m ou n ts toRs.20.00 crores.2.6 Th e Ben ch th en took Mis c. Applica tion No.673/ 2011 for h ea rin g.Th e Ben ch observed th a t th ere wa s n o on e pres en t in toda y s h ea rin g fromEPFO. Th e represen ta tive of th e com pa n y s ta ted th a t th e com pa n y iss eekin g wa iver of da m a ges from EPFO a n d th e com pan y h a s a lrea dyforwa rded copy of Mis c. Applica tion a n d a ls o la s t SOP. Th e represen ta tiveof th e com pa n y a dded th a t a s per s a n ction ed s ch em e, th e com pa n y s ou gh twa iver of Rs .11.00 crores towa rds da m a ges , h owever, EPFO h a d on lywa ived Rs .8.00 crores . On en qu iry from EPFO it wa s lea rn t th a t a s perth eir policy th a n ca n n ot give wa iver of ba la n ce Rs .3.00 cropres . On aqu ery from Ben ch a bou t th e proof s ervice, th e repres en ta tive of th ecom pa n y s ta ted th a t th e Applica tion a n d SOP were given by h a n d in th eoffice of EPFO a n d s h own th e proof s ervice. He a ls o a ppris ed th e Ben chth a t th ey h a d a ls o teleph on ica lly in form ed th e con cern ed a u th ority a bou tth is h ea rin g. Th e Ben ch observed th a t a la s t opportu n ity b e given to EPFOto file their written submission within a period two weeks.2.7 Th e Ben ch th en took Mis c. Applica tion (No.756/ 2011) filed by Sa lesTa x Depa rtm en t (STD), Sta te of Ma h a ra s h tra , for h ea rin g. Th e ld a dvoca terepres en tin g Sa les Ta x Depa rtm en t s ta ted th a t th e tota l ou ts ta n din g du es7

Case No. 501/1997M/a Hindustan Antibiotics Ltda ga in s t th e com pan y till Fin a n cia l Yea r 2004-05 a m ou n ts to Rs .28.84crores , (exclu din g in teres t a n d pen a lties ). Th e ld a dvoca te repres en tin gSTD requ es ted th e Ben ch to direct th e com pa n y to pa y th is a m ou n t or th eDepartment be permitted to take coercive a ction a ga in s t th e com pa n y. Th erepres en ta tive of th e com pa n y s ta ted th a t ou t of Rs .28.84 crores on lyRs .12.00 crores is th e u n dis pu ted a m ou n t. For th e ba la n ce a m ou n t th ecom pa n y h a s a lrea dy filed a ppea l before Appella te Au th ority / Tribu n a l.On a qu ery from th e Ben ch is th ere a n y s ta y, th e repres en ta tive of th ecom pa n y s ta ted th a t th ere is n o s ta y from a n y a u th ority. Th e Ben chobserved th a t wh en th ere is n o s ta y, a n d th e Depa rtm en t h a s a lrea dyexten ded con ces s ion , th e com pa n y h a s to pa y th e prin cipa l outstandinga m ou n t. Th e Ben ch directed th a t CMD of th e com pa n y to look in to th em a tter a n d file written s u bm is s ion on th is is s u e. Th e ld a dvoca terepres en tin g STD in terven ed a n d s ta ted th a t High Cou rt in recen tju dgm en t h a s observed th a t com pa n y s h ou ld pa y th e du es of s ta tu torya u th orities . Th e Ben ch observed th a t th e com pa n y to pa y u n dis pu tedamount of Rs.12.00 within a period of one month.2.8 Th e Ben ch th en took Mis c. Applica tion No.668/ 2011 filed by M/ sEllora In fra s tru ctu re Pvt Ltd (EIPL). Th e Con s u lta n t repres en tin g EIPLs ta ted th a t in com plia n ce of direction of th e Ben ch in th e h ea rin g h eld on30.01.2012, EIPL requ es ts Ben ch perm is s ion to file written s u bm is s ion a tth is m om en t. Th e Ben ch a greed a n d a s ked th e Con s u lta n t repres en tin gEIPL to h a n dover copies to MA (IDBI) a n d th e com pa n y. Th e Con s u lta n trepres en tin g EIPL h a n ded over copies of written s u bm is s ion to MA (IDBI)a n d th e com pa n y. Th e repres en ta tive of th e com pa n y requ es ted th e Ben chto grant two weeks time to file reply to written submission of EIPL.2.9 Th e ld a d voca te repres en tin g DIT(R) s ta ted th a t a s in tim a ted by th eIT Depa rtm en t, th ere is a du es of Rs .38.17 crores a ga in s t th e com pa n y.This due pertains to current period i.e. after the cut-off date. The companym a y be directed to recon cile th e fa ct with field a u th orities a n d pa y th edem a n d. Th e Ben ch observed th a t th e com pa n y is ru n n in g in to los s es,from wh ere th is dem a n d h a s ris en . Th e ld a dvoca te repres en tin g DIT(R)8

Case No. 501/1997M/a Hindustan Antibiotics Ltds ta ted th a t th ere a re Ca pita l Ga in s , a s th e com pa n y h a s ch a rged wa iverinto profit and loss accounts. On a query from Bench, the representative ofcom pa n y a greed th a t th e com pa n y h a d booked wa iver of in teres t fromBa n k a n d Govt. in to profit a n d los s a ccou n ts of th e com pa n y in th e yea r2006 and thus the company in the year 2006 earned net profit.2.10 Th e repres en ta tive of Hin du s ta n An tibiotic Officer s As s ocia tion s a tedth a t th ere a re 300 officers a n d 900 em ployees in th e com pa n y. As on da teth ere is a n ou ts ta n din g du e of Rs .60.00 crores a ga in s t th e com pa n y ona ccou n t wa ge a rrea rs . On a qu ery from Ben ch , th e repres en ta tive ofcom pa n y s ta ted th a t in term s of decis ion of Govt., th e wa ge revis ion wa sa llowed in 2009, bu t effective from 2006 a n d th es e du es a re on ly preassumption,as there is no wage revision is allowed to any sick unit.2.11 On a qu ery from th e Ben ch a bou t th e s ta tu s of ASC, th e CMD of th ecom pa n y s ta ted th a t Boa rd of Directors of th e com pa n y h a d decided to gofor fres h va lu a tion of a s s ets . Th e Ben ch observed th a t ASC is th ecom peten t a u th ority to ta ke a decis ion on th e re-va lu a tion of a s s ets a n dth e decis ion of Boa rd of Directors of th e com pa n y to in terfere in th ein tern a l m a tter of ASC is grea t con cern , wh ich cou ld a ls o be term ed a sgros s viola tion of th e Ben ch Direction . Th e MD in ch a rge of th e com pa n ys ta ted th a t m a tter will be s orted ou t a t th e ea rlies t. On a qu ery from th eBen ch to th e repres en ta tive of Govt. of In dia (GOI), Deptt. ofPh a rm a ceu tica ls (DoP) a bou t th is is s u e wh ich h a s res u lted in a a b n orm a ldela y in ta kin g a decis ion , wh ich wa s cru cia l for th e reviva l of th ecompany, th e repres en ta tive of GOI s ta ted th a t h e will ta ke u p th is m a tterwith th e a u th ority a n d m a tter will be s orted in two m on th s . Th e Ben chobserved th a t CMD of th e com pa n y s h ou ld file a written s u bm is s ion with ina period of 15 da ys rega rdin g s ellin g of a s s ets a s a pproved by th e ASC, bu tit im plem en ted by CMD. Th e Ben ch fu rth er observed th a t h a d s a le h a dgon e a h ea d on tim e, th e com pa n y cou ld h a ve s ettled th e du es of itss ecu red creditors a n d s a les ta x depa rtm en t. Wh erea s , toda y, th e com pa n yis goin g to fa ce s h orta ge of workin g ca pita l, wh ich cou ld a ls o lea d toreduction in production or altogether stoppage of production.9

Case No. 501/1997M/a Hindustan Antibiotics Ltd2.12 Having considered the submissions made and the material on record,the Bench issued the following directions:-(i) Th e Ben ch observed th a t s h ow ca u s e n otice is s u ed to CMD of th ecom pa n y u n der s ection 33 of SICA in th e h ea rin g h eld on 2.12.2011to con tin u e to rem a in in a beya n ce till n ext h ea rin g. Th e CMD of th ecom pa n y is given 15 da ys tim e to file a written s u bm is s ion wh y ASCdecision was not implemented by the CMD.(ii) EPFO is given a la s t opportu n ity to file th eir written s u bm is s ion onth e Mis c. Applica tion (No.673/ 2011) filed by th e com pa n y with in aperiod of two weeks. EPFO also to depute a responsible office, who iswell vers ed with th e ca s e, to a tten d th e n ext h ea rin g before th eBoard.(iii) Th e com pa n y to pa y u n dis pu ted a m ou n t of Sa les Ta x Depa rtm en ts ta ted to be a bou t Rs .12.00 crores , a s cla im ed by th e represen ta tiveof th e com pa n y in th e h ea rin g, with in a period of on e m on th . Th eCMD of the company to look into the matter of Sales Tax Departmentand file written submission giving status of balance disputed amountwith in a period of on e m on th . Accordin gly, Mis c. Applica tion(No.756/ 2011) filed by Sa les Ta x Depa rtm en t, Sta te of Ma h a ra s h trastand disposed off.(iv) Th e com pa n y to file reply to written s u bm is s ion filed by M/ s ElloraIn fra s tru ctu re Pvt Ltd (EIPL) with in a p eriod of two weeks, a s a greedby them in the hearing with copy to MA (IDBI) and EIPL.(v) Th e n ext da te of h ea rin g on Mis c. Applica tion (No.668/ 2011) filed byM/ s Ellora In fra s tru ctu re Pvt Ltd is fixed on 21.02.2012 a n d th emain case is listed for hearing on 10.04.2012.(YK GAIHA)MEMBER(NIRMAL SINGH)CHAIRMAN10