Arcil takes possession of KMCL's plant

Kumar metallurgical corp defaulted on payment of loans

Asset Reconstruction Company India Limited (Arcil) has taken possession of the sponge iron plant of Kumar Metallurgical Corporation Limited (KMCL), which defaulted in payment of interest and principal installments of loans to banks and financial institutions.

Located at Chityal in Nalgonda district, the 60,000-tonne per year capacity plant was initially taken into possession by the district magistrate on Saturday and was later handed over to the authorised officer of Arcil on Sunday.

Andhra Pradesh Industrial and Technical Consultancy Organisation (Apitco), the regional partner of Arcil, said in a press release that the Satish Kumar Agarwal and Anil Agarwal-promoted KMCL was classified as a willful defaulter by various lenders.

"They have been defaulting and owe around Rs 250 crore to various lenders like Arcil, IDBI, IFCI and others. Earlier also, the company has defaulted on the orders of the Debt Recovery Tribunal (DRT), Hyderabad, and the Debt Recovery Appellate Tribunal (DRAT), directing it to deposit monthly payments to lenders," Apitco said.

Having taken the consent from more than 90 per cent of the lenders for taking action against KMCL under the Sarfaesi Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act), Arcil had served notices to the KMCL management on November 1, 2004, asking the company to pay Rs 78.25 crore as of September 30, 2004, together with further interest and other amounts within a period of six days from the date of notice.

KMCL management had raised certain objections to the show cause notice served to it by Arcil. Apart from terming the action as unlawful in the absence of consent from the Board for Industrial and Financial Reconstruction (BIFR), the KMCL management also said that the participation by secured creditors in the revival scheme was mandatory.

Finding these objections as untenable and unacceptable, Arcil moved ahead in taking possession of the company's assets under the Act and sought the assistance of the district magistrate.

The press release said that after taking possession of assets, Arcil appointed Manaksia Limited as custodian-cum-agent to operate and maintain the unit until a final solution was formed for recovery of dues of lenders by way of sale or merger or acquisition or tolling or other suitable arrangements.

Apitco also said that Manaksia Limited is currently discussing with the workers and employees of KMCL and is understood to have given an assurance to them that it wanted to continue the services of the entire workforce and sought their cooperation to operate the plant, the release added.