Bank of Rajasthan blocks BPL rejig

SC issues notices to durables major and other lenders

The Supreme Court (SC) has issued notices to consumer durables firm BPL and its lenders on a petition by Bank of Rajasthan, which has challenged the Kerala High Court's nod to the company's financial restructuring plan and its joint venture with Japan's Sanyo Electric.

Bank of Rajasthan (BoR), the secured creditor of BPL, has submitted before the court that BPL, which plans to recast its Rs 1,550 crore debt, was always in a position to repay all dues, and the restructuring that seeks creditors to write off certain outstanding loans was a fraudulent exercise to refrain from paying back debts.

Appearing before a bench comprising Justices C K Thakker and Tarun Chatterjee recently, the bank's counsel Shyam Diwan and Hemant Singh contended that there was no satisfactory explanation given by BPL for discrepancies in the balance sheet. They argued that the restructuring was contrary to the public policy and that BPL had failed to elaborate on Sanyo's role, which is pumping in a meagre Rs 322 crore (for acquiring into BPL's colour TV business) against the total outstanding of Rs 1,497.57 crore.

The bank pointed out that the discrepancies in respect of secured loans was as huge Rs 355.47 crore, from sundry debtors the difference was Rs 157.93 crore and from unsecured loans and advances, the gap was around Rs 282.20 crore.Further, BPL's proposal to pay off 28 per cent (Rs 420 crore) of the total debts of approximately Rs 1,550 crore was inconsistent as long-term lenders had already been paid off and injustice had been done to short-term lenders.

According to the bank, out of Rs 1,716 crore of the borrowed funds in 2002-03, around Rs 641 crore had been disbursed as loans and another Rs 340 crore has been invested in group companies, out of which more than Rs 37 crore had been written off for no valid reason.Increase in loan advances from Rs 184 crore in 2001-02 to Rs 641 crore in 2002-03 was the prime reason for BPL's inability to redeem its preference shares and payment of statutory dues, it added.

According to it, the proposed scheme which was vitiated by fraud was propounded with oblique motives to protect the interest of ICICI Bank and other secured creditors purportedly acting in collusion with BPL.The consumer durables company had gone against all logic and ethics of corporate governance and invested more than Rs 168 crore in its group companies including loss-making Bharat Energy ventures.

"BPL has thus invested enormous funds in its own loss-making subsidiary, without making any payment to its secured creditors," the petition stated.