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The Board for Industrial and Financial Reconstruction (BIFR) has offered temporary relief to SPS Steels Rolling Mills by restraining its lenders from declaring the company a wilful defaulter, bankers familiar with the development told Business Standard.
“SPS Steels has got a stay order from BIFR preventing us from declaring it a wilful defaulter. The company claimed banks were taking a coercive action by naming it a wilful defaulter. We will contest this,” said a senior executive with a state-run lender.
The steel maker had borrowed about Rs 500 crore from a consortium of eight banks. United Bank of India (UBI), one of the lenders to SPS Steels, has already declared the company, its MD Bipin Kumar Vohra, Executive Director Arjun Kumar Santhalia and director Sanjukta Vohra wilful defaulters for non-payment of dues.
Bankers explained the BIFR stay will not apply on UBI, as it had termed the company a wilful defaulter before the order was passed. “But other lenders cannot declare it a wilful defaulter now,” said another banker.
Apart from UBI, Allahabad Bank, Central Bank of India, Corporation Bank, Indian Overseas Bank, Oriental Bank of Commerce, State Bank of Hyderabad and UCO Bank have also lent money to SPS Steels.
SPS Steels, which started operation in 1981 in Durgapur, specialises in manufacturing of QST (quenching and self tempering) bars under the Elegant brand. The company’s production capacity, as mentioned on its website, is 600,000 tonnes a year. However, bankers appear confident that this relief to the steel maker will be temporary.
“One bank has already declared it a wilful defaulter. Also, the CBI has registered a case against the company and its directors for causing financial losses to another bank. We are confident we will be allowed to take steps against the company to recover our dues,” said one of the bankers cited above.
Last month, CBI registered a case against Vohra and others for allegedly causing a loss of Rs 139 crore to Central Bank of India. The investigating agency conducted search operations at 15 places in Kolkata and Durgapur, which led to the recovery of “incriminating documents”.
Vohra was not immediately available for comments. His mobile phone was switched off and text messages sent to him went unanswered.
Wilful default means a borrower does not repay his dues despite having the capacity to do so. A borrower can also be termed a wilful defaulter if he doesn’t repay and siphons off the funds, or uses the money for some other purpose than intended. Once an entity, or an individual, is declared a wilful defaulter, they are debarred from availing finance from banks and financial institutions. Lenders can also initiate legal process, including criminal proceedings, against wilful defaulters.
