Subhiksha, the Chennai-based retail chain that suspended operations in 2008 after running out of cash, has filed a Rs 500-crore defamation claim against Wipro chairman Azim Premji.
In September 2010, the chain’s promoter, R Subramanian, had sent a legal notice to Premji for his comment in an interview that “investing in Subhiksha was a mistake and a lot of money has been siphoned off”.
When Business Standard asked for a comment on the latest development, Subramanian, in a text message, said: “No comment on the matter at the court.” His advocates refused likewise. A mail to Premji Invest, the investment arm of Azim Premji, did not elicit any response.
In 2008, Premji, through his personal investment arm, Zash Investment, bought 10 per cent stake in Subhiksha from ICICI Venture for Rs 230 crore. The deal was done a few months before Subhiksha suspended all operations at its stores. It has since re-opened some stores under the franchise route, in and around Chennai, but is otherwise still dormant.
Subramanian had to suspend operations at his 1,600-store chain after it ran out of cash and could not manage staff salaries, vendor payments and bank loans. As things unraveled, Subramanian and ICICI Venture (it held 23 per cent stake) fought over control of the entity.
Zash later sent legal notices to the former directors of Subhiksha, including those from ICICI Venture, saying they did not fully investigate the retail firm's financial numbers and did not provide proper numbers when Zash bought a stake.
In January 2009, Subhiksha approached the banks, which have collectively lent the retailer Rs 750 crore, to restructure its debt, citing falling demand as a reason for its inability to follow the original repayment schedule. It became the first major retail chain to be referred to the corporate debt restructuring cell. However, there was no progress.
A senior public sector bank official said the case did not meet the norms for a debt recast. So, it went out of the CDR system, leaving each bank to decide what to do with its bad loan.