The Board for Industrial & Financial Reconstruction (BIFR) failed to reach a decision yesterday on whether to declare Dunlop India a sick company as the bankers objected to such a move.
This has prompted the board to appoint the Industrial Development Bank of India (IDBI) to prepare a report ascertaining whether the Manu Chhabria-controlled tyre could be declared a sick company.
Dunlop India management had moved the BIFR for registration as a sick company and it was registered with the board on February 3. However, the bankers' opposition means a decision will be taken by BIFR only after IDBI submits its report. The financial institution has to submit its report before the board by April 30.
Meanwhile the Jyoti Basu government feels Dunlop India should not be referred to as a sick company under the Sick Industrial Companies (Special Provisions) Act, 1985. The profit and loss account of the previous financial years prove that the tyre major should not be referred to as a sick company.
"Prima-facie, the company should not be referred to the BIFR," top level government sources said, upholding both the INTUC and the CITU-led Dunlop India unions' stand on the issue.
If the BIFR feels the firm is a sick company, it can declare the tyre major as one under section 3 (1) (O) of the Sick Industrial Companies (Special Provisions) Act, 1985.
According to section 3 (1) (0) of SICA, 1985, and the Amendment Act, 1993, a company can be referred to BIFR for a revival package if it has been 'registered for not less than five years and has at the end of any financial year accumulated losses equal to or exceeding its entire net worth'.
It appears that senior Bengal government officials scrutinised the Dunlop issue on the basis of the various facts and figures relating to the company. During the first half of the current fiscal, the company posted a net loss of Rs 19.20 crore, which is more than its paid up equity capital of Rs 18.99 crore, but much less than its net worth.
Both the INTUC-affiliated Sahaganj Labour union and the CITU-led workers' union of Dunlop India had requested the BIFR chairman to reject the company's claim to a BIFR case in a written communication.
The letter forwarded by the unions stated: "We strongly object to the unwarranted and dubious move of Dunlop India's management to get the company enlisted with BIFR through back-door manoeuvres to derive benefits at the cost of employees, investors, depositors and creditors".