Panic has gripped Kamla Tower, the JK headquarters, with three financial institutions ICICI, General Insurance Corp and Life Insurance Corp recalling their loans to the flagship company, JK Synthetics.
The move has sent a scare through JK Synthetics which is deeply riven by feuds between the three family factions headed by Gaur Hari Singhania, brother Govind Hari, and nephews Ramapati and Nidhipati.
The first move was made by ICICI, and LIC and GIC have quickly followed suit. However, the other financial institutions Industrial Development Bank of India (IDBI), Industrial Finance Corporation of India (IFCI), Industrial Reconstruction Bank of India (IRBI), and the Unit Trust of India have yet to decide whether to follow ICICIs lead.
In January, the financial institutions had rejected a revival plan submitted by Gaur Hari terming it unviable. They had also decided that the FIs should recall their loans immediately.
However, the JK factions successfully stalled the move for six and a half months.
ICICI sent its letter recalling the loan only on July 30. According to FI sources, ICICI will move the debt recovery tribunal to invoke the mortgage clauses of the agreement if the company does not respond positively to its letter.
The date is important because the FIs, in order to find a solution, had called a meeting of all the promoter-directors in Delhi on March 27 where they suggested that the management of the company should be placed under a team of professionals. They asked the factions to appoint a CEO and a chief financial officer whose performance would be monitored by a committee of promoter-directors and nominees of the banks and financial institutions.
It was agreed that the Jhalawar complex would be sold by July 31. Chairman Gaur Hari Singhania was asked to call a meeting of the board of directors of JK Synthetics Ltd and pass the necessary resolutions and take quick action to implement them.
However, a meeting of the JK Synthetics board was not held until April 25. This meeting did not take any decision on the sale of any production unit; it decided to appoint a CEO, but did nothing about a CFO (as was ordained by the FIs). The board did, however, state that a single cash flow for the company would be implemented. Till date, only an advertisement has been issued for a CEO; no other step has been taken. The inaction of the company precipitated ICICIs letter to the company.
The loan outstanding for JK Synthetics is placed at Rs 850 crore, an increase of Rs 180 crore inside of a year, say sources. The balance sheet for financial 1996-97 is still being finalised. The annual report for 95-96 puts aggregate outstanding loans at Rs 581.63 crore. However, the report has not made any provision for overdue and compound interest on late payments, on interest as well as repayment of instalments of loans and debentures; neither has any provision been made for interest on debentures series of third, fifth, sixth eight and `A series after the date of redemption.
In the balance sheet for 1995-96, the total outstanding to the financial institutions is rupee loans of Rs 32.50 crore, foreign currency loans of Rs 116.72 crore and interest accrued and dues of Rs 35.79 crore. The extent of penal interest and interest due on the loans is not clear. The total sum which is owed to the FIs is also not clear. The outstanding amount of Rs 850 crore includes all the loans.
In any case, even if the separate FI loans exceed Rs 350 crore
