Global Fin Liability Can Be Met If Liquidator Is Appointed

The entire liability of Rs 6 crore, pertaining to public deposits in Global Finance Corporation Ltd (GFCL), can be met if a proper liquidator is appointed, says a former director of GFCL.

The Hirawats are now running scared as GFCL belongs to the group of NBFCs that have been hit after the CRB scam surfaced. The company is facing a serious funds flight as investors are pressing for early withdrawal of deposits.

In an interview with Business Standard, Jayashree Hirawat, a former director in GFCL, explained what went wrong with the company.

Jayashree joined GFCL on December 1, 1994, and continued to work as a wholetime director till October 31, 1996. In 1994 her husband Deo Hirawat joined the company as vice-chairman.

 

Although I wanted to resign after anticipating the troubles ahead, I was persuaded to continue as a professional director and R K Jain (who is one of the promoters of GFCL) took over as the wholetime director.

Till October 1996, there was no statutory default and all payments pertaining to TDS, dividend and FDs were made, Jayashree said. This was also certified by the company secretary of GFCL. She also clarified that the Hirawats do not have any stake in GFCL, nor are they related to the Bhansalis of the CRB group.

We were never involved in fund-based activities. Total control was maintained by the promoter-duo of Bimal Kumar Bhansali and R K Jain. We concentrated on fee-based activities in the merchant banking and stockbroking businesses, she added.

Both the Hirawats resigned from their posts of professional directors on May 12, and the resignation letters were sent to the Registrar of Companies.

Besides GFCL, the Hirawats also held prominent positions in GFC Securities, an NSE-OTCEI brokerage. They are, however, yet to resign from the companys board.

Problems at GFCL commenced on two fronts. First, the ill-effect of the CRB scam was felt by the company as depositors wanted to withdraw funds. However, by then the authorities had issued directives to freeze our accounts. Therefore, while we tried to pacify the desperate investors, we had our hands tied up by the regulators, she said.

The NSE first decided to reduce GFC Securities net exposure limit to Rs 2 crore from the earlier Rs 10 crore limit, then the bourse decided to shut off the terminals. The debt market account, too, was frozen, Jayashree added.

This was all done because GFCL was considered a CRB group company, she added. The tag of GFCL being a CRB group company was on account of the company investing Rs 19 crore in CRB group companies.

The fixed deposit was used as working capital, and also in lease finance, purchasing real estates in New Delhi. The New Delhi property is priced at Rs 1.5 crore, the NSE account has Rs 1.5 crore, securities of blue chips valued at Rs 70-80 lakh, and also government securities valued at Rs 70-80 lakh, she said.

The equity-holding pattern of GFCL involves public shareholding of 60 per cent, with the promoter-duo initially holding the rest 40 per cent. The promoters stake has been diluted substantially after creditors (to whom the promoters had pledged shares) sold off these shares in the market, Jayashree added.

We never got to know the actual shareholding pattern as the registrar was CRB Custodial Services, a CRB group company, she added. While GFCL has a 37 per cent stake in GFC Securities, the rest is held by various investment companies floated by the promoter group.

Jayashree feels that she is morally bound to pay back the investors. However, the company cannot even sell securities in the market as these are termed as bad deliveries, she explains.

With our accounts frozen and creditors refusing to pay up, it is the depositors who are facing a rough weather. However, all liabilities can be met if a proper liquidator is appointed by the government, she concluded.