Jayant Vitamins Sues Govt, Four Banks

The government has been dragged to court for its "arbitrary" decision to reduce the price of vitamin C while claims have been filed on the banks under the Consumer Protection Act, 1956.

On the advice of eminent jurist P N Bhagwati (former Chief Justice of India), the company recently filed a claim of Rs 222.86 crore on the Union government for "arbitrarily" reducing the price of vitamin C (an essential commodity under the Essential Commodities Act, 1955) in 1989, leading to heavy losses for the producer. The company has also slapped a claim of Rs 135.07 crore on the bank consortium.

 

According to the company, various Drugs (Prices Control) Orders in force from time to time have maintained that at no point the unit manufacturing essential bulk drugs be given selling price below their cost of production.

The details of the case mentioned in the annual report of 1995-96 states that during the period that vitamin C was outside the purview of price control (from August 26, 1987 to November, 1988) the company was selling it at Rs 272 per kg.

However, in total reversal of its policy the government reduced the selling price of the drug to Rs 221 in September 1989.

The company maintains that this arbitrary reduction in selling price of the product totally disregarded the steep cost escalations from June 1985 to September 1989 and have continued to disregard the same even till date. This has affected the company's performance in the past five years.

For the year 1995-96 the company has managed to utilise only 28.82 per cent of the installed capacity of 1,500 tonnes. The chairman & managing director of JVL was not available for comment.

Repeated representations made by the company led to the government granting interim increments in the selling prices which were below the cost of production.

The ministry tried to rectify the position by writing to department of banking under ministry of finance to give adequate reliefs and working finance. .

However, according to the company, the banks were not extending working capital as per the company's requirements. Hence, it feels just and fair that the government of India, ministry of chemicals & fertilisers along with consortium of four banks be held responsible jointly and severely for the present situation in which the company finds itself.

The company has already reversed the exposure of these banks worth Rs 25.94 crore and routed it through the profit and loss account and adjusted it against its Rs 135.07 crore claim on the banks. Jayant Vitamins posted a sales income of Rs 64 crore for 1995-96 with profit before adjustments of Rs 17 crore.