Swc In Piquant Situation Over Repayment Issue

Shaw Wallace & Co has been put in a peculiar situation as a result of the delay in getting its repayment scheme approved.

It has deposited monies in excess of Rs 18 crore between January and July this year at a Standard Chartered Bank branch in the city with the purpose of repaying its creditors but has so far not been able to do so.

The company seems to be at a loss to understand why two of the creditors Kirloskar Investment and Finance Ltd (KIFL) and Hindustan Development Corporation (HDC) have come up with an alternative repayment plan when they have everything to gain by the earlier one.

 

Shaw Wallace owes HDC a total of Rs 158 crore which includes a principal of Rs 94 crore and an interest component of Rs 63 crore. According to SWC's original plan which has been approved by over 75 per cent of the creditors, HDC would receive as much as Rs 94 lakh within 30 days of the plan getting approved.

The company also owes a total of Rs 40 lakh to KIFL. Interestingly, KIFL's unaudited financial results show a loss of Rs 3.22 crore in the first quarter of the current financial year. This has been attributed to a dip in business volume related to lease, hire purchase and bill discounting finance as well as increase in interest costs. The real estate division did not contribute to the company's income.

When contacted, a SWC spokesperson told Business Standard: "After all these years of clamour for repayment, it is surprising that the plan is getting delayed. Any reasons and motivation behind the delay is beyond our comprehension."

A group of around six companies led by KIFL and HDC has approached the Calcutta High Court with the proposal that their debt be converted into equity rather than debt repayment as proposed by SWC in the compromise scheme.

According to the settlement scheme prepared by SWC and approved by over 75 per cent of the creditors, all liabilities up to Rs 10 lakh are proposed to be cleared in one instalment within seven days of the effective date.

In case of liabilities exceeding Rs 10 lakh, 10 per cent of the principal will be paid within one month. The balance will be paid in quarterly instalments within 18 months of the effective date. Simple interest at 15 per cent per annum from April 1, 1997, will be paid over a period of 24 months.