The Hindu : Karnataka News : High Court nod for financial firm's repayment package

Online edition of India's National Newspaper
Friday, Dec 03, 2004

Karnataka

Karnataka

High Court nod for financial firm's repayment package

By Our Staff Reporter

BANGALORE, DEC. 2. The Karnataka High Court has allowed a petition by Maha Rashtra Apex Corporation Ltd. (Pvt.) and sanctioned, subject to certain conditions, the scheme of compromise and arrangement entered into between it and its creditors and share, bond and deposit holders.

Permission sought

The petitioner, incorporated as a company on April 26, 1943 with its headquarters in Manipal, had sought the court's nod for the arrangement.

The company had an authorised capital of Rs. 40 crores divided into two crore equity shares of Rs. 10 each and two crore redeemable cumulative preference shares of Rs. 10 each. It had issued 1.41 crore equity shares of Rs. 10 each and its shares were listed on the National Stock Exchange and the exchanges in Bangalore, Mangalore, Mumbai and Pune.

It had not paid redemption amount on preference shares on the due dates in respect of repayment after September 2002. A non-banking financial institution with 100 branches and 350 sub-branches, the company was engaged in deposit mobilisation, hire purchase, leasing, bill discounting, demand loans and money changing.

The fiscal reforms and rapid changes in the monetary system forced the company to make several structural adjustments. Besides, the new regulations of the Reserve Bank of India (RBI) in January 1998 put the company in grave difficulty, jeopardising its resource mobilisation.

The company said the crisis deepened when the RBI irrationally downgraded it despite its good capital adequacy ratio. The income plunged from Rs. 101 crores in 2000 to Rs. 53.02 crores in 2001 and Rs. 26.08 crores in 2002. The company said it had discharged its statutory obligation despite being crisis-ridden.

Defaulted

When the company defaulted on certain payments, the High Court was approached and the company undertook to come up with an arrangement for repayment of dues.

Justice N. Kumar, who approved the arrangement, said the company owed Rs. 110.37 crores to the deposit holders and the interest payable on March 31, 2002 was Rs. 19.95 crores. It also owed Rs. 199. 92 crores to the bond holders along with interest of Rs. 31.55 crores. In all, it owed Rs. 361.85 crores to the deposit and bond holders. This amount was to be repaid in five years.

`Fair and equitable'

Accepting the scheme for repayment, Justice Kumar observed that it was fair, just and equitable and in the interest of the creditors and depositors. He sanctioned the scheme subject to certain conditions.

He said the time stipulated for repayment should be advanced by six months and the depositors and bond holders who deposited Rs. 5,000 or less would have to be paid in six months' time in a single instalment.

The court directed the company to obtain its permission before liquidating its investment in the shares of other companies.

It was also directed not to carry on NBFC activities without RBI permission.

It said all criminal cases filed against the company as well as suits, execution, petitions, complaints and appeals before the National, State and District consumer forums shall stand abated and the payments made in these proceedings be adjusted against the outstanding debts payable to such consumers.

High Court Round-up: Page 5

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