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Creditors seek Dunlop liquidation in Calcutta HC

Creditors seek Dunlop liquidation in Calcutta HC
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First Published: Wed, Nov 23 2011. 12 24 AM IST

Pawan Kumar Ruia, chairman, Ruia Group. File photo.
Pawan Kumar Ruia, chairman, Ruia Group. File photo.
Updated: Wed, Nov 23 2011. 12 24 AM IST
Kolkata: Dunlop India Ltd’s unsecured creditors have sought the liquidation of the beleaguered tyre maker at the Calcutta high court.
A spokesperson for Dunlop said in an emailed statement that the company was contesting the wind-up petition.
Pawan Kumar Ruia, chairman, Ruia Group. File photo.
EV Mathai and Sons, a Kerala-based partnership firm, has launched the wind-up petition after Dunlop reneged on commitment to clear its dues. Justice Sanjib Banerjee admitted the petition on 8 November.
In line with court orders, the Kerala-based firm issued a public notice in Tuesday’s edition of The Statesman newspaper, asking other creditors to join the petition.
The dispute dates back several years. In June 2008, EV Mathai and Sons had first moved the high court to recover its Rs 2.09 crore dues from Dunlop. After a protracted legal battle, the firm bought peace with the creditor in May this year by agreeing to pay it Rs 57.25 lakh in nine equal instalments.
The law firm claims in its public notice that Dunlop stopped paying it after four instalments, following which it moved the wind-up petition and it was admitted by the Calcutta high court.
Dunlop, according to lawyers for EV Mathai and Sons, hasn’t lately opposed the petition though notices were sent to it and its law firm—an indication that the management might allow Dunlop to go into liquidation.
“Neither did Dunlop ask for time to reschedule the payment to our client nor did it appeal the 8 November order,” said Shourya Mandal, partner at law firm Fox and Mandal. “It isn’t immediately clear from their action whether Dunlop continues to contest the petition.”
After the advertisement was issued in Tuesday’s newspapers, other unsecured creditors are likely to join the petition. At the end of September, the company had unsecured loans, or ones obtained without mortgage of any asset, of Rs 286.77 crore, out of its total indebtedness of Rs 338 crore, according to regulatory filings.
“Such petitions typically evolve into class action,” said another lawyer, who declined to be named. “Companies wouldn’t normally let this notice appear in newspapers.” But technically, Dunlop still has time to contest the petition; it could wait even till a wind up order has been passed, he added.
Dunlop, which began manufacturing tyres in India in 1896, is controlled by Kolkata-based chartered accountant-turned-businessman, Pawan Kumar Ruia. He bought the firm in 2005 from Manohar Rajaram Chhabria’s Jumbo Group for an undisclosed sum in a hedge fund-backed deal.
He did not, however, manage to stabilize Dunlop’s operations, particularly at the Sahaganj factory. In a 7 October notice announcing suspension of work at Sahaganj, the Ruia Group said its “strenuous efforts” to revive the company were frustrated by “recalcitrant” workers. Production has been suspended at its other factory at Ambattur as well.
Ruia is under intense political pressure to reopen Dunlop’s closed factories and pay worker dues. There’s little he can do if the official liquidator of the high court seizes the company to repay its unsecured creditors.
“I smell a conspiracy behind the company’s reluctance to oppose the wind-up petition,” said Santasri Chatterjee, a former member of Parliament and a prominent leader of the Left-backed Centre for Indian Trade Unions (Citu). “It seems the management wants to wash its hands of the factory... I will immediately ring up the labour minister (Purnendu Bose) and seek government intervention.”
“The unsecured creditors took the legal route, so let the law take its own course,” said Bose, the state’s labour minister. “Our government’s stand is clear: we want Dunlop to clear its dues to the workers.” Dunlop has some 870 workers at its Sahaganj factory alone. Its total staff strength isn’t immediately known.
Until a year ago, Dunlop enjoyed protection from its unsecured creditors under a state Act—West Bengal Relief Undertakings (Special Provisions) Act. Dunlop was granted the so-called relief undertaking status, which was eventually withdrawn by the erstwhile Left Front government.
The current government, led by the Trinamool Congress, offered to grant the relief undertaking status again but made it conditional upon Dunlop reopening its closed Sahaganj factory. The company said it was forced to shut the factory because its machines were being stolen and no “meaningful assistance” came from the administration despite repeated requests.
Almost all of Dunlop’s fixed assets, including its Sahaganj factory, are mortgaged. It has initiated steps to transfer its rights to some 100-odd trademarks to Ruia Sons Pvt. Ltd, the Ruia Group’s flagship holding company, in a move seen widely as an attempt to withdraw from Dunlop its yet unencumbered intangible assets.
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manish.b@livemint.com
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First Published: Wed, Nov 23 2011. 12 24 AM IST