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Business News/ Home-page / HC order hits Dunlop’s brand transfer plan
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HC order hits Dunlop’s brand transfer plan

HC order hits Dunlop’s brand transfer plan

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Kolkata: Tyre maker Dunlop India Ltd’s plan to transfer its rights to 100-odd trademarks to private firms owned by its promoter Pawan Kumar Ruia has been nixed, at least for the time being, by a Calcutta high court order.

In response to a so-called wind-up petition filed by a creditor seeking to recover money owed to it by the company, the court last week issued an order restraining Dunlop from transferring its assets and making any payment except to its workers and for utilities such as power.

Among the trademarks that Dunlop is looking to transfer to Ruia Group firms are global ones such as Dunlop, Falcon and Monotona. The tyre maker owns rights to use these trademarks in India.

Mint reported on 13 October that agreements had been concluded to transfer Dunlop’s trademarks to Ruia Group firms. At that time, Dunlop’s lawyers were preparing to file petitions with the Indian trademark authorities for the proposed transfer.

Chartered accountant-turned takeover specialist Ruia acquired Dunlop in 2005 from the late Manohar Rajaram Chhabria’s Jumbo Group for an undisclosed sum. Thereafter, he acquired several auto component makers in Europe, starting with Schlegel Automotive Europe Ltd in 2008. Lately, though, he has had to curb his ardour for overseas assets.

Dunlop’s unsecured creditors (those whose loans to the company are without collateral or security) were until recently barred from seeking liquidation of its assets to recover their dues because the firm enjoyed protection from the West Bengal government under the so-called “relief undertaking" status. The West Bengal Relief Undertaking (Special Provisions) Act precludes a firm’s creditors from seeking liquidation of its assets.

The protection has now been withdrawn, and several unsecured creditors have in the past few months moved wind-up petitions in the Calcutta high court seeking liquidation of Dunlop’s assets.

At the end of September, Dunlop had unsecured loans of 286.77 crore and total debt of 338 crore, according to regulatory filings. Most of its fixed assets are mortgaged; 91.9% of the Ruia Group’s 73.66% stake in the firm is pledged with lenders, show company disclosures.

Last week, Dunlop’s lawyers asked the high court for time to firm up a plan to repay creditors. The court granted Dunlop time till the first week of January to do so.

Jose Mathew, managing partner of EV Mathai and Sons, one of the unsecured creditors that has filed a wind-up petition, said he wasn’t sure how the firm could repay debts unless allowed to sell assets. Production at Dunlop’s Sahaganj and Ambattur factories has been stalled, and the company’s revenues are dwindling.

Unsecured creditors have also brought to the high court’s notice that Dunlop had in September mortgaged 60 acres from its Sahaganj factory to Suryamani Financing Co. Ltd, a Ruia Group firm, which has the same address as the group’s flagship holding company, Ruia Sons Pvt. Ltd.

Suryamani, according to the deed of mortgage, which Mint has reviewed, had loaned 41 crore to the tyre maker. The mortgage turns Suryamani into a secured lender at a time when unsecured creditors are seeking liquidation of Dunlop’s assets.

The same 60 acres were earlier mortgaged with the Central Bank of India, according to Dunlop’s filings with the Registrar of Companies. It isn’t immediately known whether the firm obtained the permission of the public sector bank for creating the so-called second charge of the same asset.

In response to an email seeking clarifications on the impact, if any, of the high court’s order on its proposed transfer of trademarks and on the mortgage of land to Suryamani, Dunlop issued a statement saying: “We’re quite aware of the fact that you have some personal interest in insinuating the Ruia Group and Pawan Kumar Ruia. The stories that are being published relating to Ruia Group are only for sensational purpose without any research from your end. Your last-minute queries sent to us manifest of your ‘smartness’ to save yourself, though it is clear that those are actually not required by you. The kind of negative feeling you are trying to raise in the minds of people reading your newspaper is only with a malafide motive to bring down the esteem and goodwill of Ruia Group and Pawan Kumar Ruia in the business and commercial circle."

The statement continued in the same vein, without responding to the actual questions: “You must be aware that once the matter is pending in court, you cannot go ahead and try media trial on the sub-judice issue. We don’t think that the court has called upon you and/or your newspaper to assist it in coming to a finding and if that is the case, then instead of making scintillating news from nothing, we would request you not to make defamatory statements and disturb our working with false and frivolous news articles and baseless queries."

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Published: 16 Dec 2011, 12:21 AM IST
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