Kolkata: The Calcutta high court said in its Thursday judgement ordering the immediate winding up of Dunlop India Ltd that the Ruia Group, which controls the firm, had taken assets valued “conservatively” at Rs.2,300 crore out of the ailing tyremaker.
Dunlop received “no consideration against the transfers (of these assets) other than some dud shares in newly-formed companies that had no business at all”, justice Sanjib Banerjee said in his judgement that was made public by the court on Friday.
Banerjee turned down Dunlop’s appeal for a stay on his judgement.
“The conduct of those in management… in fraudulently selling off assets conservatively estimated at Rs.2,300 crore makes it just and equitable for the company to be wound up,” Banerjee said.
A spokesperson for the Ruia Group refused to comment, saying legal opinions were still being obtained. The Ruia Group acquired Dunlop from the late Manohar Rajaram Chhabria in 2005.
The official liquidator, the judge said, should “immediately take steps to ensure that assets transferred by the company in derogation of prohibitory orders” are recovered, and “if necessary” initiate proceedings against the management for malfeasance.
These assets were transferred to various firms privately-owned by the Ruia Group, and mortgaged by them to various lenders including ICICI Bank, which alone made a loan of $125 million.
The bank’s lending to Ruia Group firms against the mortgage of properties formerly owned by Dunlop was held to be illegitimate in an interim order passed by Banerjee in March last year.
The bank intervened and an appeals court said it did not support Banerjee’s views on these transactions.
In the end, ICICI Bank, too, did not oppose the liquidation of the company.
“ICICI Bank does not comment on borrower-specific issues,” a spokesperson for the lender said in an emailed statement.
On Thursday, the state’s labour minister Purnendu Bose said Dunlop’s management had alienated assets from the company, and that it would not be allowed to remove more. What remained would be liquidated to clear workers’ dues.
The company owes its workers at least Rs.75 crore in principal alone, according to the judgement—the figure taken from petitions filed by Dunlop’s workers, who also did not oppose the liquidation of the company.
“Some of the creditors… who had bayed for blood leading to the… order of 26 March 2012 (in which Banerjee ordered the appointment of an administrator for Dunlop’s assets) are conspicuous (now) either in their absence or in their silence,” Banerjee said in his judgement.
Lawyers who closely followed the legal battle between Dunlop and its unsecured creditors said the company had in the past few months settled some of the dues. They did not want to be identified.
“The company settled most of these debts at a huge discount,” said one of the lawyers. “But we didn’t a have choice—who knows what would come out of the liquidation of the company, the management having already taken out so much of Dunlop’s assets.”
Dunlop last year filed a case against HT Media Ltd, the publisher of Mint, the newspaper’s editor and a reporter, alleging criminal defamation over a news report published in April. The case is being contested in a Kolkata court.