The Hindu : Tribunal orders sale of SPIC Petro assets

Online edition of India's National Newspaper
Wednesday, Feb 19, 2003

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Business

Tribunal orders sale of SPIC Petro assets

MUMBAI FEB. 18. The Debt Recovery Tribunal (DRT) has appointed a court receiver for sale of assets of A. C. Muthiah group's SPIC Petrochemicals Ltd.

"There is no hope for commencement of the work of SPIC Petrochemicals... and no hopes whatsoever, indicating that it will come out of financial crisis, but actually it is sinking.. considering the outstanding of various financial institutions, it is desirable to sell the assets of the company,'' DRT III, Mumbai presiding officer, A. G. Mishra, said in order dated February 14.

The order provides an interim relief to the applicant ICICI Bank that had recalled its loans worth Rs. 289 crores last December following non-payment of dues by the company. SPIC Petro was promoted by SPIC in 1994 to implement a project to manufacture purified terapthalic acid (PTA) and polyester fibre yarn in Manali near Chennai.

The total outstanding dues of SPIC Petro runs over Rs. 1,100 crores to lenders that include ICICI Bank, IDBI, SBI, Dena Bank, Bank of Baroda, Indian Bank and Union Bank of India.

The DRT also ruled out a restructuring exercise stating that "it is a premature death before commencement of work. The losses have been caused to the company, so, question of restructuring does not arise as it is yet to take-off.''

Making a reference to the unreported judgment of ICICI Bank Ltd v Daewoo Motor Ltd, the DRT paved way for the sale of assets of SPIC Petrochemicals. Due to suspension of the project's work, the lenders' dues have been piling up making the entire exercise unviable with cost overruns of up to Rs. 4,121 crores from the previous Rs. 2,125 crores.

In December last, ICICI Bank had served a notice to SPIC Petrochemicals by serving a notice to the company under the Securitisation Ordinance. SPIC had originally entered into an MOU in 1989 with Madras Refineries Limited (MRL), a public sector enterprise, to set up a naphtha based aromatic complex for manufacture of Para-Xylene and PTA. The joint venture named Arochem Ltd. faced difficulties from the beginning due to delays in obtaining necessary approvals by MRL. Owing to the delays, SPIC decided to go on its own and floated SPIC Petrochemicals. With MRL contesting the move in courts, the project work that started in 1994 came to a complete halt in 1997.

In order to bring the dispute to an early end, SPIC and MRL worked towards an amicable settlement that culminated into a Memorandum of Settlement (MOS) between SPIC and MRL in August 1998. Under the MOS, MRL agreed to withdraw from the project on receiving a compensation of Rs. 40 crores from SPIC. MRL also agreed to withdraw legal proceedings on receipt of the payment.

However, SPIC has not made the payments to MRL for close to two years now which has led to inordinate delays in the commencement of project work.— PTI

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