Date:29/05/2004 URL: http://www.thehindubusinessline.com/2004/05/29/stories/2004052901130400.htm

Back Receiver taking possession of Mardia factories

Poornima Mohandas

Mumbai , May 28

THE court appointed receiver has started taking possession of the inventory and factories of the Ahmedabad-based, Mardia Chemicals group which owes banks over Rs 1,400 crore.

The court receiver is taking physical possession of the several factories (some of which are functioning ) and inventory at Mardia Nagar (Surendranagar, Gujarat), said sources. This follows the order by the Mumbai High Court, which has been hearing the case of the debenture trustee, ICICI Bank vs. Mardia Chemicals.

This is the first major instance of assets being taken over following the Supreme Court upholding the constitutional validity of the Securitisation Act. This case was, however, argued through the High Court and received an attachment notice; the other route would have been to invoke the Securitisation Act and go through Debt Recovery Tribunals, said a banking source.

When contacted, said Mr Rasiklal Mardia, CMD, Mardia Chemicals Ltd, "The court receiver is taking possession of our plants, building and machinery which is worth over Rs 1,000 crore." He was reluctant to give details on his future plans for managing the company.

The receiver is expected to permit the existing management to continue running the company, said sources. Even a sale of the entire factory and property, which is now permissible under the Securitisation Act, will only help recover the principal amount of Rs 800 crore, which the company owes to several banks and FIs. The remaining interest component will have to be forgone. The lenders should be able to make higher recoveries if the units are sold as going concerns, said a legal head of a lending institution.

The projects of the company were funded through a combination of loans and debentures. ICICI Bank was appointed the debenture trustee with large institutions like IDBI, UTI and even the public being debenture holders.

A Rs 1,000-crore company, Mardia Chemicals Ltd, the flagship company of the Mardia group, started operations in 1987 to manufacture dyes and dyes intermediates. The group, which has facilities for manufacturing a range of products from dyes, dye intermediates, basic chemicals and caustic soda owes over Rs 1,450 crore (including principal of Rs 800 crore and balance unpaid interest) to 22 lenders, including Bank of Baroda, Bank of India, Corporation Bank, Union Bank, IDBI, Life Insurance Corporation, IFCI and New India Assurance. The exposure of ICICI Bank to the Ahmedabad-based, dyes and dyes intermediaries company, is Rs 110 crore (principal amount) and with interest works out to Rs 392 crore.

In November 2003 ICICI Bank had taken over a unit of Mardia Chemicals, located at Vatwa in Ahmedabad but got stuck in legal proceedings as the right to sell seized assets came under question until the Supreme Court upheld the constitutional validity of the Securitisation Act in April 2004.