Jes­sop, Dun­lop stare at a bleak fu­ture amid lack of clar­ity on own­er­ship struc­ture

Business Standard - - COMPANIES - AVISHEK RAKSHIT

Nearly three years af­ter the West Ben­gal Assem­bly passed two con­sec­u­tive Bills to take over Jes­sop & Com­pany and Dun­lop In­dia, nei­ther could be taken over nor liq­ui­dated to set­tle the out­stand­ing dues of banks and work­ers.

The crux of the prob­lem is lack of clar­ity over their own­er­ship.

Al­though the state Assem­bly passed Bills to take con­trol from the Ruia Group — the for­mer owner of Jes­sop and Dun­lop — in Fe­bru­ary 2016, ap­proval from the Cen­tre is still pend­ing.

While Pawan Ruia, chair­man of the Ruia Group, is not ready to ac­knowl­edge that he has con­trol over these two en­ti­ties, the state gov­ern­ment is of the view that he is an oc­cu­pier till the takeover Bills be­come an Act.

In the case of Jes­sop, the Cen­tral gov­ern­ment owns around 4 per cent of the com­pany’s shares and its ap­proval is manda­tory.

But in the case of Dun­lop, even af­ter the takeover Bill was passed, the Cal­cutta High Court, af­ter hear­ing a plea from EV Mathai & Com­pany and AK Kundu & Com­pany, be­sides 15 other cred­i­tors for non-pay­ment of dues of over ~1,000 crore, had or­dered

wind­ing up of the com­pany and ap­pointed a liq­uida­tor in Fe­bru­ary 2016.

Even af­ter three years of the high court or­der, Dun­lop is yet to be liq­ui­dated.

Peo­ple in Dun­lop’s trade unions claim that given it is un­clear as to who ac­tu­ally owns the com­pany, the liq­uida­tor may face le­gal prob­lems.

Be­sides, Bidyut Raut, leader of the In­dian Na­tional Tri­namool Trade Union Con­gress’ trade union at Dun­lop, said ap­proval from the Cen­tre is also manda­tory in this case.

“There needs to be some clar­ity on who ac­tu­ally owns Dun­lop. If val­u­a­tions are prop­erly done, the out­stand­ing dues of work­ers (~40-45 crore) can be cleared. Also, fi­nan­cial cred­i­tors will get some por­tion of their money back,” Raut said.

Banks and fi­nan­cial lenders of Jes­sop are faced with a sim­i­lar dilemma.

“The only rea­son we haven’t moved the Na­tional Com­pany Law Tri­bunal (NCLT) is be­cause of lack of clar­ity on Jes­sop’s own­er­ship. The com­pany is in such a stage where nei­ther Ruia nor the state gov­ern­ment can claim it — thus the pro­moter hold­ing is un­clear,” said one of the fi­nan­cial lenders to Jes­sop.

The cur­rent as­sets of Jes­sop are es­ti­mated to be worth around ~500 crore, against an ex­pected debt of over ~1,000 crore.

Fal­con Tyres — an­other Ruia Group com­pany in Kar­nataka — is faced with liq­ui­da­tion as an op­tion al­though lenders ex­pect to take a ma­jor hair­cut.

“In case of Fal­con Tyres, al­though the Kar­nataka gov­ern­ment had pub­licly ap­pealed to other com­pa­nies to take over and re­vive the firm, it didn’t pass any takeover Bill. So, there was clar­ity on the own­er­ship struc­ture and thus the lenders had taken it to NCLT. But the same can’t be done with Jes­sop at this mo­ment,” the lender said.

Peo­ple with knowl­edge of the mat­ter said that le­gal pro­vi­sions do not sug­gest any spe­cific time­line within which the Cen­tre has to re­vert on these Bills.

De­spite the lack of clar­ity over own­er­ship, the West Ben­gal gov­ern­ment has been pay­ing ~10,000 ev­ery month as stipend to around 400 re­main­ing work­ers in Jes­sop and around 180 work­ers in Dun­lop.

Trade unions in Jes­sop claim that the com­pany needs a work­ing cap­i­tal in­fu­sion of ~150 crore to restart op­er­a­tions but banks aren’t ready to fund it.

“We have met rep­re­sen­ta­tives from the Cen­tre and have briefed them about how work­ers them­selves can turn this com­pany around if the Pres­i­dent gives con­sent to the Bill and some work­ing cap­i­tal is in­fused. We can post some profit in a year’s time it­self,” Sreeku­mar Mukher­jee, trade union leader at Jes­sop, claimed.

By 2016, the state gov­ern­ment came to believe that Ruia isn’t in­ter­ested to re­open ei­ther Jes­sop or Dun­lop and fi­nally passed the Jes­sop and Com­pany (Ac­qui­si­tion and Trans­fer of Un­der­tak­ing) Bill, 2016 and Dun­lop In­dia (Ac­qui­si­tion and Trans­fer of Un­der­tak­ing) Bill, 2016 with an ob­jec­tive to help the ail­ing work­ers in these two com­pa­nies.

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