Insolvency Act in the works
Chaturvedi takes over as president of Hind Motors
Jute packaging order relaxed for foodgrain
Cellular players ready to clear spectrum dues
Global Tele hires 2 audit firms to fix swap ratio
Lycos casts its Net on India with dedicated portal
Plantation firms in the dock

New Delhi, July 18 
The department of company affairs (DCA) is planning a separate Insolvency Act and has set up a committee under Justice B. Eradi to suggest ways to speed up liquidation proceedings.

The panel is reworking the insolvency laws to bring them on par with international practices, but the government will decide whether the new legislation should be a part of the Companies Bill, or kept separate. “However, we will keep working on the draft Act,” DCA secretary P. L. Sanjeeva Reddy said.

The committee has been asked to suggest ways in which closures can be hastened, and companies prevented from seeking shelter under the Sick Industrial Companies Act (Sica). It is also supposed to assess if a separate tribunal dealing in wind-up cases can be constituted. If the proposal is implemented, foreign investors will get a proper exit route.

“The department has announced Company Law Settlement Scheme 2000, which allows firms to file their balance sheet, profit and loss accounts and other documents with the Registrar of Companies (RoC), if they have not done so earlier, and, therefore, to go in for a one-time settlement,” Reddy said. Companies, by making a modest, one-off payment, can regularise their record and get immunity from prosecution.

Already, 2.25 lakh companies have been sent notices for not filing their documents. The department has sought the assistance of state governments, customs and excise officials to track down such firms, and warned financial institutions to keep off them.

In order to protect small investors from vanishing companies, a committee comprising representatives of DCA, Sebi, RBI has been set up. An investor protection fund is also in place, a portion of which will be used for education and awareness. The corpus of this fund has come from unclaimed dividends, deposits and share-application money.

The department is also thinking of asking entrepreneurs setting up new companies to furnish more details, such as passport numbers, photographs and at least two references, to the RoC.

In another significant move, the DCA has submitted to the government a report emerging from its detailed study of the Competition Policy.

The report is seen as a key input in the formulation of the Competition Law which, Reddy said, will foster a greater degree of competition in the domestic market, and not restrict it. Critics of the move say it would.

The policy, once it is voted and signed into law, will bring mergers and acquisitions worth more than Rs 500 crore come under the proposed Competition Commission of India.

More important, Company Law Second Amendment Bill dealing with transparency, accountability, investor protection, reservation of seats for women and small investors is likely to be introduced in the monsoon session of Parliament.

A law to enable the corporatisation of co-operatives is also being finalised by an expert committee under Y. K. Alagh. Another panel formed by the Company Law Board is examining the possibilities of deposit insurance for investors of Nidhi companies.

Insurance registration on

The DCA has lifted the embargo on registration of insurance companies with immediate effect. This comes after the IRDA Act, 1999 came into force from April 19. The insurance watchdog had asked the department to lift the embargo.    

Calcutta, July 18 
B.K. Chaturvedi, an Eicher veteran, today joined as president of Hindustan Motors after the post was newly created by the C.K. Birla company.

Chaturvedi will look after the auto business units in Calcutta, Chennai and Indore.

Prior to this assignment, Chaturvedi was the managing director of Eicher Ltd, a group with which he was associated from 1978 and had held various responsible capacities.

After R. Santhanam, executive director of HM, resigned a couple of months ago, A. Sankaranarayanan was looking after the day-to-day operations of the company.

Chaturvedi will have a tough task of turning around the company which is saddled with a net loss of Rs 62.28 crore for the year ended March 31, 2000. Sources said he had visited the Uttarpara factory at the end of last month to take stock of the situation.

The HM management had stopped production at its Uttarpara factory for two days last month to keep a check on the rising inventory. At present, the company’s Uttarpara unit is carrying about a month’s inventory of finished goods as against the normal seven to ten days’ level.    

New Delhi, July 18 
The Union Cabinet today cleared a new jute packaging order that allows up to 10 per cent of foodgrain to be packed in plastic bags, retaining 90 per cent of the market for jute bags.

Earlier, all foodgrain were compulsorily packed in jute bags. For small packs of foodgrain up to 5 kilos, the government, however, decided to continue with the practice of packing them in non-jute bags.

The Cabinet also cleared amendments to the Workmen’s Compensation Act, 1923 to hike maximum compensation for death from Rs 2.28 lakh to Rs 4.56 lakh and from Rs 2.74 lakh to Rs 5.48 lakh for permanent disablement. The minimum compensation was raised from Rs 50,000 to Rs 80,000 for death and from Rs 60,000 to Rs 90,000 for permanent disablement. The amendment Bill is expected to be moved in the monsoon session of Parliament.

It also cleared a Rs 2.38-crore additional budgetary support to the Calcutta-based National Instruments Ltd. The money has been released to help out the company pay wages and salaries of its employees till March 31, 2000.

The restructuring package for Hindustan Machine Tools (HMT) was also approved by the Cabinet. The package includes infusion of fresh equity by the government, shutting down 5 unviable units and saving three units—machine tools, watch group and tractor division. These too were to be spun off and divested up to 74 per cent to private buyers.

But the much-awaited battle royal at the Cabinet meeting between Trinamool leader Mamata Banerjee and her detractors did not take place, with Mamata deciding to skip the meeting.

Industry minister Manohar Joshi wanted the Bengal leader to agree to reserve 60 per cent of all railway wagon orders to save six public sector wagon builders, including four in West Bengal. The catch for Mamata was that she had already written to the Cabinet stating that these companies could not be trusted with huge orders.

The plot was hatched by BJP leaders fed up with Mamata outwitting them on every move to close sick public sector companies in West Bengal.

An Act to create a legal framework which will allow multimodal movement of goods was also cleared by the Cabinet today.    

New Delhi, July 18 
The Telecom Commission is expected to discuss the issue of unpaid frequency-allocation charges by mobile operators when it meets on July 20.

The Cellular Operators Association of India (COAI) had asked government to change the existing system under which spectrum charges are calculated on the basis of city-wise coverage. They say this method discourages operators from venturing into areas with low business potential.

“COAI has proposed to clear the dues its members owe the Wireless Planning Commission’s (WPC) with certain reservations, but they have asked for an early settlement. We will take up the issue soon,” sources in Telecom Commission said.

According to a Telecom Commission note, cellular operators have expressed their willingness to pay at least 20 per cent of what WPC claims are the outstanding dues, but is disputed by them.

“At the last meeting, we had decided that cellular operators would have to pay the interest on the outstanding WPC charges, at least from April 1. We have told COAI that the payments should be completed in a time-bound manner,” sources in the Telecom Commission said.

Meanwhile, an empowered committee under the Telecom Commission is currently evaluating the issues raised by private telecom operators, and is studying ways to remove the impediments to achieving higher tele-density.

The Commission had reviewed the requirements of financial and performance bank guarantees for cellular operators late last month, and the issue of providing direct connectivity between cellular operator and other service providers.

Cellular operators had demanded that the high-value financial bank guarantee (FBG) should be returned and the lien on them should be withdrawn if companies furnish a new FBG, securitise the licence fees (in the form of revenue share) for two quarters along with the WPC charges due.

Sources said the meeting also discussed demand of cellular operators to review and return the performance bank guarantee (PBG) of those operators who had achieved the targets laid down in the licensing conditions.

“We have sent our recommendations to the minister. However, he wanted some clarifications. We will soon send our observations again,” sources said. Performance guarantees have to be furnished and maintained during the entire licence period as a form of security.    

Mumbai, July 18 
The board of directors of Global Tele-Systems Ltd (GTL) has appointed two international audit firms to recommend the ratio for exchange of shares of the unlisted company Global Electronic Commerce Services (GECS) with GTL.

Deloitte Haskins and Sells and Pannell Kerr Forster (M/s Ratan S Mama and Co) were appointed today by the board as valuers to recommend the ratio. On the basis of the recommendation, the board of directors will approve within four weeks.

The board also appointed a committee comprising independent directors namely TNV Ayyar and Prof S C Sahasrabudhe to review and recommend the terms and conditions of the amalgamation and ratio of exchange of shares based on the valuation report submitted by the aforesaid valuers. The board will give a final approval thereafter.

Further, the GTL board also appointed Salomon Smith Barney as advisors to assist the board of directors in reviewing the business synergies for the proposed amalgamation.

In a statement, GTL said that the board will consider these reports and decide on the amalgamation over the next six weeks.

GECS aims to become a dominant player in the electronic commerce and messaging business. It is presently engaged in corporate internet infrastructure and access, data centres, managed network services and messaging services in the B2B space. It owns one of the largest private sector digital data network spanning across 14 cities in India.

The international gateway for its data services is expected to be operational by August 15. General Electric, Hindustan Lever, Tisco, Telco and Bajaj Auto are among its 8,000 customers. The promoters of GECS hold 38.50 per cent, while foreign institutional investors, non-resident Indians hold over 45 per cent.    

Mumbai, July 18 
Lycos Inc., the leading global internet communications, commerce and media company, today set up base in India by launching Lycos India, a portal site dedicated to domestic internet users.

Lycos launched the Indian portal through one of the region’s fastest growing internet companies, Lycos Asia , which is an arm of Lycos Inc.

“The website,, will offer localised content and services in English and Hindi,” Mary Ong, CEO, Lycos Asia, told reporters at the launch today.

She also said the site’s content is prepared in India in collaboration with local partners. It will provide the users a comprehensive array of services which include search, local directories, free-e-mail and web-building. It will also provide channels of special relevance to the local communities.

Lycos has tied up with leading content providers in India like Indbazaar, Webdunia, Cyberastro, Nazaara, CIOL, Jobsahead, Weddingsutra and a few more. The partnership with Webdunia has allowed Lycos to reach out to the Indian mass via the Hindi website of the former.

The partnership with e-patra allows users to send e-mails in vernacular languages like Hindi, Marathi, Gujarati and Punjabi.

Ong added that Lycos Asia’s entry into India is the most natural and logical step instigated by the country’s fast developing infrastructure in information technology as also by Asia’s fastest growing internet population residing in the country.

Initially, Lycos India will depend on revenues from advertising but eventually e-commerce income will form a major part of its earnings. “Lycos Asia’s growth and growing influence in the region is driven by the company’s deep seated conviction that internet users in multi-cultural Asia will respond to local content, with a depth of services of international quality”, said Ms Ong. However, she declined to reveal the nature of the tie-up with the Indian outfits.

Lycos Asia, which has already established a local office in the city will eventually expand to Bangalore and Delhi. The Singapore based Lycos Asia is a 50:50 and US$ 50 million joint venture between Lycos Inc and Singapore Telecommunications Limited formed in Singapore in 1999.

Founded in 1995, Lycos Inc. is a leading web media company and owner of the Lycos network, one of the most united hubs on the internet reaching one out of every two web users.    

Calcutta, July 18 
The Securities and Exchange Board of India (Sebi) is planning to take 60 plantation companies in the eastern region to court for defaulting on payment to the investors.

These companies had raised around Rs 37 crore in the later half of nineties through lucrative investment schemes in plantations.

According to a senior Sebi official, only five companies from this region had applied for registration. These five companies together raised around Rs 11 crore. But the other 60 companies violated the directive for compulsory registration. “Out of the 65 plantation companies in this region, only five had applied for registration though Sebi had extended the time for application from December 15 last year to March this year,” the official said.

On May 12, Sebi showcaused these errant companies and asked them to pay back the investors by May 28. However, the plantation companies ignored the market regulator’s showcause notice which forced Sebi to slap winding-up notices on June 27. “But these companies even ignored the order. We are now planning to prosecute them for the anti-investor approach,” the official said.

The largest defaulter among these 60 companies is the Patna-based Helios Plantation & Developers Ltd, which alone raised Rs 21 crore.

The Sebi official said most of these companies had downed shutters and fled to evade payment. “Most of these companies have disappeared and their directors are absconding,” the official alleged.

The stock market regulator is expected to take up the matter with the police in the respective states to bring the ‘culprits’ to book.

Sebi has also informed the registrar of companies in this regard.

The legal action against these companies will be part of Sebi’s drive against 605 plantation companies across the country, which together had raised over Rs 2500 crore.

The official said the northern region was worst affected.

“Our central office will initiate legal proceedings against the companies which have defaulted in making payments by the stipulated date,” the official said.

Earlier, Sebi had directed all these plantation companies to apply for provisional registration under Section 11B of Collective Investment Schemes Regulation, 1999. But only 35 companies had applied for such registration.

Sebi chairman D.R. Mehta would soon take a decision on the legal actions and the views of all regional offices would be sought.    


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