Mumbai, Feb. 18: The debt recovery tribunal (DRT) of Mumbai has appointed a court receiver for sale of assets of the A C Muthiah group’s Spic Petrochemicals.
“There is no hope of work starting at Spic Petrochemicals... And no hopes that it will come out of the financial crisis, but actually it is sinking… Considering the outstandings of various financial institutions, it is desirable to sell the assets of the company,” DRT III Mumbai presiding officer A. G. Mishra said in an order dated February 14.
The order provides an interim relief to the applicant, ICICI Bank, which had recalled its loans worth Rs 289 crore last December following non-payment of dues by the company.
Spic Petro was promoted by Spic Ltd in 1994 to implement a project to manufacture purified terapthalate acid and polyester fibre yarn at Manali near Chennai.
The total dues of Spic Petro runs over Rs 1,100 crore to lenders which include ICICI Bank, IDBI, State Bank, Dena Bank, Bank of Baroda, Indian Bank and Union Bank.
The tribunal also ruled out a restructuring exercise saying, “It is a premature death before commencement of work. The losses have been caused to the company. So, the question of restructuring does not arise as it is yet to take-off.”
By referring to the judgement of ICICI Bank vs Daewoo Motor, DRT paved the way for 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 crore from the previous Rs 2,125 crore.
Last December, ICICI Bank had served a notice to Spic Petrochemicals under the Securitsation Ordinance.
Spic had originally signed an MoU in 1989 with Madras Refineries Limited (MRL), a public sector undertaking, to set up a naphtha-based aromatic complex for manufacture of para-xylene and PTA. The joint venture, 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.
To resolve the dispute, Spic and MRL worked out 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 crore 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 that has led to inordinate delays in the commencement of project work.