The Telegraph
Since 1st March, 1999
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JK group faces bad-loan nemesis

Mumbai, Dec. 3: The noose gets tighter by the day for defaulters. Armed with the recent legislation on NPAs, banks and financial institutions are having their day out, warning defaulters to pay up, or else…

Leading the pack is ICICI Bank. After training its guns on Mardia Chemicals and the Patheja group, it has now issued a notice to JK Udaipur Udyog Ltd (JKUUL) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance.

The JK group firm headed by Hari Shankar Singhania owes about Rs 70 crore to ICICI Bank and Rs 52 crore to other banks and financial institutions including Unit Trust of India, Life Insurance Corporation, State Bank of India, IDBI and Central Bank of India among others.

Sources said JKUUL had taken loans from ICICI Bank for its cement plant at Udaipur in Rajasthan. However, due to the downturn in the cement industry and “inefficient management,” it started facing financial constraints. The company was subsequently declared a ‘non-performing asset’ by ICICI Bank in November 1999, and figures as a bad debt on the books of most of the other institutions and banks as well, sources added.

Bankers here said term lenders to the company had restructured the facilities in January 2001, which was approved by the Rajasthan High Court with the specific condition that the cement businesses of the JK group would be consolidated in JK Corp Ltd.

Despite the restructuring, the company failed to make any payments since December 2001 and its manufacturing facilities have been lying closed since March this year. In order to save JK Corp, the group’s other profit making cement business, the promoters decided to renege on their commitment of merging JKUUL with JKCL, thereby leaving lenders to the former in a lurch, the official alleged.

Under the regulations, banks and financial institutions have a timeframe of 60 days after a notice is issued, following which it can decide to either sell the assets of an errant company or change its management. This decision has to be endorsed by around 75 per cent of the lenders in terms of value.

ICICI Bank is understood to have served more than 15 notices in the past few days to recover loans. Earlier, it had taken over the assets of Mardia Chemicals’ Vatwa unit in Gujarat. The company owed more than Rs 1,450 crore to all banks and financial institutions.

This was preceded by the State Bank of India, which took over a 66-room running hotel in Nashik on November 10 for clearing outstandings of about Rs 11 crore.

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