The Telegraph
Since 1st March, 1999
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Order to attach guarantor govt’s offices

Mumbai, Jan. 8: Governments infamous for not standing by their guarantees have been served an unmistakable warning by a debt recovery tribunal that has ordered the attachment of two offices in Mantralaya — Maharashtra’s seat of power.

The debt recovery tribunal has allowed financial institutions to attach the offices of the textiles secretary and his counterpart in the cooperatives department for failure by Sindkheda Mill, a sugar factory, to repay a state-backed loan of Rs 50.69 crore.

The state government has vowed to approach a higher authority, but debt recovery officer R.D. Gupta feels that the case against the defaulters is strong.

The attachment order coincides with a newfangled assertiveness among lending institutions after a recent Bill empowered them to recover assets from errant creditors.

The mill is under the charge of Hemant Deshmukh, an NCP leader and minister of state for labour in the Congress-led Vilasrao Deshmukh government.

The tribunal said something has to be done on a larger scale to remedy the curse of defaults as various cooperatives owe banks around Rs 750 crore.

“The Sindkheda Mill is just a case in point because selling the cooperative in question, machinery and land included, will only fetch about Rs 5.19 crore,’’ a tribunal official said.

He added that it is the mismanagement of loans by the government that has to be tackled first.

The tribunal said the attachment order was issued after giving the government a lot of time to answer questions.

“But till now, nobody seemed to be particularly bothered,’’ the official said.

In an order passed on January 6, the tribunal questioned the government’s stand on such issues in general and the Sindkheda case in particular.

In a strongly-worded letter, the tribunal has asked the government to clear the dues by January 21.

The tribunal also asked why the government’s treasury and its bank account with the Reserve Bank of India should not be attached if it fails to repay the loan within the stipulated deadline.

The tribunal has also said the government has till now failed to substantiate its stand that the financial institution can recover its dues from the assets of the defaulting sugar factory.

The state government feels that the onus of repayment is on the defaulting factory, but the tribunal contends that the guarantor cannot wash it hands of the issue.

“The government cannot ask banks to finance non-performing units and then back off,’’ a tribunal official said.

Sources said more financial institutions have approached the tribunal for taking similar measures to recover government-backed loans from defaulting cooperative units.

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