Calcutta, March 28: The Calcutta High Court today scrapped the deal under which Jessop & Company was sold to Ruia Cotex, queering an already uneven pitch for the Centre’s selloff programme.
The September 30 order of the Board for Industrial and Financial Reconstruction (BIFR), clearing the transfer of a 72 per cent stake in the public sector company, has been tossed out. The deal was clinched on February 15, 2002, when the department of disinvestment decided to hand over Jessop’s control to the Ruias.
The court has observed that the decision-making process which led to the transfer of shares “was not in accordance with the law”. It also raised questions on the accuracy and fairness of the valuation, and pulled up State Bank of India — the operating agency — for not following disinvestment guidelines.
Justice Kalyan Jyoti Sengupta directed the BIFR to prepare a “fresh revival scheme in accordance with law” within three months of the receipt of the order, but accepted a request from Ruia’s lawyer, Abhrajit Mitra, that the ruling be stayed for a fortnight. The employees’ contention that Jessop is a company with strategic importance did not cut much ice.
The controversial sale of the 215-year-old company by the department of disinvestment on February 15, 2002 had provoked howls of protest from an angry union, which challenged the deal on March 3.
Four days later, the court had issued an interim stay against the sale order, prompting the Ruias to lodge an appeal with the division bench — a larger jury panel. When that attempt failed, it went to the Supreme Court, which refused to rule in its favour. The Ruias last knocked the doors of the division bench again on March 5 this year without success.
Reacting to the decree, Jessop Staff Association general secretary Aloke Brahmachari said the employees’ apprehension over the manner in which the company was sold to a private company is justified.
“Jessop, being one of the oldest company in the country, still has the potential for becoming a highly profitable entity. It needs some support,” he said.
The company, which mainly manufactures wagons, EMU (suburban train) coaches, cranes and road rollers, has been suffering losses for close to 10 years because orders and working capital have dried up.
The union has alleged that the company did not receive adequate orders from the railways, which has preferred to meet its requirement from smaller private players.
“Moreover, the loan burden has been too onerous for us and the interest rate too high to sustain.”
The government had written off the company’s accumulated losses to the tune of Rs 218 crore and helped it arrive at a one-time settlement with banks through a package of Rs 63 crore. This largesse, say the unions, helped Ruia Cotex get the company’s 72 per cent equity almost free of liability, for a measly Rs 18 crore.
Brahmachari said workers would be able to turn around the company and make it profitable if the government offers a deal matching the one given to the Ruias. Jessop, which has 1,470 on its payrolls, has an asset base of over Rs 230 crore, the association said.
The Ruia Cotex management was not available for comment on the judgement despite several attempts.