Bengal purse faces takeover tension
The Mamata Banerjee government will use tax-payers money to take over assets, liabilities and the responsibility to run tyre-maker Dunlop and wagon manufacturer Jessop from its owner Ruia Group, further straining the state exchequer which is already burdened with dole politics.
- Published 28.02.16
Calcutta, Feb. 27: The Mamata Banerjee government will use tax-payers money to take over assets, liabilities and the responsibility to run tyre-maker Dunlop and wagon manufacturer Jessop from its owner Ruia Group, further straining the state exchequer which is already burdened with dole politics.
The poll-bound Bengal assembly today passed two separate bills facilitating acquisition of the iconic industrial ventures of yesteryears in order to "ameliorate the sufferings of the employees" and "sub-serve the interest of the general public".
The bill held workers' - there are about 1500 of them - dues as the foremost category to be paid off, followed by government taxes even as secured creditors, banks and sundry creditors came at the bottom. The government will set up a corpus, to be announced later, from budgetary provisions to pay off the liabilities.
The owners of the company, which include Ruia Group, public shareholders and financial institutions, will get whatever is left of the corpus.
"The amount to be paid to the proprietors under this section shall stand reduced to the extent," the bill read.
Chandrima Bhattacharya, Bengal law minister, however, claimed the government was going to take over only the assets and not the liabilities. "The liabilities will remain with the erstwhile owner," she said.
Finance and industry minister Amit Mitra, who introduced the bills in the assembly, said the workers' right will be "100 per cent protected".
A careful reading of the bill revealed the Banerjee government has ring-fenced itself from legal action that may arise out of partial or non-payment of claims of liabilities. The bill also tried to override the scope of the judiciary by noting that companies would not be wound up by court.
As a result, inspite of creating a detailed schedule on the priorities of liabilities, it said "every liability of the proprietor in relation to the undertaking in respect of any prior period to the appointed day, shall be the liability of the proprietor and shall be enforceable against them and not against the state government".
Both Dunlop and Jessop, especially the tyre maker having plants in Bengal's Sahagunj and Tamil Nadu's Ambattur, are understood to have run into huge liabilities over the years as both companies have not been in operation. Dunlop has several high value properties that are mortgaged to banks.
The bill says mortgage holders can only stake claim of money but not take over the properties.
The bills will be sent to the governor for assent. There is a possibility that they may have to be sent to Delhi for Presidential assent as well as the companies were formed under Companies Act 1956, which is under the jurisdiction of the Union ministry of corporate affairs.
Ruia Group declined to make any statement. It is said to be exploring legal options.
Legal sources said several chapters of the bill might face a legal test. "The law proposed to have an overriding effect on any other law. This may be challenged as according to our Constitution, a state legislation normally cannot override a central legislation in matters coming under the concurrent list," a legal expert said.
"Moreover, the provision on mortgage may prove onerous to the existing lenders who have granted loans to the company and may also be in conflict with the Securitisation Act," he added.
Industry observers questioned the economic rational to take over the companies. "The government has no expertise to run these firms. It has several companies already but barring one or two, none are doing well. The only rational is to please voters before election," they added.